Wednesday, May 20, 2009
Posted by D. Daniel Sokol
Robert O’Donoghue & Louise Macnab (Brick Court Chambers) Dominant Firms’ Duties to Deal with Pharmaceutical Parallel Traders Following Glaxo Greece.
ABSTRACT: EU competition policy on dominant firms and pharmaceutical parallel trade—wholesalers taking advantage of arbitrage possibilities to export drugs from a low-priced Member State to a higher-priced one—reminds one of a debate between two famous economists. Each of them had taken opposing sides in a case and, after several discussions, they each remained wholly unpersuaded of the other’s view. In a fit of exasperation, one economist said to the other “I agree with you, but you are completely wrong!”
So it is with parallel trade. The virtuous wholesalers say that they bring much-needed price competition to the (higher-priced) market. The no-less-virtuous pharmaceutical companies say that this is true, if at all, only in the short term, and that it comes at the expense of appropriation of manufacturer profits that fund expensive research & development (“R&D”)—so there is, they say, less competition in the medium- to long-term. Both may be correct, for different reasons and from different perspectives.