In two recent landmark decisions, Novartis v. Abacus (C-147/20) and Bayer v. kohlpharma (C-204/20), the Court of Justice of the European Union (CJEU) strengthened the position of drug manufacturers against repackaging practices of parallel importers. The court held that, based on European Union trademark law, the drug manufacturers can stop parallel importers from distributing their medicinal products if they have been repackaged in new outer packaging with the corresponding trademark of their medicinal product affixed.
The practice of parallel importers in the medical sector
Due to differing price levels on the pharmaceutical markets in various EU member states, parallel importers buy drugs for a lower price in one market (e.g., Eastern Europe) and sell them at higher prices in other markets (e.g., Germany). The products are either relabeled or the outer packaging is replaced in its entirety in order to change the packaging language. In the latter case, the trademark of the reference product is affixed to such repackaging by the parallel importer. In the current cases, pharmaceutical companies Bayer and Novartis have opposed this repackaging practice of parallel importers kohlpharma and Abacus.
Legal framework shaped by CJEU case law
The CJEU has dealt with parallel imports of medicinal products in several landmark decisions. The starting point is the right of the drug manufacturer to prohibit third parties from using its trademark during trade (Art. 9 para. 2 of the EU trademark regulation 2017/1001). However, due to the principle of free movement of goods within the EU and the fact that the trademark proprietor's rights are generally exhausted for the entire EU once an individual product bearing the mark has been placed on the EU market (Art. 15 of the EU trademark regulation 2017/1001), it is settled case law that parallel imports of medicinal products are generally permissible (case no. C-16/74). For repackaged products, this is only the case if the conditions carved out by the CJEU in previous decisions (joined case nos. C-427/93, C-429/93, and C-436/93) are fulfilled. The conditions require that (i) repackaging is necessary for commercializing the goods in the import market, (ii) the condition of the goods is not affected, (iii) the repackaging is made transparent on the goods, (iv) the importer informs the manufacturer about the repackaging, and (v) the new presentation does not cause damage to the reputation of the trademark.
Repackaging v. relabeling of pharmaceutical products
In the decisions at hand, the CJEU focuses more closely on the necessity of repackaging over pure relabeling. The court recognizes that repackaging has a stronger impact on the rights of the trademark proprietor than mere relabeling. The court emphasizes that the repackaging must therefore be a necessary means for the importing of the product. This, according to the court, would be the case, if regulations or practices in the importing EU member state prevent the distribution of that product on the market of that EU member state in the same packaging in which the product is distributed in the exporting EU member state. However, it would not be the case if the repackaging of the product is based exclusively on the parallel importer's desire to obtain an economic advantage.
The parallel importers argue that repackaging is necessary due to the requirements of the EU falsified medicines laws, which provide that all medicinal products sold in the EU must have a unique identifier (i.e., a barcode) and an anti-tampering device (i.e., a security seal to verify whether the packaging of a medicinal product has been opened or altered) to ensure that their content is authentic (see Art. 47a of Directive 2001/81, inserted by Directive 2011/62/EU and Art. 4 Regulation 2016/161). In order to replace the package leaflet of the original product with a package leaflet in the language of the import market, the anti-tampering device will have to be broken. If the packaging would only be relabeled and a new anti-tampering device added, the traces of the damaged original security seal may still remain visible. Parallel importers claim that this would be a major barrier to importing the products into other EU member states as medicinal products with damaged packaging are less likely to be accepted, especially by consumers.
In the decisions at hand, the CJEU considered these risks to be less significant. It held that the aforementioned Article 47a(1)(b) of Directive 2001/81 allows reuse only on the condition that the original security features can be replaced by those that are equally suitable for verifying the authenticity and identity of the medicinal products concerned and for providing evidence of their tampering. The fact that wholesalers or consumers may be irritated by traces of a broken anti-tampering device has no bearing, as it only had to be made clear to them that these traces were made by the parallel importer. A general presumption of consumer resistance to relabeled drugs is not sufficient to require repackaging. This may only be different if it was clearly demonstrated that a significant proportion of consumers decided against purchasing the relabeled products. Under these circumstances, the repackaging of the products in new packaging would not be aimed exclusively at an economic advantage, but at gaining effective access to the market.
Conclusion
The two CJEU decisions are good news for manufacturers, as they raise the bar for repackaging of parallel imported drugs. Importers will now have to provide proof for each market that the majority of consumers are less likely to buy relabeled products over repackaged products, even when they are informed that relabeling was done by the parallel importer. Otherwise, only relabeling will be permissible.
MoFo research assistant Tim Stripling contributed to this article.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved
