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Pirates and Corsairs

Written by Miguel Gorj?o-Henriques

Pirates and Corsairs - The difficult equation Pharma-Parallel Trade

“In the legal debate (…), with a little bit of imagination, the undertakings who dedicate themselves to parallel trade could be compared with the pirates and those who defend their intellectual property rights could be compared with the corsairs, who received the “corsair patent” from their Government to attack the ships of the enemy countries.

However, in the European law the terms invert themselves, as (…) the parallel importer acts in the respect of the law, (…) holds the corsair patent to persecute the undertakings who harm this freedom of movement. Everything depends on the point of view, since, for these big undertakings, the free riders or parallel traders are true filibusters”. The words are very recent and belong to an advocate-general of the Court of Justice of the European Union.It is well known that the parallel import of medicines is today an activity regulated by law (in Portugal, in the Medicines Act). However, the quotation arises in the context of the ongoing discussion about the possibility of the Pharmaceutical Industry – “PI” – establishing private limits to the parallel import/export of medicines, and which are these limits.

In other words, one ought to inquire to what extent it is legitimate for the PI to adopt contractual or unilateral measures to preserve the profitability of its business, to protect the R&D activities and the innovation, to react against State mechanisms of price-fixing and price control that limit the free exercise of its economical activity and hinder the free competition (allegedly to protect the financial interests of the States), to manage its distribution systems, vertically integrated or contractual and, finally, to comply with its legal responsibilities in the market supply.This is indeed a controversial question, even if the agreements which restrain or affect the parallel trade of medicines – in particular through prohibitions of resale or export, or dual pricing systems – undeniably restrict competition (which does not necessarily amount to being prohibited).It is still under debate if and when the unilateral practices of undertakings with these results can be considered abusive, too. It is not settled case-law whether the refusal to supply all the wholesalers orders can be considered abusive per se or the terms that can objectively justify such policies, such as the mechanism of price fixing and control and other regulatory requirements, the protection of the legitimate commercial interests, including the funding of the R&D, or the economical benefit arising from such practices.

In this sense, the undertakings find themselves at a crossroad, for which there is today only one certainty: the differences of opinion between advocates-general (Jacobs and Jarabo-Colomer, in the cases Syfait I and the so-called Syfait II), on one hand, and between the Commission and the Community First Instance Court (v. judgement GSK Services v. Commission), on the other hand, impose a special attention in the analysis of the competitive impact of the commercial strategies in this field, maybe encouraging solutions of vertical integration. The debate parallel trade/innovation/competition is not closed yet. Pirates and Corsairs go on sailing in the “eye of the storm” and have to look for the best solutions, in a moment in which Europe has to decide if it has a global vision on the role of competition law in the satisfaction of the consumer welfare and its “essential interest in the protection of innovation” (Thomas O. Barnett, Antitrust Division of the USA).

Miguel Gorjão-Henriques

Partner Sérvulo&Associados (Lisbon): This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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