Court Rejects Antitrust Objections over Companies' Canadian Drug Blockade

December 4, 2006 ( - The 8th US Circuit Court of Appeals said that pharmaceutical companies did not violate antitrust laws when they banded together to try and block the importation of cheaper drugs from Canada, because importing the drugs violates federal law.

Getting prescription drugs from Canada in an effort to circumvent higher priced US drugs has not been sanctioned by the Food and Drug Administration. Agreeing with the ruling of a federal district court, the appeals court says that because the importation violates the agency’s Food, Drug and Cosmetic Act that requires approval of drug labels, the companies’ attempt to prevent importation does not violate antitrust laws.

The group of consumers and organizations from Minnesota filed suit on May 19, 2004, alleging that the defendants, whose ranks include Pfizer, Inc., Eli Lily and GlaxoSmithKline, PLC, had “engaged in a concerted course of conduct designed to prevent brand-name prescription drugs purchased from Canadian pharmacies from entering the United States,” according to the opinion. The plaintiffs said that the companies eliminated a legal source of prescription drugs and caused consumers to pay higher prices.

The court said that the fact that Canadian drugs do not have FDA approval is not, as the plaintiffs claim, simply a “hyper-technical” violation of the federal law, but rather “a manifestation of a congressional plan to create a closed system” to guarantee safe and effective drugs for American consumers.

The court rejected plaintiffs’ contention that Canadian drugs are “the same” as those sold legally in the US exempt for the labeling, saying that labeling requirements cannot be segregated from other requirements in this way, but work together with “other statutory standards and FDA regulations to create a system that excludes noncompliant and potentially unsafe pharmaceuticals.”

The plaintiffs contend that the drug companies violated antitrust laws by:

  • requiring Canadian pharmacies to certify that they were not selling prescription drugs to persons whom the pharmacies knew or should have known were taking the drugs outside the country;
  • monitoring orders of Canadian pharmacies and limiting their purchases to historical levels;
  • creating “blacklists” of pharmacies that were suspected of selling drugs to American consumers and directing wholesalers not to sell to the blacklisted pharmacies, and
  • cutting off supplies to wholesalers who did not comply with their policies.

However, the court found that “the absence of competition from Canadian sources in the domestic prescription drug market, therefore, is caused by the federal statutory and regulatory scheme adopted by the United States government, not by the conduct of the defendants.”

For the full court opinion go  here .