On 19 October 2016 the Court of Justice of the European Union handed down a judgment wherein it found that the current German fixed price regime for prescription drugs is in violation of the EU principle of free movement of goods (docket no.:. C-148/15).
The case was brought by the Association for Protection against Unfair Competition (Zentrale zur Bekämpfung unlauteren Wettbewerbs eV'; ZBW) against the German Parkinson Association (‘Deutsche Parkinson Vereinigung'; DPV) before the Regional Court of Düsseldorf. The DPV had established a bonus system where its members were granted a discount on prescribed Parkinson medicaments when purchased via the Dutch pharmacy DocMorris. The Regional Court had granted a cease and desist order against the DPV. On appeal the Higher Regional Court of Düsseldorf confirmed that the bonus system would constitute a violation of German law as a prescribed drug must be handed out for the exact same price by every pharmacy throughout Germany. Moreover, granting the patients additional advantages when they purchase a fixed price drug would violate Section 78 of the German Drug Act (‘Arzneimittelgesetz’; AMG) as well as Art. 34 TFEU. Thus, the Higher Regional Court of Düsseldorf referred the case to the ECJ in order for it to assess whether the German provision was indeed a violation of EU law and if so whether such violation could be justified on grounds of the protection of health and life of humans under Art. 36 TFEU.
The ECJ found that the relevant provision in the German Drug Act constitutes an unjustified restriction of the free movement of goods. The Court placed emphasis on the fact that the fixed price system impairs in particular foreign pharmacies, as an important means of getting access to the German market for them is sale by mail. For those pharmacies, price competition was also more important considering that they cannot compete with local pharmacies when it comes to individual consultation and counselling of patients.
The ECJ had taken into consideration a possible justification under Art. 36 TFEU, but found that the German AMG does not attain the protection of health or life of humans. It had not been shown how the fixed price system for prescription drugs ensures the appropriate geographical distribution of traditional pharmacies in Germany. The ECJ was even left with the impression that no equal price level could be maintained so that in areas with fewer pharmacies higher prices were normally charged. It was also criticized by the Court that free price competition would lead to a system where appropriate patient care could no longer be ensured.
The ECJ judgment caused criticism and applause alike: while the German pharmacists association found that unrestricted market forces had triumphed over consumer protection in health matters, European mail pharmacies found that patients could benefit from the competition.
It is agreed that the ECJ judgment will trigger activity of the German legislator. One possibility to deal with the consequences of this judgment could be that the German Parliament bans the online sale of prescription drugs in Germany. This solution is not far-fetched, as antitrust lawyer Dr. Stephan Waldheim has commented1. Referring to the ECJ judgment of 2003 (cf. decision of 11 December 2003, German Association of Pharmacists vs. Doc Morris, docket no.: C-332/01) where the Luxembourg Court expressly stated that a national provision which prohibits the sale of prescription drugs via an online sales system can be justified on grounds of the protection of health and life of humans under Art. 36 TFEU, he found that future legislative action of the German Parliament had good chances of success.
It would not be surprising if such legislation will sooner or later be assessed by the ECJ again. It is obvious that in this case it all comes down to demonstrating on a factual level that nationwide patient care would be endangered in the absence of a fixed price system. It could not be shown or substantiated in both prior cases that such impairment for patients would actually be caused when pharmacies engage in regular price competition also for prescription drugs.
1 Süddeutsche Zeitung, 08.11.2016: http://www.sueddeutsche.de/news/gesundheit/gesundheit-wandel-in-der-apothekenbranche---profitieren-verbraucher-dpa.urn-newsml-dpa-com-20090101-161108-99-100648.
This article is part of the International Life Sciences and Healthcare update for January 2017