Drug firms seek help on anti-trust rules

Date: 28/05/1998

By Peter Chapman

PHARMACEUTICAL firms and member states are calling on the European Commission to give companies clear guidelines on how to avoid EU anti-trust action when they take steps to thwart the market in 'damaging' parallel imports.

This follows the launch by competition officials of a probe into the pricing policy of UK-based drugs company Glaxo-Wellcome, after its move to clamp down on wholesalers exporting its products from Spain to more expensive markets, thereby eroding the firm's profits elsewhere.

The company argues it has to supply drugs to chemists and outlets in the Spanish health system at lower prices than normal because of government restrictions.

It now wants to raise its charges to Spanish wholesalers who are cashing in on the current cheap prices. Such a move could technically be in breach of the EU's anti-trust rules outlawing price fixing.

Glaxo-Wellcome argues that it is not setting two prices but one, claiming it is the Spanish government which is creating an artificially low price for domestic consumption.

The company has notified the Commission of its plan and is now waiting to hear if it will be granted an exemption from its rules. Commission sources say Glaxo-Wellcome has yet to respond to detailed questions over its pricing policy.

The case has highlighted widespread concerns within the industry over the issue of parallel imports. The European Federation of Pharmaceuticals Industries and Associations (EFPIA) warns that the approval procedure Glaxo-Wellcome is having to go through takes time and is uncertain.

It says that parallel imports are a major headache for drugs firms and they need to be able to tackle the problem without facing the risk of EU court action each time.

An EFPIA expert said companies had pulled out of certain markets such as Greece because government price limits on drugs sold there were so low that they opened up massive opportunities for exporters to sell outside the country.

The drugs lobby argues that the industry needs "appropriate mechanisms" at EU level to address the price differentials between member states and the issue of parallel trade in over-the-counter medicines.

The EFPIA says it plans to hold talks with Commission officials to put forward its own ideas on what these mechanisms should be in time for them to be included in a key policy paper on the single market in pharmaceuticals, due to appear in the autumn. That paper will provide the basis for discussion at a December round table between Commission, member state and industry representatives.

Single market ministers supported the EFPIA's calls for the parallel imports issue to be tackled when they met earlier this month. EU diplomats want the Commission to give details in the autumn policy paper of how it intends to use its competition powers.

"There are procedures where companies can gain exemptions from these competition rules. Clarification of the Commission's approach to Article 85 of the treaty on these issues would be nice," said one diplomat. "It may be that the issue will be clarified by the approach it takes to the Glaxo case."