European Competition Commissioner Mario Monti has barred GlaxoSmithKline (GSK) from the dual-pricing of wholesale drugs in Spain.

"The European Commission has decided to prohibit the dual pricing system which Glaxo Wellcome had introduced for all its pharmaceutical products in Spain," it said in a statement.

The Commission said EU rules barred GSK from charging one price to Spanish wholesalers for drugs they sell domestically and a higher price to the same wholesalers for the same drugs exported to the rest of the EU.

Drug companies argued different health regulations across European countries caused the price variations.

However, Mr Monti said: "Pharmaceutical companies, or other companies, cannot put into place distribution arrangements which perpetuate the partitioning of the single market into national markets."

GlaxoSmithKline notified the EU of its pricing system in 1998 and will not be fined.

Open market

In 1999 the Commission said it planned a formal ban on the dual price structure.

GSK however, cited large differences between Spain and its home market of Britain as an example.

But, the Commission rejected this argument, saying the system "cannot be justified on economic grounds".