Parallel imports and price controls

Abstract

Price controls create opportunities for international arbitrage. Many have argued that such arbitrage, if tolerated, will undermine intellectual property rights and dull the incentives for investment in research-intensive industries such as pharmaceuticals. We challenge this orthodox view and show, to the contrary, that the pace of innovation often is faster in a world with international exhaustion of intellectual property rights than in one with national exhaustion. The key to our conclusion is to recognize that governments will make different choices of price controls when parallel imports are allowed by their trade partners than they will when they are not.JEL Classification: O34, F13

Modern Issues and Methods in Biostatistics

“…The prevailing wisdom, expressed for example by Barfield andGroombridge (1998), Chard andMellor (1989), and Danzon and Towse (2003), is that parallel trade impedes the ability of research-intensive firms such as those in the pharmaceutical industry to reap an adequate return on their investments in new technologies. Grossman and Lai (2008) challenge the prevailing wisdom that parallel trade is induced by different national price controls. They argue that the existing policy discussions and formal modeling overlook an important effect of national policy regarding the exhaustion of IPRs.…”

“…The European Union provides for regional exhaustion of IPR, whereby goods circulate freely within the trading bloc but parallel imports from nonmember countries are banned. Japanese commercial law permits parallel imports except when such trade is explicitly excluded by contract provisions or when the original sale is made subject to foreign price controls (Grossman and Lai 2008).…”

Trade Marks and Free Trade

“…85 The purpose of price discrimination is, as mentioned above, the maximisation of manufacturers' profits through a lower pricing of their products in national markets with low per capita incomes, where the price elasticity of demand is, by rule, high, and through a higher 84 See Abbott (1998, Barfield andGroombridge (1999-2000), Chard and Mellor (1989), Chen and Maskus (2005), Danzon (1998), Gallini and Hollis (1999), Ganslandt and Maskus (2007a, b), Grossman and Lai (2008), Li and Maskus (2006), Malueg and Schwartz (1994), Chen (2002, 2004), Maskus (2000a), Müller-Langer (2012), Rey (2003), Szymanski and Valletti (2005) and Valletti (2006). It is noted that several studies have also been commissioned to assess the impact of parallel imports from non-EEA Member States on the socioeconomic welfare of the EU/EEA Member States (see the economic studies cited in infra section "Reactions Among Legal Writers to the Outcome of the Judgment in Silhouette International Schmied v. Hartlauer Handelsgesellschaft").…”

The Welfare Impact of Parallel Imports: A Structural Approach Applied to the German Market for Oral Anti-Diabetics

“…However, even from a theoretical point of view, these mechanisms are not unequivocally clear. Parallel imports might well have positive eects on the innovation intensity due to the dierent incentives rms and regulators face when IPRs are internationally rather than nationally exhausted (e.g., Grossman and Lai, 2008). Hence, the assessment of the welfare eects of parallel trade is essentially an empirical issue.…”

“…to high-price countries such as the UK, Sweden, and Germany (Kyle, 2011;Grossman and Lai, 2008). In 2012, parallel trade amounted to about e5.3bn in the EU and to e2.9bn (based on ex-factory prices) in Germany (Murray and Weissenfeldt, 2013).…”