French crackdown on parallel drugs trade

The French government is planning to push through a dual pricing system for pharmaceutical products, designed to clamp down on the lucrative export of drugs to other European countries, reports Andrew Jack in the UK's Financial Times. The move would squeeze "parallel trade," the widespread and legal practice within the European Union by which arbitragers buy medicines where they are available cheaply and sell them where they cost more.

Estimates suggest 10% of drug sales in Europe occur through parallel trade, a practice the traders say saves money while pharmaceutical groups claim it hands profits to intermediaries that they could retain to invest in further innovation.

Draft legislation to modify the French public health code is soon to be presented to parliament after recommendations from the country's strategic health industry committee, which is chaired by President Nicolas Sarkozy .

The aim is to allow drug companies to charge higher prices for medicines that are exported from France, rather than the single lower regulated price negotiated with the authorities for use in the national medical system. The action could spark fresh legal challenges, following a series of European judgments pitting parallel traders against pharmaceutical companies trying to operate a range of systems to thwart the practice, says Mr Jack.

Past rulings have broadly defended the parallel trade as an aspect of the EU's commitment to free trade, although drugs are one of a small number of products and services on which prices remain government regulated in many member countries.

Heinz Kobelt, secretary general of the European Association of Euro-Pharmaceutical Companies, representing parallel traders, said he would fight the proposal. "Maybe the French should read the European rulings more thoroughly," he told the FT.

But Ian Read, president of Pfizer's biopharmaceutical business, told the newspaper that fear of parallel trade had prevented his company charging lower prices in the EU's poorer eastern member states, which would have helped improve access to treatments to more patients. He said Pfizer would be keen to take advantage of the French reforms if they passed, building on a dual pricing system it used in Spain, which imposes a high standard price on medicines and then provides rebates to purchasers in the country's health system.