International Institute for Sustainable Development (IISD), Swiss Agency for Development and Cooperation (SDC), June 2007 

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This paper was prepared at the request of the Swiss Agency for Development and Cooperation for use in dialogue with members of the Swiss Federal Assembly as that legislative body considered proposals to modify Switzerland's law on patents and parallel importation. The paper provides an overview of the arguments for and against allowing international exhaustion of patent rights, with a focus on trade in pharmaceuticals and public health. It explains the different potential geographical bases for exhaustion: national, regional and international. It observes that there may be differences between the way exhaustion policies affect "ordinary goods" and goods with significant public health effects. It outlines arguments from the producer and consumer sides, including arguments made by pharmaceutical producers in favor of market segmentation to allow price discrimination in favor of low income populations. It notes the option of limiting exhaustion to a regional group with relatively homogenous income levels and regulatory supervision, observing also that this does not take advantage of lowest world market pricing. The objective of the paper was to provide parliamentarians with a concise overview of different sides of the parallel importation discussion.