Monday, 26 October 2009

EU - European Court Sides with Drugmakers on Pricing Matter

The European Court of Justice ruled on 6th October 2009 that the EU Commission should reconsider whether efforts by drugmakers to prevent traders from exploiting price differences across Europe should be allowed.

Up until now, the EU Commission has opposed companies changing their prices to compensate for parallel trade. Pharmaceutical companies, however, have complained that this undermines their ability to recover the costs of developing new medicines.

The case involved GlaxoSmithKline, who introduced a policy in the late 1990s to put higher prices on a number of drugs sold in the Spanish market, which it had determined were going to be exported. The EU Commission said that the company was restricting competition within the European Union, having long favoured the creation of a single market for goods, including prescription drugs, with the aim of lowering prices.

Many governments buy medicines in bulk in southern European countries such as Spain, and sell surpluses in northern nations such as the UK, where drugs usually cost more. This type of parallel trade helps to cut the price of medicines for their health services.

The traders were disappointed by the verdict. Andreas Mohringer, the president of the European Association of Euro-Pharmaceutical Companies, which represents the traders, commented, “Allowing the system in Spain to stand would mean competition would suffer in Europe with the losers being national social security systems, taxpayers and patients.”

However, the victory for the pharmaceutical industry could be significant at a time when companies face a great deal of price competition.

Further reading - Detailed reviews of the pharmaceutical markets in all European countries are available from Espicom: Pharmaceutical Market Reports; Europe

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