Social Welfare Impact of Parallel Imports of Pharmaceuticals vis a vis Access to Medicine

Abstract

Legitimate parallel imports stem from the doctrine of exhaustion or the ―first sale‖ doctrine in intellectual property law, particularly in cases of international and regional exhaustion. It is the law of the importing country that determines the legitimacy of any particular instance of parallel imports, namely the kind of exhaustion that such country recognises and follows—national, international or regional. Since parallel importation involves taking advantage of price arbitrage by bypassing the official distribution network of the intellectual property holder, it is commonly referred to as the ―grey market‖ and remains a controversial area in law. Under the flexibility provided by Article 6 of the TRIPS Agreement, a country may adopt different approaches to exhaustion for different forms of intellectual property, such as patents and trademarks. This complicates the legal position when the subject matter of parallel imports is protected by multiple intellectual property rights, enabling right holders to use these overlaps to restrict such imports. In the pharmaceutical sector, the additional requirement of marketing and import approvals further makes the import process more complex. In a global context marked by instances of excessive pricing of medicines, the legitimisation of parallel imports through the explicit adoption of international exhaustion has emerged as a potential mechanism to improve access to affordable medicines, particularly in developing and least developed countries. Based on doctrinal and comparative legal research involving the analysis of international agreements, national laws, judicial decisions and existing literature, this paper examines the social welfare impact of parallel imports in terms of their effect on drug prices and domestic pharmaceutical markets. The analysis suggests that while parallel imports can contribute to enhanced price competition and improved access to medicines in certain regulatory and market conditions, their overall welfare impact remains context-specific and empirically under-examined. The paper therefore concludes that parallel imports constitute an important policy tool for addressing access to medicines, but their effectiveness depends on appropriate regulatory frameworks and further systematic research.