Transcript Parallel Import - Industrial Economics Institute

Strategic pricing and antitrust
issues in the European
pharmaceutical market: the Glaxo
case.
EDLE – European Doctorate in Law and Economics
University of Bologna
Claudia Desogus
Roadmap…
• The European approach to PT - a change?
• The Glaxo case: the dual pricing scheme
• Consumer welfare with and without PT
– Do savings from PT exist?
– How large they are? A numerical drug
bargaining game
• From static to dynamic efficiency: the link
between PT and incentive to innovate
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The European approach to PT
Legal doctrine
Freedom of movement of goods (Artt. 28-30 EC)
Regional exhaustion within the EEA of the IPR
after the first sale
“PT does not hinder patents’ subject matter” (C-15/74
Centrafarm v. Sterling);
“PT is an important driving force for market
integration” (EU Commission, 1998);
“Medicinal products fall within the rules of the
Internal Market” (EU Commission, 2003).
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Some figures about PT…
EUR 4.6bn
Size
Growth
+11.8%
+2.5% market
Share
Import mkts
9.1%
Share
All EU 27
3.2%
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Importing markets:
market growth
+2.8%
Germany, UK,
the Netherlands,
Sweden, Norway,
Finland, Denmark,
Belgium, Austria.
Source: Data at MAT/JUN/07, IMS Health.
Values are at standard purchase price in importing
market. Transaction can be pharmacy sell-in or sellout.
4
Dual pricing: international price
discrimination
or
export
ban?
Prices in Euros.
Name of
products
Becotide
Inh. 200 x
50 mcg
Beconase
Sp. NA.
50 mcg x
200 d.
Flixotide
250 mcg
Inh. x 120
d.
Flixotide
500 mcg
Accuhaler
x 60
Lamictal
25 mg (56
compr.)
Serevent
Inh. 25
mg (120
d.)
Ventolin
Inh. 100
mg (200
d.)
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Spain
(domestic
sales)
Spain
(exports)
UK
EU

(ESUK)

