Parallel importation of medicines explained

Parallel importation is a trade mechanism that allows a specific medicine to be purchased in one country and imported into another for resale, without the explicit permission of the patent or trademark holder. It generally involves branded, patented medicines that are priced differently across various global markets. This practice is distinct from the importation of generic medicines, as parallel imports are the original branded products manufactured by or under licence from the patent holder, simply sourced from a lower-priced market. The concept relies on a legal principle known as the exhaustion of intellectual property rights, which determines what happens to a manufacturer's control over a product after its first sale.

Exhaustion of rights and global legality

The legal foundation of parallel importation is the "exhaustion of rights" doctrine. Once a pharmaceutical company sells a medicine in a particular market, its intellectual property rights regarding that specific batch of products are considered "exhausted." This means the company cannot legally control the subsequent resale of that product. How this principle applies across borders depends on individual national laws and international trade agreements, such as the World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which leaves the question of international exhaustion to the discretion of each member state.

Globally, approaches to parallel importation vary. Some countries adopt a "national exhaustion" model, meaning rights are only exhausted within the country of sale, effectively banning parallel imports. Others adopt an "international exhaustion" model, allowing parallel imports from any country where the product was legally placed on the market. The European Union operates on a "regional exhaustion" model, permitting parallel imports between EU member states but not from outside the bloc. Parallel importation is commonly permitted in jurisdictions that prioritise price competition, including the United Kingdom, several EU member states, and South Africa.

South Africa and Section 15C

In South Africa, parallel importation is explicitly addressed in the Medicines and Related Substances Act (Act 101 of 1965). Section 15C of the Act empowers the Minister of Health to prescribe conditions for the parallel importation of medicines. The primary legislative intent behind Section 15C is to make essential medicines more affordable and accessible to the public by allowing the importation of registered medicines from countries where they are sold at lower prices.

The South African Health Products Regulatory Authority (SAHPRA) oversees this process to ensure that parallel imports do not bypass the country's safety and quality standards. Importers must register with SAHPRA, and the imported medicine must correspond to a product already registered in South Africa. By allowing carefully regulated parallel imports, South Africa can introduce more competitive options into its Single Exit Price framework—the regulated pricing system applied to all medicines sold in the country. Patients and healthcare professionals can use tools like HealthSA to search for registered medicines and better understand the local regulatory landscape.

The price argument

The primary driver behind parallel importation is price disparity. Pharmaceutical companies often set different prices for the same medicine in different countries based on local economic conditions, purchasing power, and government regulations. Parallel importation allows pharmacies, healthcare systems, and states to source the identical, branded medicine from a lower-priced market and sell it in a higher-priced market.

This introduces direct competition for a patented product, which can drive down the cost of treatments. Proponents argue that this is a vital public health tool. For medicines included on the World Health Organization's Essential Medicines List, parallel importation can maximise the purchasing power of national health budgets and improve patient access to life-saving therapies. By leveraging global price differences, health systems can stretch their resources further without waiting for the patent to expire and generic versions to become available.

The safety and quality argument

Opponents of parallel importation, often the pharmaceutical manufacturers, argue that the practice poses risks to medicine safety and supply chain integrity. When medicines move through multiple distributors and across borders outside the manufacturer's primary distribution network, there is a heightened risk of mishandling. For example, if temperature-sensitive medicines are not properly managed, the cold chain may be broken, compromising the product's efficacy.

There are also concerns about the potential for substandard and falsified medicines to enter the supply chain under the guise of parallel imports. Furthermore, parallel-imported medicines may feature different packaging or package inserts, which could confuse patients or lead to medication errors if not carefully managed. To mitigate these risks, regulatory bodies like SAHPRA require parallel importers to prove that their products are genuine, have been stored correctly, and meet the same quality standards as the domestically registered product. This regulatory oversight is designed to balance the economic benefits of parallel importation with the absolute necessity of patient safety.