ECONOMY

Glaxo drug restrictions ruled unlawful

GlaxoSmithKline Plc, Europe’s biggest drugmaker, breached European Union rules by restricting Greek wholesalers from reselling drugs on more profitable markets, an adviser to the European Union’s top court said. Greek pharmaceutical companies sued Glaxo, part of an eight-year-long dispute over the company’s refusal to supply them with three drugs in Greece and limit the stock they could export to higher-priced countries. Drugmakers have for decades fought the practice by which wholesalers buy medicines at state-regulated prices in countries such as Greece, then sell them on more expensive markets such as the UK. Yesterday’s case will clarify the rights of drugmakers to control supply to so-called parallel traders. Drugmakers such as Glaxo claim the practice costs them more than -4 billion euros in annual lost sales. «A pharmaceutical company holding a dominant position which refuses to meet the orders of wholesalers in order to limit parallel trade engages in abusive practice,» Damaso Ruiz-Jarabo Colomer, an advocate-general at the European Court of Justice, said in a non-binding opinion today. The Luxembourg-based court follows its advocate-generals’ advice, at least in part, in most cases. London-based Glaxo said it is reviewing the opinion. «The final judgment on this matter will be made by the European Court of Justice,» Glaxo spokeswomen Alice Hunt said in an e-mailed statement. ‘Free movement’ The European Association of Euro-Pharmaceutical Companies, a group that supports parallel trade, said the opinion was «important.» Other drugmakers should «learn the lesson of this opinion and stop hindering the free movement of medicines inside the EU,» Heinz Kobelt, secretary-general of the group, said in a statement. Glaxo in 2000 stopped supplying the Greek traders with the epilepsy drug Lamictal, Imigran for migraines and the Serevent asthma treatment. Glaxo instead distributed the drugs directly to Greek hospitals and pharmacies. Later, Glaxo’s Greek unit limited the quantities supplied to the traders to national demand. The volume of the wholesalers’ orders were «preposterous» and »exorbitant,» lawyers for Glaxo told the court at a hearing in January. The parallel drug trade, which is supported by the European Commission, takes away hundreds of millions in euros from the pharmaceutical industry, the lawyers said. ‘Stifling’ imports The court’s adviser today said that even if Glaxo’s conduct was justified, it was «disproportionate» because it removed competition in Europe by «stifling parallel imports.» It’s the second time the case has reached the EU court, which in 2005 rejected it because it had been referred by the Greek competition authority and not by a court. In a non-binding opinion in 2004, one of the court’s advocate generals said Glaxo’s practice does not abuse the drug-pricing system in Europe under which the different nations set prices. In addition to the dispute before the Greek competition authority, the wholesalers sued Glaxo in Greek courts in 2001. They accused the company of breaching EU antitrust rules. A Greek appeals court in 2006 referred the case back to the EU court for guidance on how much companies can restrict parallel trade. The Greek antitrust authority in 2006 decided that Glaxo should be allowed to restrict drug supply to the wholesalers.