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Hatch takes Glaxo to court over limits on Canadian drug sales
by Tom Scheck, Minnesota Public Radio
November 17, 2003

Attorney General Mike Hatch. (MPR file photo)

Minnesota Attorney General Mike Hatch was in Hennepin County District Court Monday, to ask a judge to force the drug company GlaxoSmithKline to produce documents related to sales in Canada. Hatch is conducting an investigation into whether Glaxo and other drug companies are conspiring to limit drug sales to Canada in retaliation for cross-border drug sales.

St. Paul, Minn. — Many Canadian mail order and Internet pharmacies are profiting by selling less expensive, price-controlled prescription drugs to Americans. Hatch says he wants Glaxo to turn over any documents that exist in Canada and England, where the company is based. Glaxo attorneys say Hatch is overstepping his authority.

Cross-border sales have become a big issue now that Gov. Pawlenty, other governors and several members of Congress want to allow Americans to legally import prescription drugs from Canada.

Attorney General Hatch says he has information that Glaxo officials met with executives from other pharmaceutical companies on cross-border sales. He says he wants to know if the pharmaceutical industry is retaliating against Canadian pharmacies that sell drugs to the United States.

"We don't know what communication took place. Did they sit down and say, 'Let's do a boycott?' Did they say, 'Let's start raising prices' in concert up in Canada?" says Hatch. "We do know some of the companies have done that. We just don't know if there's been communication."

This is not about hiding documents or not revealing documents. This is about an attorney general trying to take a public position on federal law. - George Cary, GlaxoSmithKline attorney

Hatch says he's leading an investigation by 25 state attorneys general into the pharmaceutical industry. He took the unusual step of arguing the case in court, a job usually left to attorneys on his staff.

Hatch says Glaxo has produced some company documents, but didn't provide his office with any documents from Canada or England. He says the state's lawsuit against the tobacco companies in 1998 sets a precedent that allows a judge to order foreign documents from a company.

GlaxoSmithKline attorney George Cary says his office has been cooperating with Hatch, and invited him to view the Canadian documents -- in Canada. Cary says he doesn't know if executives with the drug companies discussed the issue of limiting drug sales, or pushing for a price increase in Canada. He says Hatch is pushing the issue for his own political gain.

"This is not about hiding documents or not revealing documents. This is about an attorney general trying to take a public position on federal law," says Cary.

Cary says the Food and Drug Administration and secrataries of U.S. Health and Human Services under President Bush and President Clinton have said they can't ensure the safety of any drugs imported from other countries. He says his company and other drug companies are abiding by federal law, by limiting sales to any Canadian pharmacy that sells directly to U.S. citizens.

Cary says Hatch is overstepping his authority by investigating a company that is complying with federal law. He says Hatch is entitled to disagree with the Food and Drug Administration, but not entitled to undercut the agency. He says antitrust laws do not protect illegal trade, which he says is what the cross-border sales business represents.

"A company is encouraged by the federal government to make sure that its products are not being sold illegally. The company has a duty to cooperate with federal regulators. And whether they do it together or do it separately, it doesn't change a requirement to see that their drugs are being sold illegally," says Cary.

Hatch says Cary's position amounts to allowing the fox to guard the henhouse. He also says it is legal to import some drugs from Canada, so industry moves could open the door to a potential antitrust violation.

But to make that determination, Hatch says he needs to see the documents to see if there's a violation.

"They want to get the cart before the horse here, and start arguing whether there's been a violation of antitrust laws. We haven't gotten that far yet," says Hatch. "We're not making that allegation. We need to look at the documents to see what's going on. We know all of these companies started acting in concert this year. We don't know if they did it pursuant to communication. If they did, it's a violation."

Hatch says he declined Glaxo's invitation to view the documents in Canada, because the company wouldn't have to provide all of their documents to him or allow Hatch to make copies.

Richard Murphy, a professor at William Mitchell College of Law, says Hatch may have a tough time proving antitrust violations without incriminating internal documents, because anti-competitive behavior and competitive behavior sometimes look the same.

Murphy says, for example, that two corner gas stations might be forced to increase prices at the same time because of external market pressure, not because of a previous agreement. He says drug companies working in their own self interest may have acted in a similar manner.

"Just because a bunch of companies are acting in a similar fashion doesn't necessarily mean that there's an agreement amongst them. That's the question that is, in essence, being investigated -- whether there is an agreement. There are plenty of situations where sellers will behave in ways that are similar, but there's no agreement between them."

The judge has given both sides more time to file additional briefs to support their cases.

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