Drug-price row casts cloud over Polish accession talks

Date: 21/02/02

By Laurence Frost

THE European Commission has intervened in a stand-off over drug prices that could have ramifications for Poland's accession to the EU.

Officials have voiced concern to Warsaw over a 'customs audit' being carried out by the government into 26 mainly European and US drug firms.

The industry expects the audit to lead to demands for up to €1.15 billion in back-payments from the multinationals' Polish subsidiaries for allegedly breaking a law which sets an 11 maximum price mark-up on imported medicines.

'Concerns have been expressed to us over the Polish import system,' said Jean-Christophe Filori, spokesman for Enlargement Commissioner Günter Verheugen.

'We're investigating the basis of those concerns in the framework of the Europe Agreement [on Poland's accession].'

Commission sources say officials have written to junior Europe minister Jaroslav Pietras and will raise the matter again with him at a meeting next month, at the request of member states.

At the centre of the dispute are 'incentive' payments made by the drug giants to recompense local subsidiaries, which claim to be selling drugs at zero margin to allow wholesalers to make a profit and stay within the 11 threshold.

The audit seeks to show that the local companies have attempted to get round the statutory limit by overstating customs values.

But the local drug companies say any move to outlaw the incentive payments would put the future of their operations in Poland in doubt.

'In order to run a business which employs local people you have to be able to make a margin,' said Cees Heiman, general manager of Pfizer Poland. 'If these practices were considered outside the law it would basically mean there was no way to import these products. I can't think of a better example of a barrier to trade.'

The maker of Viagra is among a group of multinationals considering a formal trade complaint against Poland's 11 rule through Brussels-based industry association EFPIA. Action under the EU Trade Barrier Regulation (TBR) could complicate Poland's accession and lead to proceedings at the World Trade Organisation.

Other firms considering action are understood to include European

blue-chips GlaxoSmithKline (GSK), AstraZeneca, Sanofi-Synthelabo, UCB, Roche, Novartis and Servier, as well as US firms Merck Sharp and Dohme, Johnson & Johnson, Eli Lilly and Wyeth. The industry is also concerned that Poland is allowing cheaper generic copies of drugs onto the market without adequate testing, while dragging its feet over implementation of an EU drug pricing directive which would allow patented drugs to reach the market faster.

Article 25 of Poland's accession agreement with the EU bans measures that have an 'equivalent effect' to tariffs, quotas or other trade barriers.

Enlargement negotiators have provisionally closed 20 of the 31 'chapters' setting out the terms of Poland's accession to the Union, including the free movement of goods - which covers drug imports. Chapters can be reopened only with the backing of all EU member states.

Poland's Europe minister was invited to respond to the drug firms' concerns, but failed to return calls to his office.

The European Commission has intervened in a stand-off over drug prices that could have ramifications for Poland's accession to the EU.