(ES-EU)
Trade
ESUK?
Trade
ESEU?
2,03
13,49
6,03
5,04
+124%
+167%
No
No
2,15
5,70
5,56
5,08
+2,5%
+12,2%
No
No
53,75
69,99
71,92
57,34
-2,6%
+22%
Yes
No
107,50
139,98
148,92
115,84
-6%
+20,8%
Yes
No
53,57
74,27
79,19
59,06
-6,2%
+25%
Yes
No
34,54
46,95
52,95
35,41
-11,3%
+32,6%
Yes
No
1,50
10,00
2,55
2,54
+292,1%
+293,7%
No
No
Data sourced from EU Commission decision on GlaxoWellcome case, 2001, pp. 12-13.
Calculations are mine.
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Exports bans under EU law
• Agreements with an anticompetitive objective
(hardcore restrictions) ex Art. 81(1) EC
– Art. 4(a) and 4(b) Reg. 2790/99
– Art. 5 Reg. 2658/00
– Art. 5 Reg. 2659/00
– Commission practice (Distillers, Gosme-Martell, Moët
et Chandon, Pittsburgh Corning Europe, …)
– ECJ case law (Consten and Grundig, HAG, BMW, VW,
General Motors, Sandoz …)
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A new jurisprudential trend in
pharmaceuticals?
Glaxo case
• Dual pricing is not anticompetitive in
its object but only in its effects.
• Because drug price controls impedes to
presume the existence of a real competitive
pressure on prices from PT.
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Is the pharmaceutical market specific?
‘The anticompetitiveness of dual pricing
has to be assessed in light of the fact that
1. prices are finally set by Member States;
2. prices fall outside the play of supply and
demand;
3. prices are established at structurally different
levels throughout the Community’.
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Price controls and competition
• Regulation is in place to remedy market
failures
(supply-side
barriers;
no
constraints from demand)
• Other ‘essential’ services subject to
regulation and competition law (i.e.
energy) are not exempted
• In 14 out 25 MS there is free pricing or
price negotiation
• Negotiated prices are only maximum
prices
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X
X
X
X
Mandatory quota on PI
dispensing rate
X
Financial incentives to
dispense Pi drugs
X
Financial incentives to
dispense lower-priced drugs,
including PI
Lower consumer out-ofpocket expenses (price or copayment) for PI products
UK
X
Sweden
X
Norway
Germany
Mandatory information on
availability of PI
Mandatory dispensing of PI
drugs if price differential is
least equal to a fixed range
Denmark
Policies that promote Use of
PI drugs at pharmacy level
Netherlands
Savings from PT on drugs: do they exist?…
X
X
X
X
X
X
X
Source: P. Kanavos, D. Gross and D. Taylor, Parallel Trading in Medicines: Europe’s experiences and its
implications for commercial drug importation in the US, AARP Public Policy Institute, June 2005, as updated by
me with information from EAEPC members in 2007.
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… and how large they are?
“… unless parallel trade can operate
dynamically on prices, it creates inefficiencies
because… financial benefits accrue to the
parallel trader rather than to the health care
system or the patient” (EU Commission,
1998);
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Trend of direct savings in 4 importing MS
Estimated direct savings from PI in 2001-2006. In Millions €
400
350
300
250
Denmark
Sweden
Germany
UK
200
150
100
20
01
20
02
20
03
20
04
20
05
20
06
20
07
0
50
0
Source: York study, 2003; Pedersen study 2006; Pedersen ongoing update.
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Dynamic effects of competition:
indirect savings
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Level of indirect savings
– Difficult to measure (hp counterfactual)
– Import market dynamics issue
– Regulatory issue:
- Reference price (DE)
- Approval of prices adjustments from financing
agency (SW, DK)
- Price negotiation
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Top 15 PI products in UK before and
after the new PPRS
Product
PI % 2004
PI % 2005
Price cut
Lipitor
42.5
14.6
5-17%
Zoton
37.5
42.7
0-1%
Zyprexa
48.6
35.5
0-19%
Plavix
46.2
25.8
0%
Zoladex
66.5
49.2
0-31%
Efexor
28.9
30.8
0-2%
Cozaar
43.7
45.4
-10-0%
Seretide
16.9
17.5
7%
Aprovel
80.9
34.8
24-30%
Serevent
28.7
27.4
0-7%
Cardura
32.6
6.7
0-55%
Risperdal
48.4
39.4
8-14%
Lipostat
30.0
13.2
7%
Fosamax
27.5
42.7
0-1%
Aricept
62.2
62.1
7%
(!) Reductions in PI are matched with (>7%) price reductions in six cases
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The Swedish experience
“Apart from the direct impact on prices, there
are instances of potential parallel imports having
an indirect impact on prices. Faced with the
prospect of competition from an incipient parallel
import trade, some original suppliers of drugs
have on occasion voluntarily chosen to cut prices
by over 10%, which had the effect of eliminating
the conditions necessary for parallel imports.”
Swedish Competition Authority
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The Cozaar example
MSD’ price cut on Cozaar
UK sales
(£000)
3/06 - 3/07
Old price
(£)
New price
(£)
Price
reduction
PI
market
share
25 mg
14.788
18,09
16,18
10,56%
0,00%
50 mg
52.455
18,09
12,80
29,24%
75,09%
100 mg
43.565
24,20
16,18
33,14%
57,27%
100/25 mg
1.524
24,20
16,18
33,14%
0,00%
50/12.5 mg
5.912
18,09
12,80
29,24%
60,58%
Tabs
Comp tabs
Source: EAEPC, European Assocation of Euro-Pharmaceutical Companies, August 2007
Estimated savings for the UK NHS: £30.2 million per annum
Gain of market share from MSD: 100%
Gained revenue for MSD: £ 30 million per annum
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The dynamic efficiency of dual
pricing
• Dual pricing, by eliminating PT, could
increase financial resources to be devoted to
R&D.
• Is the balancing exercise ex Art. 81(3)
backward looking or forward looking?
– The shape of the innovation function is crucial to
determine the net welfare effect
• Possibility or certainty of the causality nexus?
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PT and the incentive to innovation
• Plethora of factors driving innovation
• What is the incremental impact of
parallel trade?
• Difficult to measure in periods of 10-15
years needed to develop a drug
• The issue is much narrower: do
relaxations of restrictions to parallel import
will increase the incentive to innovate?
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Does more money bring more
innovation?
Pharmaceutical expenditures R&D expenditures 1980-2003 in Billion Euros
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Thank you very much!