Pharmaceuticals company Glaxo Wellcome won a victory in the EU courts on Wednesday over its attempts to stop drug wholesalers from re-exporting its medicines at high profits.

The ruling is a blow to such 'parallel' trading, and a boost to major pharmaceutical companies' attempts to prevent wholesalers from pocketing drug profits through such price mark-ups.

The European Court of Justice's court of first instance partially overturned a 2001 ruling by the European Commission which prohibited Glaxo from charging different prices to its Spanish wholesalers depending on the final destination of the drugs.

Glaxo was keen to stop its shipments to Spain, where the drugs were sold relatively cheaply, from being sold on by the wholesalers at high profits for themselves, particularly in Britain.

The parallel trade system employed by the wholesalers, it is argued, cuts into company profits and therefore takes money out of the research and development pot for new drugs.

Glaxo Wellcome, a Spanish subsidiary of the British GlaxoSmithKline (GSK) group, therefore adopted the dual price scheme in 1998.

The court ruled that while the trade conditions which Glaxo imposed on the Spanish wholesalers might restrict competition that this was not its aim, and that an exemption from the EU's competition rules should be considered due to the special nature of the pharmaceuticals sector, which is not driven by classical market forces.

The European Association of Euro-Pharmaceutical Companies (EAEPC) dismissed the court ruling as bringing no legal clarity to the issue.

"This is a classic fudge which brings no clarity whatsoever," said Heinz Kobelt, secretary-general of the trade association.

"We are happy the court has confirmed that Glaxo restricted competition and that parallel trade reduces the price of medicines. The commission should stick to its principles.

"Whichever way you cut it, dual pricing is clearly against the spirit of EU competition rules," he added.

EU competition spokesman Jonathan Todd told reporters in Brussels that the European Commission would "carefully analyse the ruling for lessons to be learned."

"My understanding is that the decision is annulled but precisely what we will do next in procedural terms is still under consideration."

The commission's main 2001 conclusion that the sales scheme was aimed at restricting competition was incorrect, the court ruled.

"Unlike the situation in other economic sectors, the prices of medicines reimbursed by the national sickness insurance schemes are not freely determined by supply and demand, but are controlled by the member states" it said.

However the court upheld a subsidiary 2001 conclusion that the Glaxo system does restrict competition in effect, although this may not be the prime objective.

The question whether the general sales conditions might give rise to an economic advantage by contributing to innovation, which plays a central role in the pharmaceutical sector, was not examined with sufficient thoroughness, the court decided.

Therefore the court called on the EU's executive arm to reconsider Glaxo's original request for an exemption from the relevant parts of competition law.

GlaxoSmithKline welcomed the judgement but added that it would have no immediate impact on its operations in Europe, as the scheme was only implemented in Spain for a short time.

"GSK continues to believe that parallel trade in the context of the pharmaceutical industry, where prices are directly or indirectly controlled by EU governments, serves only to benefit parallel traders," the group said in a statement.

The ruling is likely to have ramifications beyond Glaxo. US pharmaceutical giant Pfizer is in the midst of similar dispute with the EU also over pricing in Spain.

On Wednesday Pfizer asserted that its policy in Spain was different from Glaxo's arrangements in 2001 and therefore "we do not expect an impact of this ruling on our own distribution model".

Glaxo and the European Commission shared their court costs.