10.28.2004, 05:40 AM
A top legal adviser at the European Court of Justice said Thursday that GlaxoSmithKline PLC and other major pharmaceutical companies can restrict some supplies of their patented medicines in Europe.
The advice of Advocate General Francis Jacobs still has to be confirmed by a court ruling later for it to stand.
Drug wholesalers in Greece were making substantial profits by repackaging prescription drugs and selling them in other EU countries where national governments assign higher costs to the same products. To halt this practice, in 2000 Glaxo began limiting the quantities of wholesale orders.
Greek and European regulators questioned whether Glaxo, the world's second-largest drug company, was abusing its dominant role in the pharmaceutical industry and violating EU competition laws.
Thursday's opinion could give the pharmaceutical industry a stronger hand in stopping so-called parallel trading that affects profits and is worth about euro4.5 billion (US$ 5.75 billion) a year. The trade also is an issue in the U.S. presidential race, where some citizens are clamoring for cheaper medicines from Canada.
Jacobs' opinion stated that the wide variance in drug prices among EU member countries and the regulatory nature of the prescription drug industry create an environment where typical competition rules do not apply.
He said restricting product supply is not automatically an abuse, as long as the pharmaceutical manufacturer is providing enough of its product to meet the country's legitimate needs.
Glaxo is entitled to take measures that "are reasonable in order to defend its commercial interests," Jacobs said.
He also noted that his verdict was "highly specific to the pharmaceutical industry" and should not be applied elsewhere.
The opinion by the Advocate General of the European Union's top court is a critical stage in a long-running battle between big pharmaceutical companies and the traders. Ten months earlier, the same court allowed German drug giant Bayer AG to maintain a similar quota system.
The court's advocates general's opinions are followed a few months later by the full court in about 80 percent of cases.
