Now It's Drug Companies' Turn To Flip Out Over Legal Parallel Imports

from the exposed dept

Imagine you’re an entrepreneur who’s able to source a locally available product from a foreign country very cheaply — so cheaply that you can undercut local distributors and sellers of the product. Sounds great, right? You sell the product and make a profit, consumers get a quality good at a lower price — so everybody wins. However, what you might see as a normal part of business (finding the cheapest sources for your products), some companies want to make illegal. We’ve seen the British music industry freak out when a vendor imported legitimate CDs from Asia to the UK, exposing the record labels’ price discrimination that resulted in inflated prices for CDs there. The BPI (that country’s equivalent of the RIAA) argued that the importer was somehow violating their members’ copyrights, even though it was importing legally purchased, legitimate discs, and has been awarded 41 million pounds in damages from CD-Wow, the importer. Now, though, it’s drug companies that are starting to get worked up (via WSJ Health Blog) about parallel imports, for exactly the same reason: they expose their price discrimination and threaten their margins. Middlemen in the EU take advantage of price differences throughout the continent, buying drugs where they’re cheapest, repackaging them, and then selling them in countries where prices are higher (but still undercutting the manufacturer’s price). Drug companies, like the music industry, have concocted a flimsy argument against the practice, saying it contributes to counterfeiting and threatens public safety. Of course, they fail to point out how last week, UK regulators found the first case of counterfeit drugs to go through parallel importers — but the fakes were discovered only because they were pointed out by the importer. The head of a European drug company says his biggest priority is “the integrity and transparency” of the company’s drug supply chain — but apparently that transparency doesn’t apply to pricing. Somehow, it’s hardly surprising that two industries that lean on the protectionism of intellectual property laws the most are also fighting the hardest for laws to protect their price discrimination.

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Comments on “Now It's Drug Companies' Turn To Flip Out Over Legal Parallel Imports”

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ScaredOfTheMan says:

Globalism in Reverse?

You know this makes me mad. Why is it when a corp, even a pharama corp can source labor cheaper in another country its ok. But when consumers can source goods cheaper in another country and import its not?

Globalism only works when everything is open to competition not just the few select things that raise corp profits

My ramblings on macro economics

Oliver Wendell Jones (profile) says:

It's all about the lawsuits

If you’re a pharmaceutical developer you’re much more likely to be sued by an American than by other countries – partly due to our culture and partly due to late night TV commercials that let you know you you’re probably able to climb aboard someone else’s class-action suit if you ever heard about or saw a picture of the pills in question (possible slight exaggeration there).

I’ve worked for a medical diagnostics company and a pharma company and there *ARE* differences between what a product sells for in one country vs. another – part of that is due to the economy in the target country, part of it is due to legal restrictions in other countries (mostly those with socialized medication – the government is only willing to pay $XX.XX per pill/device/etc.) and you have to adjust your prices accordingly.

It’s not a case of “stick it to the Americans!” as much as it’s a case of “if we don’t let France/Canada/etc. have product Y for $X.XX then we simply can’t sell our product in that country. Period.”

Anyone with a economics background can tell you its better to sell 100,000,000 of an item at $0.01 profit per item than it is to sell 0 of an item with $10.00 profit per item.

Furthermore it’s better to sell 100,000,000 of an item at $10.00 profit per than to sell those same 100,000,000 with $0.01 profit per, and to then let the intended recipient resell those items and keep the $9.99 profit per for themselves.

Dillenger69 says:

Sticking it to the individual again.

When corporations buy from overseas it is good business.
When individuals buy from overseas it is undermining the economy and putting people at risk to cheap foreign goods.

If only the rules for individuals were as sweet as for corporations. I’d be able to encorporate in a country that didn’t charge me income taxes but still work and live where I do. I’d save a pile of money. “But that would ruin the infrastructure by removing needed money for vital services” … no duh, then why allow corporations to do it?

