GlaxoSmithKline faces antitrust investigation

A drug manufacturer being investigated for possible antitrust violations because it cut off shipments to Canadian mail-order pharmacies has to turn its records over to the Minnesota attorney general’s office, a judge has ruled.

Hennepin County District Judge Peter Albrecht also gave a boost to Gov. Tim Pawlenty’s drug-importation Web site, ruling that not all drug importation is illegal.

“It’s the first court decision in the country to declare there’s no blanket prohibition on the importation of Canadian drugs,” Attorney General Mike Hatch said. The ruling was in response to a lawsuit Hatch filed against GlaxoSmithKline PLC, the British pharmaceutical company that makes Paxil and Flonase, among other drugs.

The judge ordered GSK to turn over Canadian and British records that Hatch believes shows it colluded with other drug companies to shut off supplies of medicine to Canadian mail-order pharmacies selling to U.S. customers.

The importation of Canadian drugs into the United States has become a major economic and political issue. The Canadian government negotiates the price of medicine with manufacturers so prescriptions often cost less there. Pawlenty’s administration has even set up a Web site, MinnesotaRxConnect.com, to show residents how to buy drugs from two Canadian druggists.

But the U.S. Food and Drug Administration has threatened the governor over the Web site. The FDA claims that the importation of drugs into this country is illegal and possibly unsafe.

GSK has admitted that its Canadian subsidiary, GSK Inc., stopped shipments to the suspect pharmacies, but claimed it did so on its own and didn’t conspire with other drug companies. The company also it had the right to stop those shipments under the terms of contracts those pharmacies signed with GSK, said company spokeswoman Nancy Pekarek.

“In our view, antitrust laws do not protect illegal activity,” said Pekarek. “And it is illegal to bring drugs across the border of the United States. We believe GSK Canada was acting legally when it reminded our customers of our terms of the contracts.”

Albrecht disagreed. “First, not all drug importation is illegal,” he wrote in his ruling. “Second, if it can be demonstrated that GSK has acted in concert with other drug manufacturers to stop Canadian imports to the United States, such activities would not be immune from antitrust scrutiny, even if the FDA’s position were clear, which it is not. Enforcement of federal law is the responsibility of the FDA, not of GSK.”

Pekarek said GSK’s attorneys are trying to decide whether to appeal Albrecht’s ruling or hand the records over to Hatch. The company had offered to allow lawyers for the state limited “viewing” and “note-taking” of the records in Canada and Great Britain, but Albrecht ruled that “a grossly inadequate substitute for production.”

Hatch said he believes the records will show GSK and other pharmaceutical companies conspired to boycott distributors and pharmacies that sold drugs to American customers via mail. He noted that GSK was one of at least five companies that took similar actions against Canadian druggists in a three-month period.

“They say they’re all doing it separately,” said Hatch. “We think that’s too much of a coincidence.”

Asked if drug company executives would reduce such potentially incriminating information to writing, Hatch he’s seen parallels between the pharmaceutical industry and the tobacco industry.

“When an industry is that arrogant, you can be assured they’ll have documents going back and forth,” he said.

“He may think that, but he’s wrong,” Pekarek said of Hatch. “There was no collusion between GSK and any other company. This decision was made independently by GSK Canada and doesn’t relate to decisions made by any other company.”