Intellectual Property Exhaustion and Parallel Imports of Pharmaceuticals: A Comparative and Critical Review

Abstract

This Chapter addresses the topic of intellectual property (IP) exhaustion in the context of the parallel trade of pharmaceuticals. These imports, which are controversial in general, are more complex with respect to pharmaceuticals, which require additional marketing and import authorizations. Nevertheless, individual countries remain free to accept these imports under the flexibility of Article 6 of the Agreement on Trade Related Aspect to Intellectual Property Rights (TRIPS Agreement). This Chapter reviews several national approaches—in developed, developing, and least developed countries (LDCs)—from the perspective of the exhaustion of patent rights as well as other IP rights. Through this review, it highlights that several countries today accept parallel trade. A large of number of these countries are, however, developed countries, whereas several developing countries and LDCs instead prohibits parallel imports. This finding is perplexing, and the reasons for this restrictive approach are unclear as developing countries and LDCs need flexible policies and can largely benefit from parallel trade. In addition, despite the claim by the pharmaceutical industry that parallel trade would increase the price of medicines in these countries—as originator would increase prices due to the fear of parallel imports—medicines are sold at lower prices mostly because of governments’ pricing or after the expiration of patent protection. Based on this review, this Chapter concludes that national legislations, which are not taking advantage of the flexibility in Article 6 of the TRIPS Agreement, may consider reviewing their policies and allow parallel imports.