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ECJ Allows Dominant Pharmaceutical Manufacturers Refusal To Supply In Order To Defend Legitimate Commercial Interests

Client Alert | 2 min read | 09.16.08

While in 2005 the European Court of Justice ("ECJ") (Case C-53/03 - Syfait and others v. GlaxoSmithKline) refused to rule on the application of Art. 82 EC to supply quota systems because the referring Greek competition authority was not found to be a court within the meaning of Art. 234 EC, the ECJ held today (Joined Cases C-468/06 to C-478/06 - Sot. Lelos and others v. GlaxoSmithKline) that a pharmaceutical company would not abuse its dominant position, if "the refusal […] to supply wholesalers involved in parallel exports constitutes a reasonable and proportionate measure in relation to the threat that those exports represent to its legitimate commercial interests […]" (para. 70). Should a dominant pharmaceutical company, however, refuse to meet "ordinary" orders from a wholesaler, it is abusing its dominant position (para. 77). According to the ECJ, the crucial factors to determine whether a wholesaler is ordering "ordinary" orders are:

  • the size of the orders in relation to the requirement of the market of a given Member State and
  • the previous business relationship with a given wholesaler (para. 73).

Accordingly, in light of the specifics of the regulated pharmaceutical markets in Europe, the ECJ left the door open for quota systems in the pharmaceutical sector. It is interesting to note that today's ruling takes a middle course between Advocate General Jacobs' view to largely allow a refusal to supply based on objective market factors (cf. opinion delivered for case C-53/03 GlaxoSmithKline), and Advocate General Ruiz-Jarabo Colomer's view that dominant pharmaceutical manufacturers have to provide conclusive evidence that the refusal to supply was required by the market situation (opinion delivered in this case). In any event, the judgment is likely to have ramifications for the whole pharmaceutical sector where prices are directly or indirectly controlled by governments.

Please find below the references to today's decision and the diverging opinions of the Advocate Generals.

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