Drugs giant rapped for supply curbs

Date: 10/01/02

By Laurence Frost

DRUG wholesalers are calling on the European Commission to act against new supply restrictions announced by GlaxoSmithKline (GSK) in a bid to stamp out parallel trade in its medicines.

The pharmaceuticals firm has told the EU executive it has introduced new quotas limiting sales to the quantities needed in each wholesaler's domestic market.

The move is the latest in the industry's long-running battle with the middlemen who buy and sell medicines to exploit price differences between EU countries. But the drug traders say the new GSK system breaks EU competition rules, and want the Commission to investigate.

'It's a total distortion of the market,' said Donald Macarthur of the European Association of Euro-Pharmaceutical Companies (EAEPC).

The parallel traders' group also warns that the new limits on supply could lead to local shortages of vital medicines. 'Drug companies have a moral obligation to maintain supplies,' said Macarthur. 'If there are supply restrictions then patient health can suffer.'

A spokeswoman for Mario Monti, the competition commissioner, said the EU executive had not yet reached a decision on the new GSK regime. 'At this stage the Commission has not taken a position,' said Amelia Torres. 'We will be looking into it.'

GSK argues that its new conditions do not amount to anti-competitive agreements with wholesalers, banned under Article 81 of the EU Treaty, since the new limits are set unilaterally by the firm. It also insists that the new conditions contain no export restrictions - illegal under EU single market rules. 'There's nothing to stop people exporting products,' said GSK spokesman Martin Sutton.

Sutton promised that GSK would act fast to prevent any drug shortages resulting from parallel trading. But he declined to say whether the new limits could be used to favour wholesalers that refrain from selling GSK medicines in other countries where the going rates are higher.

'We've made our position clear on parallel trading,' he said. 'It undermines the local GSK business in the importing country where prices we believe are reasonable have been agreed with governments.'

The pharmaceutical industry's attempts to limit parallel trade are already the subject of several legal cases before the EU courts. The Commission is appealing over an October 2000 ruling by the Court of First Instance against its ban on supply quotas introduced by drug firm Bayer, and is yet to evaluate a separate supply quota system introduced five years ago by Merck.

GSK has appealed against a Commission ruling last May banning its separate dual pricing system in Spain - where wholesalers agreed to pay higher rates for drugs bound for export than for those sold domestically.

Pfizer, which also faces a Commission investigation over dual pricing on the Spanish market (European Voice, 6-12 September 2001), sparked anger last month when CEO Hank McKinnell said the firm might withhold new treatments from France unless the government there agreed to higher drugs prices.

Drugs wholesalers are calling on the European Commission to act against new supply restrictions announced by GlaxoSmithKline (GSK) is a bid to stamp out parallel trade in its medicines.