Over-boxing the answer to parallel trade risks?

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Related tags: Parallel trade, Authentication

The European Union parallel trade in pharmaceuticals is offering
few benefits to cash-strapped national healthcare systems and may
raise the risk of medication errors and entry of counterfeit
medicines into the supply chain, according to a new report.

But the document, published by the Social Market Foundation in the UK, stresses that there is no evidence as yet that parallel imports have caused a patient safety problem or act as a driver for the trade in fake drugs, writes Phil Taylor.

70 per cent of the EU's parallel-imported drugs go into the UK and are estimated to save the country's National Health Service up to £178 million (€269m) a year, reports the SMF, an independent think-tank. But the benefits to the healthcare systems are small because traders maximise profits by pricing just below the local level, a process known as price shadowing, it notes.

Pharmaceutical companies argue that the process of parallel trade - in which a trader sources lower-priced products from one country and imports them for sale in another where prices are higher - introduces a risk of mislabelling that puts patients at risk and an entry point for counterfeit goods.

The SMF report agrees, at least in principle. But it notes that while the process of re-packaging parallel imports increases the chance of mislabelling, there is no evidence to date this has occurred. However, it does point out that the complexities added into the supply chain by parallel trade makes batch recalls in the event of a safety scare much more difficult.

In the UK, £1.1 billion is spent very year on drug adverse events, 70 per cent of which are preventable.

Similarly, the incentive to counterfeit pharmaceutical products comes from the pricing of the products, not from parallel trade, claims the report.

"Therefore it cannot be argued that parallel trade is a motivator for the counterfeiting of pharmaceutical products. However, it is possible to argue that parallel trade offers a vehicle by which to introduce counterfeit products into the supply chain."

The US Food and Drug Administration (FDA) estimates that 10 per cent of all circulating medicines in the world are counterfeit, an industry estimated to be worth $20 billion (€16.6bn).

Parallel traders open boxes of imported drugs, often removing tamper-evident packaging, and remove the foreign Patient Information Leaflet, substituting it for a local version. New labels are pasted over the relevant portions of the contents, e.g. the blister pack, and it is then re-boxed in the trader's own box design.

The SMF report recommends that while it recognises the legality and modest benefits of parallel trade, it is important that the potential risks to patient safety do not become actual risks.

"To this end, the broad aim is to ensure product integrity, by ensuring that tamper-proof outer packaging remains intact. Re-boxing of medicines ought to be eschewed in favour of over-boxing,"​ it concludes. This will guarantee the integrity of the pharma companies' packaging and should make it harder for counterfeiters to use this route, as well as making it easier to spot mislabeling.

It also recommends that the track and traceability of products across what isnow a complicated supply chain ought to be ensured, echoing the sentiments of the FDA that has started a major effort in this direction. The SMF notes this might require the use of fairly innovative technology such as radiofrequency identification (RFID) to allow for the unique identification of products.

However, Don Macarthur, secretary general of the European Association of Euro-Pharmaceutical Companies (EAEPC), the trade body representing national associations and individual companies engaged in parallel trade and the distribution of pharmaceuticals, was scathing about the recommendations.

He argued that overboxing would simply present another barrier for the patient in accessing their medicine, and would not be welcomed by pharmacists, for whom shelf space is often at a premium. Moreover, overboxing presents all sorts of trademark issues, and would put parallel traders at risk of trademark infringement actions at a time when their legal right to re-box is continually being upheld in the European courts.

A spokesman for Pfizer, which announced a move towards tamper-proof packaging for its product lines on the same day the report was presented, said he believed overboxing would improve patient safety and introduce another barrier to counterfeiters.

He noted that the company will introduce new packaging for its products featuring a perforated opener that cannot be reclosed, along with stickers saying that the product has been 'sealed by the manufacturer for patient safety', or similar phrasing.

The first product to use the new packaging will be Pfizer's top-selling cholesterol-lowering drug Lipitor (atorvastatin) - which is a particular target of counterfeiters - and could be extended to all its major products in time. Another candidate is Viagra (sildenafil), its erectile dysfunction product that is also prone to counterfeiting.

The SMF report also plays down suggestions that parallel trade is in part responsible for the widening gap in pharmaceutical R&D between the EU and the US. "There is insufficient evidence to point to parallel trade as the main cause of the gap,"​ it says.

Meanwhile, the EAEPC estimates that the parallel market had sales of approximately €4.5 billion per annum (at ex-factory prices) in 2002.

Related topics: Markets & Regulations, Regulations

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