GSK abused dominant position in Greek parallel trade case, says Court

The European Court of Justice (ECJ) has ruled that GlaxoSmithKline had abused a dominant market position in refusing to supply certain drugs to wholesalers in Greece.

In a landmark ruling with potentially wide implications for parallel trade the ECJ concluded that the UK company must fill wholesaler orders of an "ordinary" magnitude but had the right to refuse supply beyond this. The Greek courts will now hav to decided what constitutes an "ordinary" wholesale order.

The Court rules that "a pharmaceutical company is abusing its dominant position if it refuses to meet ordinary orders by wholesalers in order to prevent parallel exports".

This suggests the court took the view that GSK's actions may have affected trade between EU member states to the prejudice of consumers. Despite national pricing of drugs, it also did not accept the argument that parallel importing was only of minor benefit to consumers.

However, a company "must nevertheless be in a position to take steps that are reasonable and in proportion to the need to protect its own commercial interests". The ruling concludes that to ensure that steps taken by a company are reasonable and proportionate it "must be ascertained whether the orders of the wholesalers are out of the ordinary". This decision must be based on national needs and previous trading history.

In the wake of the ruling, Jonathan Todd, spokesman for European Competition Commissioner Neelie Kroes confirmed the Commission was looking to apply the judgement well outside of the GSK case and internationally.

Representatives of parallel traders have said an ECJ judgement on the legality of dual pricing schemes - under which wholesalers are charged much less for the same products when the manufacturers is sure it is to be sold domestically and not destined for export - could be expected in about 12 months. However, this could change if the European Commission seeks to apply this judgement to dual pricing.

Monika Derecque-Pois, director general of the European Association of Pharmaceutical Full-line Wholesalers (GIRP), looked for the judgement to be widely implemented. "This judgement offers national courts and competition authorities, as well as the European Commission, some guidance on how to deal with such complaints." There are complaints pending before the European Commission in Brussels and before the national courts in Belgium, France, Greece, Italy and Spain, she added.

Parallel traders also welcomed the decision. Richard Freudenberg, president of the parallel traders body the European Association of Euro-Pharmaceutical Companies (EAEPC) said "The ruling makes it clear that efforts by manufacturers to stamp out their competitors by abusing their dominant position are illegal. It is a clear signal that patients in Europe can continue to count on the benefits provided by parallel distribution of medicines."

Nevertheless, the ECJ's ruling that companies should have the right to refuse orders that are out of the ordinary in terms of quantity was seized on by GSK. "This allows GSK to fulfil its duty to patients in all EU Member States, ensuring that they receive supplies of GSK's medicines and that GSK is not obliged to supply amounts of its products which are out of the ordinary in order to feed parallel trade," the company stated.

"The majority of pharmaceutical pricing in the EU is fixed by governments. The resulting price differentials between countries are exploited by parallel traders who profit from the purchase of medicines in low price countries and their subsequent sale in countries where prices are higher. This practice has little or no benefit to payers or patients."