EU pharma package: impact on the parallel import of medicinal products
The parallel import of medicinal products has been an "ongoing issue" in the EU single market for decades: Parallel importers exploit differences in supply and price between EU and EEA Member States to purchase medicinal products which have been lawfully placed on the market in one Member State at a lower price in that Member State, import them into another Member State, and sell them at a profit there. From a legal perspective, parallel imports represent a conflict between the free movement of goods on the one hand and the strict EU regulation of the pharmaceuticals market and intellectual property rights on the other.
Whilst the EU pharma package does not fundamentally alter the legal framework governing parallel imports, it may change certain economic and regulatory conditions for parallel importers. This is also relevant for marketing authorisation holders and trade mark proprietors. This article provides an overview of the current legal situation and, against this background, examines the potential impact of the planned changes on parallel imports.
Current legal situation: permissible in principle, subject to restrictions under pharmaceutical and trade mark law
The parallel import of medicinal products means that a finished medicinal product which has been lawfully placed on the market in one EU Member State is imported by a wholesaler into another Member State and distributed there without the marketing authorisation holder or trade mark proprietor instructing them to do so. However, in accordance with section 21 (1) sentence 1 German Medicinal Products Act (AMG), a finished medicinal product may only be placed on the market in Germany if it has been granted a national – German – authorisation. This means that a medicinal product imported into Germany would have to undergo a full authorisation procedure and, in particular, the parallel importer would have to submit the necessary authorisation documents. However, they will normally be unable to do so. This is where parallel imports differ from so-called parallel distribution. With parallel distribution, a finished medicinal product is imported that has been authorised by the Commission through a centralised procedure with effect throughout the Union. By virtue of its centralised authorisation, the medicinal product is automatically marketable throughout the Union; this article does not go into further detail on the particularities of parallel distribution.
However, with regard to parallel imports too, the European Court of Justice (ECJ) ruled at an early stage, on the basis of the free movement of goods applicable within the EU, that the importing country may not refuse to grant national authorisation if
- the reference medicinal product is authorised in the importing Member State,
- the imported medicinal product is authorised in the exporting country and
- the imported medicinal product and the reference medicinal product are identical.
It is sufficient for the medicinal products to be essentially identical (ECJ, judgment of 20 May 1976 – C-104/75 – De Peijper). In the latter case, however, the medicinal products must have a common origin, i.e. they must have been manufactured by the same company or by an affiliated company, or under licence (see ECJ, judgment of 27 October 2016 – C-114/15 – Audace).
This is therefore a simplified authorisation procedure, as the parallel importer need only demonstrate that there are no therapeutically relevant differences between the imported medicinal product and the reference medicinal product.
Relabelling and repackaging: practical aspects of parallel imports
In practice, however, it is often not the "substance" of the medicinal product that is the problem, but the "packaging". Under sections 10 (1) and 11 (1) German Medicinal Products Act (AMG), a finished medicinal product may only be placed on the market if its primary and, where applicable, secondary packaging, as well as the package leaflet, meet the requirements set out in those provisions. In addition, there are social security law requirements, for example regarding the inclusion of a so-called central pharmaceutical number (section 131 (6) German Social Code Book V (SGB V). In order for the imported medicinal product to be lawfully distributed in Germany, it must therefore, as a rule, first be "relabelled", and the package leaflet must be amended and, in particular, translated into German. In this respect, medicinal product safety takes precedence over the free movement of goods.
With regard to the "repackaging" of medicinal products (i.e. repackaging, relabelling and replacing the package leaflet), the free movement of goods is at odds not only with medicinal product safety but also with the rights of the trade mark proprietor. In most cases, there are trade mark rights relating to the name of the medicinal product and/or the name of the manufacturer. If the trade mark proprietor (or a third party with the proprietor's consent) places the medicinal product bearing the trade marks on the market in an EU Member State, their trade mark rights are, in principle, exhausted in accordance with section 24 (1) German Trade Mark Act (MarkenG). As a rule, they can no longer prohibit resale in other EU countries.
However, if the parallel importer alters the product in order to place it on the market in another Member State, they cannot rely on the principle of exhaustion, and the trade mark proprietor may, under certain conditions, raise objections to the parallel import. In this respect, certain criteria – known as the "BMS" criteria (named after the landmark judgments of the European Court of Justice in the Bristol-Myers Squibb cases, C-427/93, C-429/93 and C-436/93) – have emerged in case law under which alterations to products, i.e. repackaging, are permitted. The key criterion is that the repackaging must be objectively necessary in order to market the product in the importing country. Where repackaging is required by the importing country's labelling regulations under pharmaceutical or reimbursement law, there is always a corresponding necessity (see ECJ, judgment of 23 April 2002 – C-143/00 – Boehringer Ingelheim).
From free competition to greater security of supply: a paradigm shift brought about by the EU pharma package
Unlike in the legislation on veterinary medicinal products (see Article 102 of Regulation (EU) 2019/6), the EU pharma package does not comprehensively regulate the parallel import of medicinal products for human use either. Only certain documentation and information obligations for wholesalers (parallel imports being wholesale activities) have been standardised. In principle, therefore, the legal framework governing parallel imports continues to be guided by the aforementioned case-law principles, even under the EU pharma package.
However, the pharma package could alter the economic framework conditions governing parallel imports, as it would give greater priority to the objective of enhanced security of supply over the free movement of goods and competition regarding medicinal products. This could narrow the differences in supply and prices between individual Member States, from which parallel importers have so far derived economic benefit.
