Research Handbook on Intellectual Property Exhaustion and Parallel Imports
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Research Handbook on Intellectual Property Exhaustion and Parallel Imports

Edited by Irene Calboli and Edward Lee

From the Americas to the European Union, Asia-Pacific and Africa, countries around the world are facing increased pressure to clarify the application of intellectual property exhaustion. This wide-ranging Research Handbook explores the questions that pose themselves as a result. Should exhaustion apply at the national, regional, or international level? Should parallel imports be considered lawful imports? Should copyright, patent, and trademark laws follow the same regime? Should countries attempt to harmonize their approaches? To what extent should living matters and self-replicating technologies be subject to the principle of exhaustion? To what extent have the rise of digital goods and the “Internet of things” redefined the concept of exhaustion in cyberspace? The Handbook offers insights to the challenges surrounding these questions and highlights how one answer does not fit all.
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Chapter 8: Parallel trade in pharmaceuticals: trade therapy for market distortions

Frederick M. Abbott


Pharmaceutical products are developed, approved, manufactured, traded, and used under complex and demanding regulatory schemes. While the intensity of regulation varies substantially among countries, lightly regulated markets are the exception, particularly from an economic standpoint. In this regard, pharmaceuticals are not generally traded in what might be described as a “free market” in the sense of absence of regulation, and this includes import restrictions which are generally consistent with the overall regulatory schemes. A drug that is not approved for marketing in a particular country does not become so because it is imported. Parallel trade (i.e., imports and exports) in pharmaceuticals takes place in markets that are “distorted” by regulation. Probably the single most significant “distortion mechanism” is the patent. The patent allows its owner to price a pharmaceutical product in the absence of ordinary market competition in the sense that potential competitors may not freely copy the product. The ultimate price may depend on a variety of factors, including the uniqueness of therapeutic effect within a particular class. But, the price of patented pharmaceutical products generally does not represent the cost of reverse engineering plus production.

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