Court sides with GSK over parallel trade restrictions

The European Union (EU) is intended to be a single market for goods, with products seamlessly crossing borders, but this has resulted in the rise of parallel trade of drugs. This practice sees drugs bought in a country where prices are lower and sold for a profit in another nation.

Pharma is unhappy with this practice, and many companies put this across in the EU’s counterfeiting consultation, but efforts to restrict it have been ruled against by the European Commission (EC).

In 1998 GSK adopted new sales conditions with Spanish wholesalers in an attempt to restrict parallel trade. When the EC met in 2001 it decided GSK’s actions were prohibited because they restricted competition and the pharma failed to prove it should be exempt.

When the case moved to the Court of First Instance (CFI) in 2006 it upheld the EC’s finding that GSK was infringing competition law but also stated that the EC failed to adequately examine the request for exemption.

Both sides brought appeals to the European Court of Justice (ECJ). All the appeals were dismissed by the ECJ but it ruled that the EC must reconsider whether GSK’s sales rules in Spain may be exempted.

The EC can rule that the practice is exempt if it gives rise to an economic advantage by contributing to innovation, which plays a central role in the pharma industry. In the ECJ ruling it, like the CFI, found that the EC’s examination of this was insufficient.

GSK said the ruling vindicates its position and the development is likely to be monitored closely by other pharmas that want to restrict parallel trade.