Lilly loses appeal in U.K. drug case

Eli Lilly and Co. has lost a European court bid to stop a pharmacy from buying medications in Turkey at cheaper prices and selling them for more in the United States.


The trademarks in dispute are the Lilly name, as well as brand names for the Cialis impotence treatment, Evista for Osteoporosis, and Humulin and Humalog for Diabetes.

The Court of Appeal in London ruled Tuesday that 8PM Chemist Ltd., a pharmacy in the United Kingdom, did not infringe on the Indianapolis drug maker's trademark when it shipped the company's products to the United States.

U.S. customers often order medications through Canadian Web sites, according to the judgment. Some of those companies place orders for the drugs with a Turkish company that packs and labels the treatments and air-freights them to 8PM in the U.K.

8PM then sends them to the U.S. without opening the packets. 8PM has about a hundred employees and "one or two" are involved in passing the drugs on, the ruling said.

"The essential function of Lilly's European trademarks is in no way jeopardized by 8PM's activities," three judges said in a ruling.

Lilly argued that 8PM represented to U.S. patients that the products had come from a U.K. pharmacy rather than a Turkish one. Lilly said that gave the products an aura of safety that was not justified, as the patient would be more likely to trust a British than a Turkish source.

"We believe the court's action could compromise patient safety by allowing diverted pharmaceutical products to flow outside of the legitimate supply chain," Lilly said in a statement.

The dispute is part of a wider fight over the so-called parallel drug trade. Pharmaceutical companies for decades have fought the practice by which wholesalers buy drugs in lower-cost countries such as Turkey and Greece and sell them in more expensive markets such as the U.S. and the U.K., pocketing the difference.

Drug makers lose more than $5.9 billion in sales annually that way, according to the European Federation of Pharmaceutical Industries and Associations in Brussels.

"Under European Court of Justice case law, trademark proprietors cannot prevent goods bearing their marks from simply passing through the European Union," 8PM's lawyer, Ralph Cox, said in an e-mail. "The fact that the goods are pharmaceuticals does not alter the position."

February 06, 2008