Glaxo under scrutiny in EU

In a "landmark case" over trade rules that seems to have even the courts confused, GlaxoSmithKline received a mixed ruling, and some are calling the case "a crucial victory for competition." 

Late in 2000, the company's Grecian subsidiary, GSK AEVE, noting product shortages, stopped supplying Greek wholesalers and went directly to hospitals and pharmacies instead.  Yesterday, a justice in the highest court, the European Court of Justice, ruled that pharmaceutical companies in the European Union must meet "ordinary" orders made by wholesalers to prevent parallel imports, but left the definition of "ordinary" up to the national courts.

If the orders are unusual in size, the court ruled that the company does have the right to protect its commercial interests. To that extent, GSK said the orders coming in from the wholesalers were "preposterous" and "exorbitant," implying that the wholesalers clearly intended to sell at least some of the medications in other markets.

The wholesalers initially brought claims against GSK AEVE, saying its refusal to supply them was in conflict with the EU competition law, as well as that of Greece. Yesterday, the ECJ determined that the company was taking advantage of its position, but that it had some rights since its commercial interests were in question. 

The case helps clarify the rights of drugmakers, such as GSK, which say that parallel import practices cost them nearly $6 billion in sales every year, because the wholesalers purchase drugs in countries with price controls and then redistribute them in countries where they can garner a higher price.

The ruling, however, seems to further complicate the order (How large of an order is too large?) and will likely result in more companies going to battle in court.

- check out the European Commission's release
- read the story at PharmaTimes
- see more at First Word Plus

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