Did you know that the medicine you buy at the pharmacy might have traveled across half of Europe before reaching you? Welcome to the complex world of pharmaceutical parallel trade, a legal but often controversial phenomenon that impacts prices, availability, and even the core strategies of pharmaceutical companies.
Parallel trade in the pharmaceutical sector is a regulated yet often complex phenomenon. it involves the sale of medicines between European Union (EU) countries outside the distribution channels intended by the manufacturer. This practice is legally permitted under European regulations by virtue of the principle of the free movement of goods.
What is Parallel Trade?
Parallel trade is the resale of authorized medicines from one EU country to another by intermediaries. These intermediaries purchase medications in a country where prices are lower and then resell them in a country where they are higher, provided that the medicine has obtained a Marketing Authorization (MA)—known in Italy as AIC—in both countries involved.
The parallel distributor purchases original drugs in an EU country where the price is contained, repackages and relabels them according to local regulations, and resells them in another EU country where the selling price is higher. This often results in a loss of profit for the original manufacturer.
Technically, the medicine remains the same in terms of quality, but it is distributed outside the direct commercial channel of the MA holder. While this practice impacts drug traceability and compliance, it simultaneously generates savings for the National Health Service (NHS).
What are the Impacts of Parallel Trade?
- For Manufacturers: loss of profit, significant impact on pricing strategies, and increased difficulty in market monitoring.
- For Patients and Pharmacies: potential impacts on traceability and product availability (it can sometimes lead to localized drug shortages in the export country).
How can Parallel Trade be mitigated?
There are regulations in place that make this type of trade more difficult. For example, in Italy, AIFA (the Italian Medicines Agency) authorizes and monitors parallel distributors, imposing stringent requirements regarding relabeling, language, patient information leaflets (PIL), and prior notifications.
However, it is the manufacturer’s responsibility to adopt strategies aimed at limiting and controlling parallel trade. In addition to establishing internal regulations for their various operating countries, companies can adopt solutions such as:
- Differentiated packaging by country or the use of different branding to make product repackaging more costly;
- Narrowing price differentials between EU countries;
- Applying flexible pricing policies negotiated with regulatory authorities;
- Monitoring product flows by utilizing drug tracking and serialization processes;
- Controlled supply policies (quota systems).
How Blue BI supports the Pharmaceutical Sector in managing Parallel Trade
At Blue BI, we support pharmaceutical companies in navigating the complexities of parallel trade through data-driven solutions. Our projects aim to:
- Optimize Supply planning: we calculate the product quantities to be allocated to distributors to ensure an adequate supply that meets territorial/local needs while mitigating the volumes destined for the parallel market, thereby guaranteeing availability for patients.
- Improve Distribution visibility: we provide detailed reporting on drug flows at both territorial and regional levels, with a specific focus on wholesalers and parallel distributors, enabling tighter oversight.
- Analyze Market Trends: we offer in-depth analysis of sales volumes by country and period, with particular attention to parallel trade dynamics and price trends by channel, providing crucial insights for strategic decision-making.
- Ensure Product availability: we integrate Customer Service and Supply Chain data to provide reporting on product availability, focusing specifically on stock shortage issues or stock-out risks.
We realize Business Intelligence & Advanced Analytics solutions to transform simple data into information of great strategic value.
