Cross-Border Trade: Policy Implications for the Pharmaceutical Industry

ABSTRACTCsross-border trade (aka parallel trade, reimportation, or importation1) via Internet-based, mail-order pharmacies and, potentially by US community pharmacies and wholesalers may have a long-term negative impact on the industry's financial ability to conduct research and development. The net financial effect on a global pharmaceutical manufacturer is unclear, but unfettered parallel trade/importation may result in a reduction in R&D expenditures and future drug innovation because current and future R&D requires significant positive free cash flows and operating margins. Public policy to increase consumers' access to affordable prescription drugs should be designed to consider the long-term social value of pharmaceutical innovation rather than a short-term political fix involving importation and price or reimbursement controls.