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GSK scores partial victory over parallel traders

Published on 29/09/06 at 12:30pm

GlaxoSmithKline has won a partial but significant victory in a European Union court which could give it and other pharma companies more freedom to block parallel traders.

The practice of parallel trade involves wholesalers buying cheap prescription medicines in countries such as Spain and then selling them on in higher price countries such as the UK, and is completely legal under EU law.

Europe's trade officials have protected the rights of parallel traders to move goods between member states, and were behind a 2001 legal case which saw GSK barred from using dual pricing in Spain to prevent parallel trade.

Judges in the EU's Court of First Instance (CFI) have now partly overturned this ruling, saying that pharma companies should be allowed to use measures to prevent the trade.

GSK said it welcomed the CFI's judgement and added that it continued to believe that "parallel trade in the context of the pharmaceutical industry,  where prices are directly or indirectly controlled by EU governments,  serves only to benefit parallel traders."

Parallel traders insist that the practice saves money for healthcare systems such as the NHS, with one study suggesting it could save the NHS as much as 200 million a year.

The European Association of Euro-Pharmaceutical Companies (EAEPC), which represents parallel traders said the CFI had once more failed to bring clarity to the precise rules on the application of EU competition law to the pharmaceutical sector.

A spokesman said: "The pharmaceutical industry's convoluted argument that less parallel trade will lead to higher profits and therefore to increased investment in R&D and more innovative and effective medicines, is flawed  and does not stand up under theoretical or empirical analysis."

The spokesman added: "There is no causal link between parallel trade and the industrys ability to innovate."

The court ruling was not entirely in GSK's favour, agreeing with the Commission that dual pricing was anti-competitive. But the court's judgement will spur on the pharmaceutical industry to pursue its argument that it should be exempt from some EU trade rules because of its high R&D investment.

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