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Absent ruling hurts GSK

GlaxoSmithKline must continue supplying drugs to parallel traders after Europe's highest court failed to deliver a ruling.

GlaxoSmithKline (GSK) received a blow after the European Court of Justice refused to rule whether it can legally limit the supplies of three drugs to Greece in a bid to stop parallel traders from re-importing them to more expensive markets.

GSK, which was appealing a 2001 decision by the Greek Competition Commission that it had abused its dominant position, now has no choice but to continue supplying Imigran, Lamictal and Serevent to Greek wholesalers.

With a decision on the case seen as a landmark ruling that would determine the future of parallel trade, drug companies will be disappointed that they may now have to wait as long as five years for the issue to be decided.

ìThe Court has found that it has no jurisdiction to answer the questions referred by the Greek competition authority since that body is not a `court or tribunal',î the Luxembourg-based European Court of Justice said in a statement.

ìThis is a positive ruling for the wholesalers,î said Tim Price, spokesman for the European Association of Euro-Pharmaceutical Companies (EAEPC), representing parallel traders.

EAEPC president Hans Bogh-Sorensen described GSK's stance on the three medicines as ìanti-competitive as well as dangerous for patient healthî.

ìIt is high time that the manufacturers finally got the message and ceased their practice of restricting supplies,î said EAEPC secretary general, Dr Hein Kobalt.

Back in October, Francis Jacobs, an advocate general at the EU high court said GSK should be allowed to impose restrictions as the differences in the price of the medicines were the result of state intervention.

GSK spokesman David Mawdsley said the company was disappointed because the court ìdidn't take the opportunity to accept the reference and issue a decision supporting the opinion of the advocate generalî.

Parallel trade has long been a contentious practice for the R&D-based industry despite its legality. Manufacturers say that the practice of shipping medicines between European countries to exploit price differences reduces incentives for innovation and provides few cost benefits, merely shifting savings to middlemen.

However, parallel traders insist the practice helps curb rising healthcare costs and constitutes the only form of competition to patented drug brands. According to IMS Health, parallel trade generates as much as Ä5bn ($6.2bn) a year in Europe, about 5 per cent of total European sales.

30th September 2008

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