Healthy Skepticism Library item: 16598

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Publication type: news

Kanter J
European Court Sides With Drug Companies Over Pricing Matter
The New York Times 2009 Oct 6
http://www.nytimes.com/2009/10/07/business/global/07eurodrugs.html?_r=1

Full text:

Europe’s 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 ruled that the company was restricting competition within the European Union. 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’s evidence properly. On Tuesday, the European Court of Justice upheld that ruling.

“The commission must reconsider whether GlaxoSmithKline’s general sales conditions in Spain may be exempted from the community competition rules,” 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.

“On the whole, today’s judgment is good news for pharma companies,” said 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 “more detailed analysis of the evidence required by the E.U. courts.”

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

“We trust that the European Commission will have the courage of its convictions,” 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, “with the losers being national social security systems, taxpayers and patients,” Mr. Mohringer said.