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Parallel Trade in Scandinavia1. Parallel Trade in

Scandinavia

2. Introduction

3. SMART CLUB

4. The supply chain

5. A market, or an ecology

6. The model, animals in the woods

7. Scandinavian population

8. Scandinavian PI markets

9. Norway

10. Sweden

11. Denmark

12. Differences and similarities

13. Pharmacies

14. The underlying process

15. The story

16. Example of a story

17 Price structures

18 Currencies

19 GBP

20 NOK

21 SEK

22 DKK

23 The next few years

24 Next century, the crystal ball

25 References

26 The end, the ecologial approach

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Introduction

• A general phenomenon.

• Confined to EU and EEA, 16th of July 1998, the Silhouette case in ECJ.

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SMART CLUB

• SMART CLUB, an example.

• A one stop shop

• A wareouse based on parallel import for branded products

• The power is in the retail part of the distribution chain

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The supply chain• TRADITIONAL

1. Manufacturers, or trademark owners

2. Wholesalers

3. Pharmacies

• PARALLEL DISTRIBUTION

– New steps, 3 new palyers

– A large detour

– Discounting

– Very effective

– Societal benefit

– Well adapted to changes

PI - a detour

Evolution = adaption

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A market, or an ecology?1. The patient is not informed,

and the decision making process is split in 3 for reimbursed medicine

2. Some criteria for an efficient market: 1. Large number of non-dominant

players2. Informed customers3. Rational behaviour

3. The pharmaceutical market is an agglomeration of monopolies

DTC – Direct to Customer Marketing, may be considered an opportunity to empower the customer

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The model, the animals in the wood

• The market may be described as an ecology

• The market is governed by natural selection

• Dinosaurs

• Fat cats

• Birds, examples of effective down-sizing

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Scandinavia, population

POPULATION MARKET PPPmillions 1000 US $ 1998

Norway 4,4 803Sweden 8,8 2 040Denmark 5,2 1 010total 18,4 3 853

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Scandianavian PI marketsParallel Import in Scandinavia

0,00 %

2,00 %

4,00 %

6,00 %

8,00 %

10,00 %

12,00 %

SWEDEN

DENMARK

NORWAY

SWEDEN 0,02 % 0,02 % 0,02 % 1,94 % 6,19 % 7,43 %

DENMARK 0,16 % 5,40 % 7,55 % 9,78 % 10,57 % 10,25 %

NORWAY 0,00 % 0,20 % 1,42 % 3,48 % 7,13 % 7,15 %

1994 1995 1996 1997 1998 MAT.6.99

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Norway, USD PPP

• No 1, Astra Zeneca has decreased turnover

• No 2, Merck is on a plateau

• No 3, Glaxo is growing

• No 4, Pfizer is increasing rapidly

• No 5, Pharmacia Ujohn grows slowly

• No 6, Novartis decreases

• No 7, Paranova, the largest PI company, grows rapidly

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Sweden, USD PPP

• The 3 largest companies, AstraZeneca, Pharmacia & Upjohn and Merck are all heavily affected by PI

• Cross Pharma is the 6th largest company in Sweden

• Medartuum is the 17th largest

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Denmark, USD PPP

• The largest companies are on a plateau

• Denmark is the most ”mature” PI market, the change lately are less dramatic than in Sweden

• No 4, Orifarm, has a strong growth

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-Differences and similarities

• Culture– Languages

– Political system

• Business life– Index of 500 largest/1”

inhabitants

– Clusters

• The national character

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Pharmacies

1. Reference pricing (NB VAT)

2. Generic substitution and empowering

3. Apoteket AB4. Apokjeden and LIS5. Amgross6. Gatekeepers and police7. Socialised medicine is

good, market is …

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The underlying process

• Interstate price differentials

• Currency fluctations• Cost containment• Pharmacoeconomics,

PI is cost minimalisation

• DTC

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The story

• Media, or what story do you have?

• Basic scripts:– Marketing vs bribery

– Marketing dementia or flooding

– David and Goliath

• What is the essence of drama?

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Example of a story

”Wrong use and side effects of parallel import is known by 15% of the health personel”

• It is expensive to tell

• It tries to belittle the PI industry

• It puts shame on those selling PI

• Do you think it works?

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Price structures

• Denmark– Discounts forbidden

– Obligation to sell low cost

• Norway– Profit share scheme

– Referece pricing

• Sweden, one body

• Reference pricing

• Tenders

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Currencies

• The British story• The Euros• Norwegian kroners,

8,12 the 271199 • Swedish kronors• Danske kroner

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GBP

• The GBP is strong now

• PI is booming

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NOK per Euro• Last year, the

krone became weaker

• Now it is relatively strong

• 261199, it was 8,12 NOK/Euro

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SEK

• Turmoil beginning 1999

• Stabilised now

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DKK

• Very strong Jan 96

• Now stable

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The next few years

• Legal issues, Bayer, Glaxo Wellcome, Paranova, Losec etc.

• Price regulation schemes in ES and the UK

• Business is opportunistic

• PI companies are very effective

• Vertical integration

• Generics

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Next century, at the speed of light

• 2010 and later, Bill Gates

• Flow of goods and flow of information

• Internet• Do we need

wholesalers and pharmacies?

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References

1. Parallel Imports – Effects of the Silhouette Ruling. Swedish Competition Authhority, January 1999. Web site www.kkv.se

2. Pharmaceutical pricing and reimbursement in Europe –1999 Edition, Dr Panos Kanavos, 24th August 1999, by PJB Publications Ltd

3. www.sigma.no

4. www.eaepc.org, catalogue /Members/N-Norway/index.htl

5. Business at the speed of thought – using a digital nervous sytem, Bill Gate, Warner books 1999

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Final, the ecologial approach

• The smallest fish: the world is not just

• The middle fish: the world is just sometimes just

• The largest fish: the world is just