BRUSSELS—Europe's highest court said that BayerAG can limit supplies to prevent discount traders from exploiting drug-price differences within the European Union, handing a major victory to the pharmaceutical industry.
The case started during the early 1990s, when the German pharmaceutical company limited supplies to wholesalers to stop re-exports of its best-selling Adalat heart treatment from France and Spain -- where prices are lower because of state regulation -- to higher-priced Britain. Bayer said it was losing half its U.K. sales because of the practice.
Bayer's move soon encountered resistance in Brussels. Spanish wholesalers complained that Bayer unfairly limited supplies, and during 1996 the European Commission fined Bayer €3 million ($3.8 million) for breaking Europe's anticartel laws. Bayer contested the fine, and the commission was overturned twice in lower courts. Judges said Bayer hadn't overstepped the law because Bayer didn't explicitly prohibit exports.
On Tuesday, the European Court of Justice, based in Luxembourg, upheld Bayer's previous victories and threw out the fine. Judges said none of the documents submitted contained evidence proving Bayer sought to ban re-exports.
Bayer's victory is critical for big drug companies facing stiff price competition from generic-drug makers and discounters. The case concerned the discounters, which buy bulk batches of medicines in EU countries such as Spain and sell surpluses into nations such as Britain, where drugs can command higher prices. The practice represents about €5 billion in sales and slices as much as €2 billion from drug companies' profits, according to Janice Haigh of IMS Global Consulting Group in London.
After the latest ruling, drug giants can fight back with quota arrangements such as Bayer's to stymie the discounters. Bayer said the ruling shows it is "under no obligation to supply the entire European market from the member state with the lowest state-regulated prices."
The ruling is a "disappointment" for regulators, acknowledged commission spokeswoman Amelia Torres. Despite the setback, Ms. Torres said the commission will continue investigating "about a dozen" quota systems operated by other pharmaceutical companies, including GlaxoSmithKline PLC and Merck & Co.
Discounters are counting on those regulatory efforts. The loss in the Bayer case won't "prevent Brussels officials from finding ways of upholding fair competition in the medicines market," said Don Macarthur of the European Association of Euro-Pharmaceutical Companies, which represents discount traders. Discounters say their practices save Europe money.
In a separate but similar battle to protect higher-margin business, some big drug makers, including Pfizer Inc., GlaxoSmithKline and Eli Lilly & Co., have said they will limit sales of patent-protected medicines to Canada because of concerns that the drugs are being re-exported to the U.S. Many Americans have been turning to Internet pharmacies operating out of Canada, where medicines generally are less expensive owing to government price controls.
BRUSSELS (AFX) - The European Court of Justice has ruled in favour of Bayer AG in its battle with the European Commission over parallel imports of its cardio-vascular drug Adalat, according to a statement from the court.
The court upheld an earlier decision by the Court of First Instance (CFI) which overturned the commission's decision to fine Bayer for restricting parallel imports of the drug by Spanish and French wholesalers into the UK.
It said in its judgement that it confirmed the view of the CFI that the commission had been unable to demonstrate that Bayer had entered into an agreement with the wholesalers to restrict imports.
"In the view of the Court of First Instance, neither the conduct of the Bayer Group nor the attitudes of the wholesalers were factors constituting an agreement between undertakings," said the statement.
The CFI had also said the commission had not proved that Bayer intended to impose an export ban on its wholesalers or that supplies were made conditional on compliance with that alleged ban. The wholesalers also had in fact shown "an attitude of opposition" to the policy.
"The Commission had not therefore proved the existence of an express or tacit acquiescence by the wholesalers in the attitude adopted by the manufacturer," it said.
Furthermore, the CFI had ruled that the commission's argument did not stand that the parties maintained their business relations and that the very concept of an agreement rests on a meeting of minds between economic operators
Between 1989 and 1993, the Spanish and French national health authorities fixed prices for Adalat that were around 40 pct lower than those in the UK. Bayer stopped fulfilling large Adalat orders from the wholesalers, subsequently claiming that sales by its UK subsidiary had fallen as a result by almost 50 pct. These wholesalers then complained to the commission.
The commission then took a negative decision against Bayer and fined the company 3 mln ECU for its alleged restricition on competition.
emma.davis@afxnews.com ed/vs
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