Glaxo fights EU ban on dual pricing

Date: 01/08/01

By Laurence Frost

DRUGS giant GlaxoSmithKline is to take the European Commission to court in a bid to prevent middlemen from cashing in on the differing prices that it charges member states for its medicines.

In a case that could have major repercussions for the €71-billion drugs industry and national healthcare systems, Glaxo will ask the Court of First Instance to overturn the EU executive's ban on its dual-pricing policy in Spain.

The company had imposed the system on wholesalers in a bid to stamp out 'parallel trade' - when drugs are purchased in countries where the price is low and sold on at a profit to wealthier nations.

Glaxo thought it had resolved the problem by forcing Spanish wholesalers to pay more for drugs bound for export than those destined for domestic use only. However, the Commission banned the scheme last May on the grounds that it restricted competition.

It rejected Glaxo's argument that the company had no influence on prices set for its products by governments. “None of these arguments were convincing upon closer scrutiny,” said competition chief Mario Monti.

But Chris Viehbacher, president of Glaxo Europe, believes his firm has strong grounds to appeal. “We don't see the situation to be so clear,” he told European Voice. “We take particular exception to the Commission statement that we have flexibility around pricing [where governments are concerned].“

Although the Commission found that Glaxo had recently negotiated price increases on four of the eight medicines mentioned in its submission to the executive Viehbacher insists such increases are exceptional. “It's like snow in July,” he said. “In 99.9% of cases it's national governments who set the prices. Increases are extremely rare in Europe.“

The case will be closely watched by the drugs industry. If approved, Glaxo's dual-pricing model would become a standard weapon against the parallel traders whom the blue chips accuse of hitting their profits - and their research budgets.

Parallel traders say their activity reduces costs and keeps price differences between countries in check. “We bring savings to the healthcare system and therefore to patients,” said Donald Macarthur of EU drug traders' lobby EAEPC.