Refusals to supply in the EU’s pharma industry – is it legal, and what about patients?

Paul Gershlick of Matthew Arnold & Baldwin LLP explores the topic of UK pharma being unable to get drugs to patients owing to supply chain issues.

(Continued from “A new regulation that we should be pleased with!“)

One of the hottest issues facing the UK’s pharmaceutical industry is an inability of patients to obtain the drugs they need when they need them. The supply chain challenges arise from economic issues, particularly the different prices of drugs in each Member State of the single European market and exchange rate fluctuations.

The scenario is complex. Exporters look for opportunities to profit (but also claim that people in other countries can get the medicines cheaper, thus serving a public benefit). Pharmacists and wholesalers (who may or may not be exporters) find it hard to get medicines and spend lots of time ringing around. Patients may not get the drugs when they need them. Governments are happy to benefit both from businesses carrying on increased exports and from paying for cheaper imports.

Pharmaceutical suppliers want to supply as much as possible in the countries that pay the higher prices; in doing so, they seek to meet demand in the cheaper countries but not much more. Pharmaceutical suppliers have introduced restrictive measures such as systems that seek to cut out the middlemen (ie wholesalers) and supply direct to pharmacies. They also demand information from pharmacies as to the patients who are receiving the drugs – to have a greater level of control over the end destination of the medicines so as to maintain partitions within the market and also (pharma suppliers say) to try to avoid shortages in any one place. And whoever is involved, all speak of wanting to protect patients.

“…players in the supply chain – whether suppliers, wholesalers or pharmacists – are under a regulatory duty to supply medicines to people who need them…”

The EU seeks to maintain a free market of trade between EU Member States and to give some protection to pharmaceutical suppliers. What we are dealing with here, though, are not cans of drink but important goods – medicines that can make the difference to people’s lives if they cannot get hold of them when they need them. That is why players in the supply chain – whether suppliers, wholesalers or pharmacists – are under a regulatory duty to supply medicines to people who need them – because this can be a matter of life and death.

The issue became so serious that the Parliamentary All Party Pharmacy Group held an enquiry into the issue in 2012.

Chemistree v Abbvie case – the background

Now, a case has come before the courts to seek to resolve the position of the parties in the supply chain, but unfortunately the Court of Appeal has failed to grasp the nettle. The judgment left more questions than answers but what it did answer would preserve the right of suppliers to refuse to supply medicines.

Chemistree alleged an abuse of a dominant position by Abbvie, which had refused to supply Kaletra (the HIV drug) unless Chemistree provided patient data – on the basis that some supplies may have been destined for places within the EU other than the UK. Chemistree had lost in the High Court after the judge had not been happy with Chemistree’s conduct in refusing to provide information to Abbvie. The High Court had agreed with Abbvie that it did not have a dominant position in the market, its action did not amount to abuse and the balance of convenience until a further trial was that it was best not to award Chemistree an injunction mandating the supply of Kaletra.

“Price is always a secondary factor to therapeutic advantage.”

Following the High Court ruling, different arguments were presented. To succeed, Chemistree had to overturn all three rulings – i.e. what is the market, abuse and balance of convenience. The arguments included the following:


• The usual test for the market was not relevant for medicines. In particular, when pharmacists are presented with a prescription, they have to fulfil that and not substitute an alternative drug. Therefore, no theoretical change to the price could affect which drug the pharmacist can buy. The branded drug named on the prescription is effectively the 100% market in that situation. Accordingly, the pharmacist is the customer in this market and price makes no difference.

• Even if the pharmacist is not considered to be the customer, the question of who is the customer is a complex one in prescription products. The person who consumes the drug (the patient) neither decides nor pays; the person who decides which drug should be used (the prescribing doctor) neither pays nor consumes; and the institution that pays for the drug (the NHS) neither consumes nor decides. This is far more complex than looking at what happens if the price of a fizzy drink increases and what would a consumer decide then.

• Another reason why drugs are so different to other products is that prescriptions are written based on clinical need. Price is always a secondary factor to therapeutic advantage.

• In fact, for some cohort of patients, Kaletra is a “must have” drug.


• On the question of abuse, the regulatory framework requires that pharmacists must be able to supply medicines to patients within the EU. It is also an abuse to refuse to supply an existing customer in a manner which would tend to eliminate parallel trade if the refusal relates to an order which is “ordinary”. There has been some debate as to what is meant by “ordinary”. The allegation here was that Abbvie’s refusal to supply was intended to stop meeting EU prescriptions for Kaletra and any inter-state wholesale trade in Kaletra.

• Chemistree’s position was that refusal to supply to wholesalers (ie under the business model that is the direct-to-pharmacy model) is a policy that is aimed at eliminating competition and partitioning of the markets, contrary to EU law.

Balance of convenience

• On the balance of convenience, Chemistree’s argument was that there were issues that could not be compensated by money damages alone in that there were the interests of patients in being able to access the drugs.

Court of Appeal ruling

The Court of Appeal ruled just on the first point – i.e. what is the market? It refused Chemistree’s appeal. It did not agree that the pharmacist was the customer for the purpose of establishing the market. It also applied the established test of price in determining what the market was, and fudged the question as to who is the customer, saying it was probably a combination of several people including patient, doctor and payer, with the pharmacist being a mere middleman. As to whether there was a particular cohort of patients who needed Kaletra, the Court ruled that not enough evidence of this had been presented to the High Court.

“It was disappointing that the Court did not give an opinion on the abuse points, including the direct-to-pharmacy model.”

Having ruled on the question of the market and not allowed Chemistree’s appeal, the Court of Appeal did not consider it necessary to rule on the other points.

Future implications?

It was disappointing that the Court did not give an opinion on the abuse points, including the direct-to-pharmacy model. Those arguments may well be re-presented on another day.

The issue is left unresolved. We continue to live in a fudged state, where some parallel exporting is allowed at law, some restrictions are allowed by suppliers, and all the while patients suffer when they cannot get hold of their medicines when they need them.

Should parallel trade in pharma be stopped in Europe?

Should there be a genuinely single market within the EU with one price (or an equalised price in which the European Commission smoothes the differences)?

Should wholesalers, pharmacists and suppliers be required to hold additional stocks in supply to smooth against any problems (which could be costly and lead to waste)?

Or how about this for a solution that could be a winner for suppliers, a winner for exporters, a winner for pharmacists, and most importantly a winner for patients, with charitable benefits? How about if a Government body acted like the Bank of England’s role as bank of last resort and bought and held additional stocks to be made available for emergencies? And then for stocks left over near their expiry dates, they could be given as aid to developing countries as part of an international aid budget. Far better than seeing the international aid budget ending up in arms or a space programme!

The next article by Paul Gershlick will be published in February 2014.


About the author:

Paul Gershlick is Partner and Head of Pharmaceuticals and Life Sciences at Matthew Arnold & Baldwin LLP, he can be contacted using the details below:-

T: +44 (0)1923 208816

F: +44 (0)1923 215004


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