THE RTMA
DISTRIBUTORS SET TO TAKE LEGAL ACTION AGAINST GSK
Big pharmaceutical distributors are readying themselves for legal action against GlaxoSmithKline, claim the heads of national distributor trade associations. From the start of this year GSK has limited supplies to European distributors in order to halt parallel imports. The rest of the drugs industry is watching GSK's progress with bated breath. Merck Sharp & Dohme and Eli Lilly are both operating similar schemes and many other drugs companies are preparing to follow suit.

Distributors are furious at these moves. The French trade association is in talks with the Ministry of Health and the Ministry of Economic Affairs. Olivier Le Guisquet said: "Under French law distributors have a duty to guarantee supplies. We can not do this if the drugs companies impose quotas. It is a political question. Is it GSK or the French government who controls drug policy?"

But some suppliers reckon that distributors are too cowed to react. A senior manager at one said: "MSD and Lilly have been operating similar schemes for nearly eight years and none of their distributors have ever taken legal action."

But Michael Watts, head of the British Association of Pharmaceutical Wholesalers says the European Association will definitely be taking action. He claims: "These restrictions are affecting distributors ability to ensure supply." European Association head Monika Derecque says: "I can not say that we are definitely taking legal action. We don't want a fight with the industry. We have never taken legal action before."

National governments effectively set prices in Europe and single market legislation allows middlemen to make huge profits by exporting from low price regimes such as Spain to high price regimes such as the UK.

Restricting supplies could be deemed to impede the single market and, as such, the drugs companies could face swingeing fines. To avoid these, GSK notified the European Commission in advance of its plans. Such advance notification of new schemes generally means that the EU does not impose punitive fines.

What of the EU? The European Commission normally takes a couple of years to rule on new notifications, but four months ago distributor sources were forecasting "a volcanic reaction" to the GSK notifications. Now Direq says: "Unfortunately it does take a long time unless the Commissions decides on interim measures. I doubt that this will happen. I have learnt that the Directorate for Competition has started looking into things." She adds: "Apparently , they have received some complaints, but not from us."


That leaves the European Parliament where MEP Bashir Khanbhai is raising questions. He wrote to Jean-Pierre Garnier, chief executive of GSK, some three months ago and says he has yet to receive a written response. He sees parallel importers as parasites making hundreds of millions of euros from European taxpayers.

He thinks the answer is for European governments to work together to create a reimbursement system where the price for any given drug would be the same everywhere in Europe, with the individual governments giving different levels of reimbursements, according to the price that they wish to charge.

Our Analysis: The conundrum is that drugs prices in Europe are fixed by the different national governments, and yet single market legislation gives parallel importers an open charter to arbitrage. Imposing warehouse-by-warehouse restrictions sounds draconian, but it is one way to limit parallel imports.

On balance, some sort of legal response looks likely from the big distributors. But it is interesting to note just how muted their response has been to the GSK measures, introduced 6 months ago!

Meanwhile, the political will to act seems to be lacking. It is hard to see national governments ever giving up their powers to levy the prices they think fit. But equally it is hard to see the EU being willing to put in place formal curbs on the single market.


© 2008 The Routes to Market Association // Tel: +44 (0) 20 7585 3399 // Fax: +44 (0) 20 7924 5284 // Email: info@the-rtma.com

Registered number 3579985 England //
The Routes to Market Association, 4th Floor, Sterling House, Great Eastern Wharf, Parkgate Road, London SW11 4NQ //
Site powered by WORKSsitebuilder