Anthony Raphael Gatt is a Pharmacist and holder of MAs in bioethics and business ethics
An originator medicinal product is the first of its kind to be developed and authorised for its use after extensive preclinical research and large-scale clinical trials that demonstrate safety, efficacy, and quality.
This originator drug is protected by intellectual property (IP) rights, which prevent competitors from copying it for a specified period. This original drug is marketed under a proprietary brand name chosen by the manufacturer. When these exclusivity rights expire, any manufacturer may copy it to manufacture a generic. This generic can be marketed under its International Non-proprietary Name (INN) or, in some cases, the generic manufacturer may label it with a brand. The originator drug always remains the reference product against which all its generics are tested for bioequivalence.
Parallel importation is a legal system that allows medicines and healthcare products to be brought into Malta from other EU countries. Because the EU guarantees the free movement of goods, wholesalers can purchase products at a lower cost in one country and resell them in another, bypassing the official distributor. These medicines and healthcare products are genuine and non-counterfeit. The parallel trader does not require explicit permission from the manufacturer or the authorised distributor in Malta to market and distribute these pharmaceutical, parallel-imported products to local pharmacies.
This opportunity arises from the doctrine of regional exhaustion of IP rights. Once an IP owner puts one product in the EEA market, their IP rights are exhausted and hence, cannot use these rights to prevent the subsequent resale or movement of the product within the EEA.
Parallel importation is an economic arbitrage opportunity brought about by the free movement of goods and solidarity within the EU’s single market. Many view this mechanism to balance the IP rights with the human right to health. Parallel importation has the primary objective of creating downward price pressure, making essential originator medicines more affordable for the private sector and providing substantial savings for public health systems. Furthermore, parallel importation may introduce new dosage forms and alternative packaging, hence broadening the options for patients and prescribers. Additionally, this mechanism can enhance supply chain resilience by mitigating shortages in one member state by importing surplus from another member state.
Different philosophical traditions justify or critique pharmaceutical parallel trading. Cheaper essential medicines improve affordability, and from a consequentialist perspective, parallel trading is warranted because it maximizes overall patients’ well-being. From a deontological perspective, better medical affordability aligns with the duties of justice and the protection of rights. From a care ethics perspective, parallel importation embodies attentiveness and responsiveness to patients’ vulnerability by prioritising the affordability of medicines over excessive profiteering.
However, pharmaceutical innovation companies argue that parallel trading reduces their profits, which may affect their research and development budgets and thus limit the development of future innovative drugs. Additionally, pharmaceutical companies contend that parallel trading undermines their pricing model, which relies on high prices in wealthy countries and lower prices in poorer countries.
This parallel trading process is meticulously regulated by the Malta Medicines Authority (MMA), which has significant discretionary power over which products are allowed to enter the Maltese market. A parallel import licence must be obtained from the MMA, which assesses the product’s therapeutic equivalence to the version already authorised in Malta. This process ensures that patients receive the same therapeutic benefit and that safety is never compromised. Furthermore, the authority also enforces rules on packaging, recalls and pharmacovigilance, ensuring that parallel imported medicines meet the same standards as those brought in Malta through official distributors.
Other authorities interested in this process include the Malta Chamber of SMEs and the Malta Competition and Consumer Affairs Authority (MCCAA). Research from the University of Malta demonstrates a structural issue in the local pharmaceutical market. This research highlights that the prices of original drugs are among the highest in Europe. Malta’s small size creates a unique marketing dynamic dominated by a few direct importers, creating a ‘virtual monopoly’. The Malta Chamber of SMEs supports parallel trading, as this mechanism challenges the concentrated marketing power of a few direct importers, ensuring more affordable options and genuine free movement of goods. The question that this organisation should now answer is: Does the local parallel importation business lead to a ‘price war’ or a ‘profit war’, benefiting only pharmacy owners?
Another authority that supports parallel importation is the Malta Competition and Consumer Affairs Authority (MCCAA). While the MMA ensures product safety, the MCCAA’s Enforcement Directorate is the primary guardian of consumer pricing. The MCCAA’s mission is to promote and protect consumer rights, resulting in providing patients with fair and affordable prices of medicines. It achieves this by monitoring the prices of pharmaceutical products and benchmarking them against prices in other EU countries. This process can trigger a ‘downward price realignment’ where necessary. However, the same question comes up: Does the local parallel importation business lead to a ‘price war’ or a ‘profit war’, benefiting only pharmacy owners?
The Maltese market, characterised by its compact size, profound reliance on imported goods, and a healthcare system where patients often pay for originator medicines directly, presents a unique landscape for the parallel importation of pharmaceuticals, medical devices, and food supplements. In Malta, these three trading processes are carried out by three companies but form one entity. Another large wholesaler also participates as a parallel importer. These entities possess several pharmacies, creating a single, vertically integrated mechanism that has the marketing power to set the rules of the local pharmaceutical market. This business model sees these Maltese pharmaceutical entities wearing several hats. They operate as pharmaceutical importers, wholesalers, parallel importers, and owners of a chain of pharmacies. This setup poses clear ethical risks, making it vital for both patients and regulators to remain vigilant.
The Maltese patient has two significant features: Many purchase originator drugs out-of-pocket; are brand loyal consumers when it comes to medicines. These two factors create a perfect niche for parallel importers who can supply the same trusted brand at a lower price than the direct importer. To compete, the direct importer must adopt prices and commercial models to counter the competitive pricing from parallel importers. So, theoretically, this situation ought to lead to a ‘price war’ that benefits consumers while making originator medicines more affordable. Unfortunately, there is only a ‘profit war’ where the real winner is not the patient but the pharmacy owner.
Savings to patients can be direct or indirect. Let us say a direct importer prices a product at €15.20. The parallel importer would mark the product at €12.20, hence the patient saves €3. This mechanism is, however, not happening. The parallel importer maintains the same retail price of €15.20 but delivers the product to the pharmacy owner at a contracted price of, say, €6.20. Hence, there is no ‘price war’ but excessive profiteering.
Sometimes, the parallel importer brings to the market a larger pack of the medicine than that marketed by the direct import originator. If one must calculate the direct savings from the larger pack, it would be in the region of 4-5%. For instance, a product costing €12 would save the patient around 60c if purchased instead of a smaller pack. However, the parallel trader sells the product to the pharmacy owner at, say, €5.70. Again, a ‘profit war’ for the pharmacy owner. A case in point is that the parallel traders have such marketing strength that they can eliminate a specific size of the product for a larger one. This situation can result in unnecessary use of the product by the patient. A case in point is that one can only buy a certain antibiotic cream in a large size. The overuse of this product can lead to the emergence of resistant microbes, and ultimately, future generations may no longer benefit from it.
Another way patients can save money is through indirect savings. This occurs when the direct importer reduces the price of the original medicine to provide a more affordable option. However, this mechanism is currently not happening. Instead, the direct importer is charging a higher price to offer better deals to pharmacy owners to compete with the parallel traders’ offers.
The confluence of Malta’s high-priced, import-dependent market and a regulatory framework that lacks explicit restrictions on corporate pharmacy ownership provides the ideal conditions for ethical issues to manifest in parallel trading. While this latter trading is designed as a pro-consumer tool to lower prices of originator drugs and increase competition, in Malta, this tool is used to maximise the profits of pharmacy owners.
Parallel trading is not creating a ‘price war’ but a ‘profit war’ that makes originator drugs less affordable, compromising patient care, eroding trust, and limiting patients’ choices.
