Parallel trade in medicines between EU countries saved patients and national health systems £635 million in 2002, according to a new study.

Parallel traders who buy medicines in low-price EU countries, and then repackage and sell on medicines at discounts to high-price countries have become the bte noire of the pharmaceutical industry, but continue to enjoy the support of the European Commission and member states.

The ABPI estimates the practice costs its members £1 billion a year, but has been repeatedly defeated in the European courts by parallel traders and the EC, who see the practice as a fundamental part of a single market.

The industry also claims that the parallel traders pass on little of their profit to the NHS, but badly undermines one of the biggest contributors to the UK economy.

The York Health Economics Consortium report commissioned by parallel traders association the BAEPD found the UK alone made direct savings of up to £228 million (E342m) a year, with much of the saving made through lower hospital medicine prices and a profit 'clawback' mechanism used in community pharmacies.

Edwin Kohl, President of the European Association of Euro-Pharmaceutical Companies (EAEPC), said: "Parallel trade in medicines is a good example of how the EU single market can deliver savings to payers. For the first time, this report puts a figure on these savings".

Dr Jorge Mestre-Ferrandiz, Industrial Economist at the ABPI-funded Office of Health Economics, declined to comment until he had time to scrutinise the study's modelling and assumptions.

Nevertheless, pro-industry analysts point out that an annual saving of £228 million is just a tiny fraction of the total NHS drugs bill, which stood at £7.2 billion in 2001. They say this saving around 3% is insignificant, especially when the administrative costs of the clawback scheme are taken into consideration. The system works by the Government anticipating the saving pharmacists make from discounts on generics and parallel imports and then taking an 11.5% slice from the NHS list price it uses to reimburse dispensers.

The study said parallel trade also generates indirect savings by creating competition by forcing pharmaceutical companies to reduce their prices.

"These indirect savings are difficult to quantify but they could be larger than the direct savings", the authors said. They concluded:"These direct and indirect savings from the parallel trade of pharmaceuticals have played a major role in holding down the spiralling public healthcare bill in many European countries".

The study looked at five European countries that have significant markets for parallel imports Denmark, Germany, Sweden, the Netherlands and the UK. The UK's calculated saving was nearly twice the size of the second biggest total, Germany's E194 million.

pharmafocus@pharmafile.co.uk