Parallel Trade In Pharmaceuticals - European Court Fails To End Confusion
Article by Cormac Little and Marie McGinley
A pharmaceutical company and parallel traders have both claimed
victory in a recent European Court of Justice (ECJ) decision on
abuse of dominance.
According to the European Commission, parallel trade is a key
component in the promotion of European market integration because
it promotes cross-border competition. Essentially, parallel trade
occurs when goods are bought at a cheaper rate in one country to be
resold in another where the prices are higher.
Pharmaceutical prices are typically cheaper in southern EU
Member States, such as Greece, than in northern European countries.
This fuels parallel trade. Pharmaceutical manufacturers often seek
to prevent parallel trade because they maintain that this
undermines their investment in the development of new medicines.
These companies have found it difficult to prevent parallel trade
while continuing to respect EC competition laws.
A Greek subsidiary of GlaxoSmithKline stopped supplying local
wholesalers with certain drugs, citing a shortage of those
particular medicines. GSK then proceeded to supply those medicines
directly to hospitals and pharmacies in Greece.
Some wholesalers brought a case to the Athens Court of First
Instance claiming that GSK's refusal constituted an abuse of
its dominant position in the market for certain pharmaceuticals
under Article 82 of the EC Treaty, because it effectively prevented
parallel trade of these medicines. Subsequently, the Athens Court
asked the ECJ for a ruling on whether a dominant supplier could
lawfully refuse to meet wholesalers' orders for the purpose of
preventing parallel trade.
Abuse of a dominant position
Article 82 prohibits the abuse of a dominant position within the
EU insofar as it may affect trade between the Member States. Any
abuse by an undertaking in a dominant position within the EU or a
substantial part thereof is prohibited. Unlike Article 81 of the EC
Treaty, which prohibits arrangements between two or more companies
which have as their object or effect a restriction on trade between
Member States, there are no exemptions to Article 82.
However, a dominant undertaking has the opportunity to
demonstrate that their conduct is objectively justified given the
circumstances despite the fact that it is a prima facie abuse under
Article 82. This argument is sometimes used by pharmaceutical
companies in their attempt to justify restrictions on parallel
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