European Court Sides With Drug Industry on Pricing

[Cees Binkhorst]

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Back to square one?

Groet / Cees

http://www.nytimes.com/2009/10/07/business/global/07eurodrugs.html
October 7, 2009
European Court Sides With Drug Industry on Pricing
By JAMES KANTER

BRUSSELS — Europe’s highest court handed the pharmaceutical industry a
victory Tuesday, saying that regulators should reconsider whether efforts
to prevent traders from exploiting price differences across Europe should
be exempted from antitrust rules.

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 into northern
nations like Britain, where drugs generally command higher prices.

In order to combat the discounters, GSK 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 E.U. 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 GSK’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 GSK could be significant at a time when big drug
companies are facing stiff price competition.

Companies like GSK also are under pressure in Europe as governments step
up efforts to evaluate are selling medicines at prices in-line with the
kind of results they deliver.

“On the whole, today’s judgment is good news for pharma companies,” said
David Hull, the head of the E.U. competition practice at the law firm of
Covington & Burling.

Even so, pharmaceutical companies should remain wary of implementing
systems similar to the one used by GSK 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 E.U.
regulators to stick by earlier findings that GSK’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.

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