[Ip-health] EU Court sides with Pharma on parallel trade

[robert weissman]

October 7, 2009


  European Court Sides With Drug Companies Over Pricing Matter

By JAMES KANTER
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BRUSSELS =97 Europe=92s highest court handed the pharmaceutical industry a
victory on Tuesday, saying that regulators should reconsider whether
efforts by drug makers to prevent traders from exploiting price
differences across Europe should be allowed.

The decision, in a case involving GlaxoSmithKline, is a blow to
governments in northern Europe that like the discount trade, which helps
them cut the price of medicines they buy in bulk for their national
health services.

The case concerned discounters who buy bulk batches of medicines in
southern European countries like Spain and sell surpluses in northern
nations like Britain, where drugs generally command higher prices.

To combat the discounters, Glaxo introduced a policy in the late 1990s
to put higher prices on dozens of drugs sold in the Spanish market, but
which it had determined were destined for export.

Shortly after, the European Commission
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an_commission/index.html?inline=3Dnyt-org>
ruled that the company was restricting competition within the European
Union
<http://topics.nytimes.com/top/reference/timestopics/organizations/e/europe=
an_union/index.html?inline=3Dnyt-org>.
The commission has long favored building a seamless single market for
goods, including prescription drugs, with the aim of lowering prices.

A lower court overturned the decision in 2006, saying that the
commission had failed to consider Glaxo=92s evidence properly. On Tuesday,
the European Court of Justice
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an_court_of_justice/index.html?inline=3Dnyt-org>
upheld that ruling.

=93The commission must reconsider whether GlaxoSmithKline
<http://topics.nytimes.com/top/news/business/companies/glaxosmithkline_plc/=
index.html?inline=3Dnyt-org>=92s
general sales conditions in Spain may be exempted from the community
competition rules,=94 the European Court of Justice said in a statement.

Trade in discounted medicines is one of the most fiercely contested
practices within the pharmaceutical industry in Europe.

The pharmaceutical industry has long complained that the practice
undermines its ability to recoup the costs of developing drugs, and a
final victory for Glaxo could be significant at a time when big drug
companies are facing stiff price competition.

=93On the whole, today=92s judgment is good news for pharma companies,=94 s=
aid
David Hull, the head of the European Union competition practice at the
law firm of Covington & Burling.

Even so, pharmaceutical companies should remain wary of adopting systems
similar to the one used by Glaxo in Spain, he said, because regulators
now need to carry out a =93more detailed analysis of the evidence required
by the E.U. courts.=94

Traders said they were disappointed by the verdict, and they urged
European regulators to stick by earlier findings that Glaxo=92s system was
anticompetitive.

=93We trust that the European Commission will have the courage of its
convictions,=94 said Andreas Mohringer, the president of the European
Association of Euro-Pharmaceutical Companies, which represents the traders.

Allowing the system in Spain to stand would mean competition would
suffer in Europe, =93with the losers being national social security
systems, taxpayers and patients,=94 Mr. Mohringer said.