GlaxoSmithKline celebrated a victory yesterday in a long-running legal battle over parallel trade in three of its top medicines in Greece.

The pharmaceutical industry has long argued that parallel trade – in which a trader sources lower-priced products from one country and imports them for sale in another where prices are higher – damages its profitability, introduces a risk of mislabelling as goods are re-packaged and serves as an entry point for counterfeit drugs.

However, the trade body representing parallel traders believes the take home message is more complex and, once again, Europe has been left in a legal vacuum on the issue of drugmakers setting quotas for national wholesalers.

The competition authorities in Greece ruled that GSK had not acted unlawfully in restricting supplies of the three products – epilepsy drug Lamictal (lamotrigine), Imigran (sumatriptan) for migraines and Serevent (salmeterol) for asthma – to wholesalers and pharmacy cooperatives in Greece suspected of re-importing medicines into other countries.

But a total cessation of supply by GSK - for a period of three months in 2000 - was considered an abuse of a dominant position by the committee, according to Dr Heinz Kobelt, secretary general of the European Association of Euro-pharmaceutical Companies which represents the parallel trade industry.

GSK has not continued this non-supply policy, but did set a quota system in a bid to prevent wholesalers having unrestricted supplies of the three drugs which could then be re-imported to other countries. Crucially, the Hellenic Competition Committee in Greece failed to deliver a ruling on whether this quota system was also an abusive position – and concluded that the case should be decided by a higher, pan-European authority.

The latest development leaves the whole issue of ‘negative clearance’ – in which a company implements restrictions on supply and leaves it up to national regulators to rule if it is within the limits of the law – up in the air, Dr Kobelt told PharmaTimes.

The case has been batted backwards and forwards between the European and national level since the complaint was first filed. The Hellenic Competition Committee referred the matter to the European Court of Justice in January 2003 for a ruling under European Competition law, and Advocate-General Jacobs issued a positive opinion in GSK’s favour in October 2004.

But the European Court of Justice referred the matter back to the Hellenic Competition Committee in May last year, on the grounds that the decision was best left to the national authority.

With the Greek authorities now referring the matter to a European authority, drugmakers remain free to set quotas and restrict supplies to wholesalers in Europe, said Kobelt, although he believes this is a risky approach for manufacturers because they could leave themselves open to damaging legal consequences if the practice is ruled anticompetitive in the future.

The EAEPC wants the European Commission to take the lead on the matter, and filed a complaint asking the EC to rule on it in parallel with the action taken by the Greek wholesalers. But after the ECJ ruling in May that sent the case back to Greece, said Kobelt, the Commission decided to close the complaint.

In June the EAEPC filed a second complaint in the European Court of First Instance, challenging the way the EC interprets its role in these matters.

Commenting on the decision Andrew Witty, president, pharmaceuticals Europe at GSK, said: “This is a vindication of GSK’s commercial policy in Europe. Today’s decision recognises that parallel trade in the context of the pharmaceutical industry across Europe, where prices are directly or indirectly controlled by EU Governments, benefits primarily traders who pass on none or almost none of the price differences to patients and payers.”

Spanish case set for ruling in September

Meanwhile, GSK is fighting a case in Spain brought by the EAEPC and national parallel trade organisation over a policy of dual pricing, in which it allegedly asks wholesalers to declare whether the product they sell is destined for domestic or international sale and charge accordingly. A ruling in this case is due on September 27.

Similarly, the EAEPC has filed a complaint against Pfizer for a scheme in which it charges Spanish wholesalers a flat rate for products, and then offers reimbursements for inventory proven to be for local sale, said Kobelt.

The EC’s position on this type of dual pricing is clear – it is not lawful, commented Kobelt. But once again the agency has sidestepped its responsibility and handed the enforcement of the matter back to the national authorities, he said.

- GSK has also been using a number of technological approaches to halt parallel trade in its medicines, including a series of packaging and tablet-coating measures to differentiate product destined for distribution in low-cost countries. The company is adopting this approach to prevent low-cost drugs for HIV/AIDS from being diverted from compassionate access programmes in the developing world.