JURIST - Paper Chase: European Court of Justice rules on drug company abuse of market position

[JURIST] The European Court of Justice (ECJ) ruled [judgment text; press release, PDF] Tuesday that a drug company refusing to meet "ordinary" orders for medicine as a means of thwarting parallel exports abuses its market position. The decision comes in connection with a lawsuit filed by Greek drug wholesalers against pharmaceutical giant GlaxoSmithKline (GSK) [corporate website], stemming from a three-month period in 2000 when GSK refused to provide the entire orders of Greek drug wholesalers for three patented products. In an apparent attempt to prevent the wholesalers from exporting the drugs and selling them at a lower price to European countries where the products command a higher price, GSK sold directly to hospitals and pharmacies in Greece and filled wholesalers' orders to the extent only that the Greek market required. EC Treaty Article 82 [text] prohibits, "in so far as it may affect trade between Member States," any abuse by an undertaking of its dominant position is prohibited as incompatible with the common market. The ECJ held that

Article 82 EC must be interpreted as meaning that an undertaking occupying a dominant position on the relevant market for medicinal products which, in order to put a stop to parallel exports carried out by certain wholesalers from one Member State to other Member States, refuses to meet ordinary orders from those wholesalers, is abusing its dominant position.

The decision reserved for the national court the factual determination of whether the relevant drug orders are "ordinary," taking in to account "the size of those orders in relation to the requirements of the market in the first Member State" as well as past business relations between that undertaking and the wholesalers concerned. Financial Times has more.

In April, EU Advocate General Damaso Ruiz-Jarabo advised [opinion, in French; JURIST report] the ECJ that GSK engaged in abusive practices that contravene EU antitrust laws, finding that any loss of income GSK suffered due to the parallel importation of its products did not cause a reduction in the amount of capital available for research and development. Ruiz-Jarabo, however, also asserted that GSK could justify its dominant position by proving that its practices are necessary to protect its legitimate business interests. Parallel importation from countries with lower drug prices to countries with higher drug prices has found support with the European Commission [EC press release] because it may decrease drug prices in general, but has predictably frustrated drug manufacturers, which have sought ways to prevent the practice.