What is Parallel Trade?
What is Parallel Trade?

04-03-2021

Parallel trade has become a commercial model that is frequently encountered in different sectors such as food, automotive and textile, as a natural consequence of globalization. In this article, we will explain the functioning and legal scope of the parallel trade model in the pharmaceutical and health sector.

Products with the same content can be offered at much lower cost in countries with different economic conditions. The parallel trade model, also known as parallel distribution, can be defined as purchasing medical products from countries that sell them at reasonable prices and delivering these products to markets different from the market of pharmaceutical manufacturer or outside the existing distribution network. This model is called parallel trade as the process runs parallel to the manufacturer's distribution network.

The model defined by the European Commission, European Economic Area (EEA) and EU as parallel imports and is defined as "Import of a medical product from one member state to another and then distribution outside of the distribution network established by the manufacturer or authorized distributor."  The European Medicines Agency (EMA) has similarly defined the area of ​​business responsible for the scientific evaluation, inspection and safety monitoring of medicines in the EU.  Accordingly, it would be correct to say that this commercial practice is carried out within the scope of the principle of free movement of goods within the European Economic Area (EEA) or the EU.

In order to be included in the parallel trade, the products must be original. In addition, in order to implement this model, the relevant company must have a distributor in the country to be exported, but the trade must also be carried out by an independent person or a different company other than this distributor. This requirement contributes to offering competitive prices in the pharmaceutical market.

Ensuring worldwide mobility by utilizing different distribution channels of pharmaceuticals, healthcare and care products is  an activity within the scope of parallel trade. The prices of medicines and medical products are determined by the governments by evaluating the market dynamics of each country. This commercial model has been accepted by the European Commission as a legal form of trade in the European Union's internal market.

In our next article, we will explain the current situation of parallel trade in the pharmaceutical industry in the European Union with an objective point of view.