Parallel importation of pharmaceuticals – when is repackaging necessary?
The repackaging of pharmaceutical products by parallel importers is a long debated subject. The above question was reconsidered in a set of judgements by the CJEU in November last year (Novartis Pharma GmbH v Abacus Medicine A/S (C 147/20), Bayer Intellectual Property GmbH v kohlpharma GmbH (C 204/20) and Merck Sharp & Dohme BV and others v Abacus Medicine A/S and others (C 147/20)) prompted by a new EU Regulation on the packaging of medicinal products.
New authenticating requirements
Since 2019, as a result of the implementation of a new EU Regulation, all medicinal products for human use in the EU are required to have two safety features:-
- a unique identifier (typically a barcode or QR code) that indicates the source of the goods, and
- that the packaging of medicinal products includes an anti-tampering device to indicate whether the goods have been opened or altered.
Together these added requirements are intended to ensure that the products are authentic and to protect consumers.
These new requirements sparked renewed questions from parallel imported and pharmaceutical brand owners about when repackaging, as opposed to relabelling, is permitted under intellectual property law.
IP and exhaustion
In the EU, a trade mark owners’ rights are considered to be “exhausted”, in that it cannot object to further commercialisation of its goods, if it has benefited from the first sale of the goods in the EEA. These goods can then legitimately be purchased and re-sold by third parties, provided that the condition of the goods has not been altered or impaired.
Hence the debate between pharmaceutical brand owners and parallel importers. Pharmaceutical companies typically prefer that their goods are simply relabelled if necessary. This is accepted as often required to some extent to comply with local regulations in the import territory, such as adding a new safety notice in the appropriate language.
Parallel importers however generally prefer the freedom to completely repackage the goods if seen fit. A new argument for this freedom was made in view of the now required anti-tamper devices. If the importer must open the packaging to insert a new notice or leaflet, the device would be broken and the goods subsequently rejected by consumers in the import market. In such cases, it would be necessary to entirely repackage the goods and add a new anti-tamper seal or device. At least this was the argument of the parallel importers.
Conditions for repacking
Previous case law has provided a number of conditions which must be met before a parallel importer can repackage pharmaceutical products. If these conditions aren’t present and the goods are repackaged, the pharmaceutical company and trade mark owner can object to the parallel importation of the goods. These conditions can be summarised as follows:
Repackaging must be necessary in the import territory due to national law or practice. It can also be considered as necessary if consumers in the import market will strongly reject relabelled goods (as opposed to those that are entirely repackaged).
The product must remain in its original state.
The parallel importer must give the trade mark owner prior notice that it intends to repackage the product.
The new packaging must contain an indication to identify the identity of the party responsible for repackaging the goods.
The new packaging must not damage the repute of the trade mark, for example if the new packaging were to be of poor quality.
So, in the reverse, provided that the above conditions are met, parallel importers of pharmaceutical products are able to repackage the goods without objection from the trade mark owner.
Recent CJEU decision
In the recent set of decisions from the CJEU it considered how these conditions, particularly the first, apply in light of the new EU Regulation. Namely, does the anti-tamper device and its need to be broken by parallel importers to comply with local requirements (e.g. to insert new safety notices or user pamphlets in the appropriate language) then allow such traders to repackage the goods?
The CJEU answered in the negative. It considered that there will be instances when the original packaging can be reused, simply with a replacement anti-tamper device added. The first principle for parallel importers should be to relabel; repackaging should only be considered if necessary.
Crucially, in line with the first conditions above, only when there is a strong resistance from a significant portion of consumers to relabelled goods, or goods which bear visible traces of being opened and fitted with new safety features, can parallel importers repackage. Further, this exception should be interpreted narrowly. The parallel importer must show that the rejection of relabelled goods, or a resistance to such goods, exists in the market. It cannot simply make this assertion on the basis of a general presumption.
The recent decisions therefore attempts to maintain the balance between free market principles of the EU and the rights of trade mark owners. They should provide some reassurance to trade mark holders that parallel importers cannot now freely repackage their goods on the basis of needing to comply with the new EU Regulation intended to keep consumers safe. Whereas they also seek to avoid such right holders artificially partitioning EU markets and being able to object to the further commercialisation of their goods after the benefit of the first sale has been enjoyed.
The decisions provide some clarity to parallel importers as to when it can and how it must repackage pharmaceutical products. Although, some ambiguity remains around when it will be considered that consumers have shown enough resistance to relabelled and re-sealed goods to permit repackaging.
For UK parallel importers, as the UK is no longer in the EU or EEA, extra caution is required. Should the owner of an EU right sell its product in to the UK, and a UK trader then seeks to import the goods back in to the EU, the EU right owner can now object to the re-entry of these goods in to the EU. It’s rights are no longer exhausted by first sale in the UK.
In contrast, for UK brand owners, their IP right are exhausted by first sale in the UK or the EEA, so parallel imports into the UK from the EEA cannot be objected to by the right holder if it has already benefited from the first sale in the UK or EEA. This is of course subject to there being legitimate reasons for the brand owner to oppose the re-entry of the goods, such as where the condition of the product has been altered or impaired, therefore also bearing in mind the debate surrounding relabelling versus repackaging above.
Whilst rulings from the CJEU are no longer binding on UK courts, they will no doubt still look to the CJEU for guidance, particularly when considering delicate debates such as the above concerning pharmaceuticals and consumer safety. As such, the recent decisions remain relevant for UK pharmaceutical companies and the management and enforcement of their IP.
This article was prepared by HGF Trade Mark Director Lauren Somers.