Overview

Macfarlanes reports on a recent Canadian decision with persuasive authority in the UK, which has determined that generic and branded products may not be comparable for transfer pricing purposes.

This is a recent Canadian decision, decided in favour of the appellant, concerning the arm’s length price of branded drugs for transfer pricing purposes.

GlaxoSmithKline Inc. (Glaxo) purchased the active ingredient of a branded drug (Zantac) from a related non resident company. Glaxo paid more than five times the price paid by Canadian ‘generic’ pharmacists to their manufacturers.

The Canadian Revenue Authority argued that the generic drug and the branded drug were comparable and so using the comparable uncontrolled price method, the arm’s length price of the branded drug was the price of the generic drug.

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