Brian Carnell (user link) says:

Price Discrimination

Oliver Wendell Jones is in the ballpark. The other thing to remember is that price discrimination benefits the poor. On the one hand, we are horrified that pharmas won’t sell cheap drugs to poor people in Africa and Asia. Then when they do, we turn around and bitch that we can’t get the same prices as a third world market.

Now personally, I could care less, but the major longterm effect of reimportation will be very modest declines in drug prices in the U.S. accompanied by very large increases in prices (or complete unavailability) of drugs to the poorest consumers in the world.

It will also mean that pharmas will have to grow a backbone toward the ridiculous formulary prices that socialized medical regimes in other industrialized countries force on them (in a very real way, American consumers are in effect subsidizing the health care systems in UK, Canada and elsewhere).

ScaredOfTheMan says:

Re:Price Discrimination

I disagree with your last paragraph, specifically the “ridiculous formulary prices” I have no problem with governments setting prices for things that are essential to survival (ie. Healthcare in general). If you were to allow a completely free market, then there would a potential for people who could not afford the drugs to simply die.

The broken piece of this equation is not the government pricing guidelines. Its the fact that most big phara spent an equal amount if not more on their Advertising Budget than on new product research and development (I can’t cite this fact, but google it and you will find the supporting evidence). Its not, we are subsidizing them, its we are getting screwed. The Pharas were quick to shut down a law that would allow our government to negotiate with them on Medicaid pricing because it would potentially cost them money. So now more of our tax dollars are used to buy drugs for the people that need them but at inflated or at the very least not the best pricing.

The ones who need backbone here are our elected officials who need to remember who they work for (supposed to be working for anyway).

ChurchHatesTucker (user link) says:

Re: Re:Price Discrimination

I’ve long advocated reimportation of drugs on a free market basis.

Consider: Atlanta Drug Co. develops a cure for AIDS, but it cost them a HUNDRED MILLION DOLLARS to develop. The pill, OTOH, only cost a few cents to make. So they sell them for a thousand dollars a pop in the US to recoup their cost.

Another counrty (let’s call it “Canada”) decides that they will only purchase the drug if it costs five cents. OK, ADC is making their nut here, why not get few extra cents out of “Canada”?

But, with drug reimportation they don’t get to squeeze that balloon. ADC will consider them part of the same market (hey, that’s what we’re all about, right?) and price accordingly. If that puts “Canada” out of what they’re willing to pay, tough.

(And yeah, there’s a lot of blowback that follows. “Canada” makes the drug themselves, we import their version, etc. But if you live by Free Trade, you can die by it as well.)

Corporate says:


The artical does make an inresting point but when you explain the company’s reason for safety on keeping the sale of drugs only in the US, you argument gets flimsy. I think that “safety” as far as presciption drugs do need to be highly enforced. If this idea of buying drugs overseas just for profit inflates it will only lead to more counterfiet pills and God knows what could be in those.

nipsey russell says:

i think the difference here is that the price discrimination in pharma is often government imposed, not seller imposed. It is therefore hypocritical for a country like the US (or its inhabitants) to think its ok to buy drugs cheaper in another country for reimportation. If the government thinks drugs should be cheaper they should negotiate those prices with pharma, and if the citizens think they should be cheaper vote like minded politicians in, but reimportaion is a short term fix that will backfire

Anonymous Coward says:

I buy Provigil from out of the country for a sleep disorder- I work night shift and have trouble staying awake on shift and off. It was supposed to go generic this year, but the maker of provigil paid other companies in the US not to make it generic. I buy it for 50 cents a tab from Canada where it is shipped from Europe, where it is made and shipped from India. Here is the US it sells for more than 10 dollars a tablet. My insurance (Aetna) wont cover it despite multiple appeals because they say I need to try the highly addictive-amphetamine based, multiple side effect, yet cheaper alternative. It really boiled down to the price and I was told that on the phone when discussing it with a rep. Someone explain to me again why I cannot choose what I want to buy?

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