Global Insight Perspective | |
Significance | Although GSK has claimed that the Greek competition body ruled that the company was not abusing its market position in restricting supplies of three key drugs to Greece, the outcome of the case appears to be less straightforward. It appears that the body did rule that GSK's categorical refusal of supplies to Greek wholesalers was illegal. |
Implications | The Hellenic Competition Committee has ultimately declined to rule out the restriction of supplies to a country via the imposition of a quota system by drug manufacturers. It can be expected therefore, that GSK will continue to impede parallel trade of its products through this system; the failure to denounce this practice outright essentially gives a green light to other manufactures adopting this practice. However, the body's condemnation of the company's complete refusal to supply wholesalers may force GSK to revise its distribution channels to the country. |
Outlook | The case sets a precedent for efforts by large multinationals to impede parallel trade. Although there is considerable uncertainty over the Hellenic Competition Committee's precise verdict, efforts by GSK and other multinationals to prevent the parallel trade of their products in Greece will continue unabated. The case may also influence decisions on similar disputes in other European countries. |
GlaxoSmithKline (GSK) claims to have won a long-running battle to restrict supplies of three of its most important drugs to Greece. The products at the heart of this battle, which was instigated in 2000 when Greek wholesalers first filed a complaint with the Hellenic Competition Committee, are the migraine treatment Imigran (sumatriptan succinate), epilepsy drug Lamictal (lamotrigine) and Serevent (salmeterol xinafoate) for asthma.
According to The Independent, GSK has celebrated the outcome of the case as a victory, since the Greek competition body ruled that the company had not abused its dominant market position by restricting supplies of these drugs to the Greek market, as had been claimed by the wholesalers that filed the complaint. However, Pharma Marketletter has reported that the ruling considered two "distinct situations"; namely, the total refusal to supply Greek wholesalers with the three aforementioned drugs and the imposition of restrictions of supplies to the country via a quota system. Pharma Marketletter has reported that the committee actually ruled against GSK over a "complete refusal to supply", and declined to take a decision on "the legality of the GSK quota system," claiming that this question should fall under the remit of the European Commission, which suggests that the battle may ensue.
GSK began restricting supplies of Imigran, Lamictal and Serevent in November 2000, after it discovered that wholesalers where exporting these products to other European member states, where prices are much higher. The U.K.-based company took the decision to supply directly to pharmacy outlets and hospitals, refusing to respond to orders from wholesalers or—in some cases—restricted supplies to wholesalers. Parallel trade is not actually forbidden under European single-market regulations; suppliers are permitted to purchase drugs cheaply in one member country and sell them in other European countries, where prices are higher. On this basis, Greek wholesalers filed a case against GSK with the Hellenic Competition Committee; the case was referred to the European Court of Justice in January 2003, but was then referred back to the Greek authority. With the latest ruling urging that the case has pan-European implications, it is possible that the question of restrictive quotas to countries may be taken up by the European Commission, which is the custodian of European competition law.
Outlook and Implications
Pharmaceutical prices in Greece are among the lowest in Europe, due to restrictive pricing measures that take into account the two lowest prices in the European Union (EU) as part of the pricing-mechanism calculations. Hence, Greece is regarded as a major source of parallel trade, and efforts to restrict the practice are adopted by manufacturers supplying to the country. While advocates of parallel trade claim that this practice benefits healthcare systems and patients by supplying cheaper medicines, multinationals such as GSK argue that the trade only benefits those actually engaged in re-selling drugs at higher prices. The ruling has not prevented the restriction of drug supplies to Greece by GSK, and so the company will continue to impede parallel trade through a quota system. However, the company may now come under pressure to negotiate with wholesalers whom it has previously refused to supply altogether. The Greek competition authority's conclusion, that a ruling on the quota system is a matter for the European Commission, indicates that the Parallel trade issue is set to be the subject of heated debate for some time to come.