The following section sets out those changes which affect, or could potentially affect, the activities of parallel importers and are therefore also of interest to marketing authorisation holders and trade mark proprietors.
Obligation to provide proof of product identity and the right to refuse parallel imports
Article 162 (3a) of the draft new directive on medicinal products ("New Medicinal Products Directive") implements the case law of the ECJ regarding the substantive requirements for authorisation of parallel imports. The parallel importer must demonstrate that the imported medicinal product and the reference medicinal product authorised in the importing country have a "common origin"; in other words – in the light of the ECJ case law set out above – they are identical or essentially identical variants of common origin (in the strict sense). Member States may, where necessary, impose additional requirements in relation to this evidence.
Whether this actually shifts the burden of proof onto the parallel importer is, however, difficult to say. The parallel importer has already been required up to now to make every effort to obtain the necessary documentation from the originator themselves;
only if they were unable to do so and were also unable to provide prima facie evidence, or if the regulatory authority cast doubt on such evidence, were the Federal Institute for Drugs and Medical Devices (BfArM) and the Paul Ehrlich Institute (PEI) required to obtain the documents by liaising directly with the authority of the exporting country (see the German Federal Act on Registration's (BMG) notification on quality control for parallel-imported medicinal products dated 23 February 1995).
Pursuant to Article 162 (3a) subparagraph 3 of the New Medicinal Products Directive, the importing country may refuse parallel imports if it suspects that such imports will circumvent the mutual recognition procedure set out in Chapter 3 of the New Medicinal Products Directive. However, the conditions under which such "circumvention" is to be suspected are not defined in detail, leaving room for interpretation.
Supply shortages and parallel imports: new information obligations and intervention options
Parallel imports rely on differences in supply and price between the importing and exporting countries. The planned measures to tackle supply shortages interfere with this, as they are intended to ensure a continuous supply of medicinal products in every Member State and could also, at least to some extent, reduce price differences between Member States. Measures to tackle supply shortages affect not only marketing authorisation holders but also other players such as wholesalers and parallel importers (more specifically: preventing supply shortages under the EU pharma package). This may lead to a reduction in the economic incentives for parallel imports, even though price differences within the EU are likely to persist and parallel imports are therefore likely to remain attractive.
Article 120 (1a) of the draft new EU regulation on medicinal products ("New Medicinal Products Regulation") sets out new information obligations for parallel importers. Under this provision, the exporting country may require that a planned parallel import be notified in advance to the competent authority of that exporting country and that certain information regarding the medicinal product – and, in particular, the intended quantity to be exported – be provided to that authority. The exporting country is then entitled to take measures to prevent or mitigate a supply shortage within its own territory. To this end, it may, for example, restrict or prohibit the notified parallel imports. However, in view of the free movement of goods and the objectives of an effective single market, such measures must always be proportionate to the objective of protecting public health. The European Medicines Agency (EMA) must be informed of the measures taken.
Electronic package leaflet can reduce the need for repackaging
Under Article 63 (3) New Medicinal Products Directive, Member States may stipulate that the package leaflet must be provided exclusively in electronic form. A paper version must then be provided free of charge only at the patient's request; the marketing authorisation holder must ensure this. For parallel importers, this may make things easier, as it means they no longer have to carry out a "repackaging process" – which is relevant under trade mark law – and do not incur any costs for printing new package leaflets.
However, under Article 162 (4) in conjunction with Article 63 (3) New Medicinal Products Directive, the parallel importer must ensure that the electronic package leaflet is (also) available in the language of the importing country (as was already required for the paper package leaflet) and that patients can access it. Furthermore, although this is not explicitly stated, there is strong evidence to suggest that the parallel importer is also responsible for ensuring that a paper version is available when required.
As before, the parallel importer must translate the labelling into the language of the importing country (see Article 162 (4) in conjunction with Article 74 New Medicinal Products Directive). Furthermore, although not explicitly stated in Article 162 (4) New Medicinal Products Directive, they are likely to still be required to implement any national labelling requirements within the framework of Article 72 (1) New Medicinal Products Directive.
Finally, the European Parliament's proposal for a new Article 67 (7a) in the New Medicinal Products Directive – which was intended to stipulate that Member States could, for reasons of patient safety, require that parallel-imported or distributed medicinal products be repackaged in new secondary packaging – was, in the interests of trade mark proprietors, rightly not adopted. This would have constituted a disproportionate encroachment on the trade mark proprietor's rights, as the proprietor wishes to keep changes to its original product to a minimum.
Shorter protection periods boost competition from generic medicines
In addition to measures to ensure security of supply, the scope for parallel importers to operate could also be adversely affected economically by the fact that, as a result of the (general) shortening of protection periods and the extension of the Bolar exception, generic medicines will now enter the market more quickly. These are generally also cheaper than the reference medicinal product and therefore represent competition for parallel imports, which may consequently become less economically attractive.
How will the EU pharma package affect parallel trade?
Until now, parallel imports have been influenced primarily by the free movement of goods and the ECJ case law on "repackaging". The EU pharma package could (slightly) alter the framework conditions for parallel trade in two main respects:
- Firstly, through a more strongly coordinated EU-wide system for managing shortages and supply, which, depending on its design, could stabilise parallel trade flows or restrict them more severely in crisis situations.
- Secondly, through the electronic package leaflet, which may reduce the need for repackaging in certain circumstances.
