GSK wins court ruling on drug re-exports

GlaxoSmithKline won a partial victory on dual pricing yesterday from a European court following its attempt to stop Spanish wholesalers re-exporting the company's drugs at big profits.

The ruling spelled good news for other pharmaceutical companies, which are losing an estimated $5bn (£2.65bn) in sales a year from the practice, known as parallel trade.

The Court of the First Instance in Luxembourg ordered the European Commission to review its 2001 decision outlawing GSK's dual pricing scheme in Spain. The commission concluded that GSK's policy of charging different prices for its products depending on whether they were destined for the Spanish market or for other EU markets breached competition rules. The drug maker was forced to undo its dual pricing system, but appealed against the decision.

Marc Israel, a partner at the City law firm Macfarlanes, said: "The court recognises that the pharmaceutical companies need to earn sufficient money on the drugs that they market in order to be able to invest in research and development.

"Given the specific characteristics of the pharmaceutical industry, there is a case to be argued that the exemption criteria [on competition rules] could be satisfied."

Pfizer, the world's biggest drug maker, is still awaiting a ruling from the European Commission on its dual pricing scheme in Spain.

The commission now has two months to appeal against the ruling. GSK said it "continues to believe that parallel trade in the context of the pharmaceutical industry, where prices are directly or indirectly controlled by EU governments, serves only to benefit parallel traders".