Parallel importation of drugs to lower cost of medication | Blog

Parallel importation of drugs to lower cost of medication← Back

Recently, the Pharmacy and Poisons Board of Kenya made a bold decision to address what maybe the local pharmaceutical industry’s most controversial issue, parallel trade in pharmaceuticals. While there have been previous attempts to tackle this matter in the past, it is hoped that the current attempt will pay attention to all important aspects of this issue in order to build a consensus among all interested parties in coming up with a policy position that is not only widely acceptable but also addresses most of the contentious issues once and for all. 

Through a process considered largely as inclusive, the exercise commenced with the PPB organizing a stakeholders’ forum where issues of parallel import of pharmaceuticals were deliberated upon; the output of these discussions were subjected to a focused/technical committee consisting mainly of representatives from the following interest groups among other membership: Kenya Association of Pharmaceutical Industry (KAPI), Kenya Association of Pharmaceutic Distributors (KAPD) and the representatives from the regulator, the Pharmacy and Poisons Board of Kenya. The result is the current product, a draft regulation framework. This document will be refined and subjected to a varied stakeholder audience including representatives from consumer organizations for input.  

According to the PPB Head of Trade Affairs, Dr Antony Toroitich, the Ministry of Health through the Pharmacy and Poisons Board developed the draft legal framework for parallel importation of pharmaceuticals, in a bid to make medication accessible and affordable to all.

This framework has put together all the necessary details pertaining to parallel importation of drugs that is expected to ease the burden of cost of medication on many Kenyan households. 

“When implemented, this policy will see the elimination of cartels in the local pharmaceutical market with resultant benefits to the population. Cartels have been a pain in this industry because they have provided an opportunity for the importation of substandard drugs and counterfeits into the Kenyan market,” said Dr Toroitich.

“They have increased the cost of treatment by manipulating the supply and demand dynamics occasioning scarcity of essential drugs and eventually raising their prices; this they do for their own selfish gains,” he added.

According to Dr. Toroitich, introduction of regulated parallel imports, will ensure constant supply of drugs and in the process improve access especially of lifesaving drugs. 

What is parallel Importation/trade?

Parallel importation is not a new concept, for the same has been in operation for many years in Kenya and elsewhere; however, previously there have not been formal rules to guide the conduct of this trade in this country and many African countries. This is the motivation behind the current policy proposals. 

The term “parallel imports” describes the purchase of trade marked or patented goods in one market and the subsequent export of those goods to another market for resale. In this case ‘market’ could refer to a country such as Kenya or a state within say an economic block for instance the East African community. In the case of European Union (EU), where there is an existing policy to manage the practice, the law provides that a trade mark owner’s rights are exhausted after goods bearing the mark are first put on sale with his consent anywhere within the European Economic Area (EEA), the practice of parallel importation is permissible, subject to compliance with certain principles and procedures. This is the same principle which proponents of parallel importation of pharmaceuticals base their argument in support of parallel importation in other jurisdictions such as the case of Kenya. To explain this situation clearly, if a manufacturer sells its patented product to its distributor in say Turkey, then if the distributor sales it to a customer who exports it to another country say Kenya, then the brand owner/manufacturer cannot make any legitimate claim to the ownership of the product as its rights are exhausted after they put the product on first sale in Turkey in this case. 

Commercial Background of Parallel importation

How does Parallel Importation arise? The practice of parallel importation is driven by price differences among different markets. In the case of EU countries, prices for pharmaceutical products are generally set by the governments of each member state dependent on national policy considerations and the operation of social security systems. Parallel importers operate outside the distribution network set up by the manufacturer or his/her authorized distributor by taking advantage of price divergences between different markets/states to profit from purchasing goods in low price markets and reselling them, at a discount, in higher price markets.  

Under what circumstances is PI justified?

A case for parallel importation is made when the price of a given medication is prohibitively high or the product is not available thereby denying access to those in need. In this case, countries make decisions to allow for importation of the medication from markets where it’s available and much cheaper, and the price benefits to the patient population of interest can be demonstrated. In such circumstances, a firm which is not the appointed distributor of the said manufacturer acts as a parallel channel to import the product into the country/market. In this way there is improved access by the patient population of interest of the drug product being imported.

Current practice of parallel importation in Kenya

At the moment, parallel importation takes place in a none structured way and only based on individual orders. For instance, if a hospital/doctor indicates a need for a certain drug which cannot be obtained locally or is available but at an exorbitant cost, a licensed importer would make an application and a decision to allow importation would be made by the PPB to bring in just enough quantity to serve that specific hospital need. According to the PPB, the proposed framework will allow the importation on a wider scale to serve the needs of many potential users. This must come as a huge relief to many pharmacists who have for long hoped to be allowed to import these products which have been considered to benefit a select few.

