Parallel trade damages profits

This year’s successful trade balance figures for the UK pharmaceutical industry would be even higher were it not for parallel trade in medicines eating into companies’ profits, according to the Association of the British Pharmaceutical Industry (ABPI).

The trade balance in pharmaceuticals rose by 12 per cent in the first six months of this year to £1,488m compared to £1,333m in the same reporting period in 2001.

However, despite the rise, ABPI director general Trevor Jones hit out at parallel traders, who re-import medicines back into the UK after buying them in other European countries where they are sold at a cheaper price.

"The increase in parallel trade, now costing the UK-based industry some £1 bn a year, is severely restricting our trade success in pharmaceuticals," he said.

He added that parallel trade, which resulted from price differentials between European countries was damaging the pharmaceutical industry and its research programme "without benefiting anyone except the people who truck medicines back and forth across Europe".

According to Janice Haigh at MS Global Consulting, the practice of parallel trade has wiped around Euros300m off major UK pharma companies’ profits.

"Parallel traders have slick and substantial operations, and shouldn’t be underestimated," Haigh added.

In Germany, government measures to tighten the reins on healthcare spending have resulted in an upsurge in cheaper imported medicines.

Pharmaceutical sales have fallen recently after a 5.5 per cent quota for parallel imports was set in April.

"The result is that if prices in one country go down, it creates a downward spiral of prices," he continued.