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EU Court of Justice Outlaws German Fixed Retail Pricing System for Prescription Medicines

 

28 October 2016

​On 19 October 2016, the Court of Justice of the European Union issued a judgment on the compatibility of German legislation setting fixed prices for the sale of prescription-only medicinal products by pharmacies with EU rules on the free movement of goods (case C-148/15). The Court ruled that (i) national legislation providing for such a system of fixed prices constitutes a measure having an equivalent effect to a quantitative restriction on imports, and (ii) such legislation could not be justified on the grounds of the protection of health and life of humans, as it is not appropriate for attaining such an objective. The judgment is likely to have significant implications on the cross-border online sale of medicinal products in Germany and more broadly on the development of the EU medicines market.

Background

The underlying proceedings stem from a dispute between the Deutsche Parkinson Vereinigung eV (DPV), a German Parkinson’s disease self-help organisation, and the Zentrale zur Bekämpfung unlauteren Wettbewerbs Ev (ZBUW), a German association for the protection against unfair competition. The dispute concerns a bonus system made available by DPV to its members purchasing Parkinson’s prescription-only medicines from DocMorris, a Dutch-based mail-order pharmacy (the bonus system).

The ZBUW brought judicial proceedings against DPV, arguing that the bonus system infringed German legislation setting fixed prices for prescription-only medicinal products (the German fixed-price statutory system). The Düsseldorf Regional Court (Landgericht) prohibited DPV from promoting the bonus system among its members. On appeal, the Düsseldorf Higher Regional Court (Oberlandesgericht) stayed proceedings and referred the following questions to the Court of Justice (CJ) for a preliminary ruling concerning the compatibility of the German fixed-price statutory system with EU rules on the free movement of goods:

  1. Must Article 34 TFEU be interpreted as meaning that a system of fixed prices for prescription-only medicinal products laid down by national law constitutes a measure having equivalent effect within the meaning of Article 34 TFEU?
  2. If the Court answers the first question in the affirmative: is the system of fixed prices for prescription-only medicinal products justified under Article 36 TFEU on grounds of the protection of health and life of humans if that system is the only means of ensuring a consistent supply of medicinal products to the population across all parts of the country, in particular in rural areas?
  3. If the Court also answers the second question in the affirmative: what is the degree of judicial scrutiny required when determining whether the condition mentioned in the second question is in fact satisfied?

Findings of the Court

The CJ reiterated that the free movement of goods is a fundamental principle of the Treaty on the Functioning of the European Union (TFEU) and concluded that the German fixed-price statutory system constitutes an unjustified restriction on such principle. The main conclusions of the CJ are summarised below.

Concerning the first question, the CJ found that a system of fixed sales prices, such as the German fixed-price statutory system (which applies to both pharmacies established in Germany and those established in other Member States providing mail-order services), affects foreign-based pharmacies more than German pharmacies. This would be because – unlike traditional pharmacies, which can compete by offering additional services such as “individually-tailored advice” to patients by the pharmacy staff – price is a “more important factor of competition” for (foreign-based) mail-order pharmacies. A system of fixed retail prices therefore “has a greater impact on pharmacies established [outside of Germany] than on those which are established within German territory, a fact which could impede market access for products from other Member States more than it impedes such access for domestic products”.

As a result, the CJ concluded that national legislation such as the German fixed-price statutory system, “which provides for a system of fixed prices for the sale by pharmacies of prescription-only medicinal products for human use, constitutes a measure having equivalent effect to a quantitative restriction on imports, within the meaning of [Article 34 TFEU]”.

Concerning the second and third questions, the CJ stressed that a restriction on a fundamental freedom guaranteed by the TFEU, such as the free movement of goods, can only be justified on the grounds of the protection of the health and life of humans under Article 36 TFEU if it is appropriate for securing the attainment of such an objective – in this case, the safe and high-quality supply of medicinal products in Germany – and does not go beyond what is necessary to attain it.  The Court added that it is for national authorities to provide evidence to that effect.

In this case, the CJ found that no evidence was brought to substantiate any assertion that the German fixed-price statutory system represents an appropriate means of ensuring the safe and high-quality supply of medicines in Germany. Therefore, it answered the second and third questions in the sense that “national legislation, such as that at issue in the main proceedings, which provides for a system of fixed prices for the sale by pharmacies of prescription-only medicinal products for human use, cannot be justified on grounds of the protection of health and life of humans, within the meaning of [Article 36 TFEU], inasmuch as that legislation is not appropriate for attaining the objectives pursued”. As the CJ found that the German fixed-price statutory system lacks appropriateness, it did not analyse whether it is proportionate to attain the objectives pursued. Of interest, in this respect, Advocate General Szpunar noted in his Opinion that, as opposed to a fixed-price system, a maximum-price system would represent a less restrictive measure allowing mail-order pharmacies to compete on price.

Conclusion

In a nutshell, the CJ ruled that the German fixed-price statutory system constitutes a measure having an equivalent effect to a quantitative restriction on imports in contravention of Article 34 TFEU, as it has a greater impact on the sale of prescription-only medicinal products by foreign-based pharmacies than by pharmacies established in Germany. It also found that such a system cannot be justified on grounds of the protection of health and life of humans, within the meaning of Article 36 TFEU, as it is not appropriate for attaining the objectives pursued (ensuring the safe and high-quality supply of medicines in Germany).
 

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