Dr. Toroitich explained that allowing parallel importation is not similar to allowing substandard drugs into the country. Instead, the policy is meant to allow entry of cheaper drug products into the country without compromising on their quality. Parallel importation indeed is not a quality issue but one of commercial in nature, it allows the country to take advantage of price differentials of drugs in different geographic markets to avail the drugs cheaply within the Kenyan market.  

“This is to help those in need of the drugs yet they cannot afford the cost of brand treatment because the drugs are either unavailable or they are very expensive,” stressed the Head of Trade Affairs. Legitimacy for parallel importation of pharmaceutical can be traced to flexibilities afforded by World Trade Organization agreements negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. Parallel importation of pharmaceuticals is one of several flexibilities contained in the World Trade Organization trade agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) with opportunities for application for public health purposes. From a public health perspective, developed and developing countries not only have the flexibilities to utilize and /or facilitate the utilization of TRIPS flexibilities for public health purposes but they in fact have an obligation to do so. It is against this background that the Pharmacy and Poisons Board of Kenya is obligated to implement policies that are supportive of the utilization of these TRIPS flexibilities for the benefit of Kenyans. 

Through implementation of this policy, PPB anticipates bringing down the prices of branded medicine by at least 60 per cent; this is expected to make the drugs affordable. Whether this anticipated price reduction is ambitious cannot be judged at this point but what is certain however is that with many players participating openly in this trade, prices will drop owing to fierce competition that will result thereby benefiting the end user. While many products can be imported through parallel channels, it is anticipated that majority of products to be imported will mainly be those drugs that are used to manage lifestyle diseases such as cancer, diabetes, hypertension and other diseases considered costly to treat. 

Explaining the proposed procedures for parallel importation of pharmaceuticals, Dr Toroitich emphasizes that the drugs will be imported by pharmacists licensed to trade as wholesalers by the PPB. These pharmacists will undergo vetting by the board and once credibility and reliability of their sources is ascertained, the board will grant them authorization to import the drugs from the registered sources.  Parallel importers will be expected to adhere to high levels of standards with regards to quality, packaging, as well as appropriate labels meeting requirements expected of pharmaceutical products.  

Other benefits expected to accrue following the implementation of the parallel importation policy is reduction of temptation for counterfeits due to diminished returns attributed to the reduction in prices. This is because many believe that counterfeits come in to take advantage of high prices charged by manufacturers locally which create opportunities for importation of cheaper replacements which end up being counterfeits in many instances. 

“Unscrupulous traders bring in counterfeit drugs to fill the gap that is created by cartels who keep on altering the demand and supply of pharmaceuticals,” said Dr Toroitich.

The PPB is considering other strategies to put pressure on retail price of drugs downwards; introduction of price control which is intended to achieve uniformity on pricing across the country is one of these options. This must be timely and a reason to smile for many would be beneficiaries coming at a time when many Kenyans are seeking specialized care abroad; if adopted therefore, this will contribute to taming the surging number of Kenyans seeking specialized treatment in India and other countries. 

It is estimated that Kenya loses over Sh10 billion in annual revenues spent in foreign countries especially India for treatment that can be availed locally. 

Quality Assurance and Post-market surveillance of parallel imported products

Distribution and supply of pharmaceutical products are governed by international rules; there are obligations that are expected of the manufacturer of the drug as well as the distributor. This is an inherent mechanism to ensure that the quality of the drug is maintained including during use. In addition, there are circumstances when the drug does not work as intended and indeed in some cases the drug can cause untoward effects. In this case, there must be a mechanism to accurately tell exactly which product and batch details was involved to aid in investigation. This poses a unique challenge in the case of parallel imported products where the representative of the manufacturer in the market is not involved in importation and sale of the ‘suspect’ product. To resolve this, the PPB proposes that in such cases, for purposes of traceability, the parallel importer must be held responsible for keeping track of the product it supplied the market, in order to assure full traceability up to the end user. This will ensure that Kenyans get an assurance that the product they are getting whether through the normal channels or parallel import of acceptable quality. 

“I am happy to talk about application of technology by the PPB to improve business processes, which has made work easier and efficient. Through the new sms service, health safety USSD code - 21031, the public can now ascertain whether the pharmacy outlet they are dealing with are registered by the PPB,” Dr. Torotich said.

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