Legal Update: EU Law Bans Fixed Prices on Pharmacies' Sales of Medicinal Products
In its judgment in case C-148/15 of October 19th, 2016, the European Court of Justice concluded that the German legislation on fixed prices for pharmacies’ sales of prescription medicinal products constitutes a restriction of the free movement of goods, and that such restriction could not be justified on grounds of it being necessary in protecting the health of the public.
The conclusion was based on the Court’s evaluation of the competitive disadvantages for foreign mail-order pharmacies, which, like traditional pharmacies, were required to apply fixed prices. From the Court’s point of view, application of fixed prices was considered burdensome and a measure which could potentially hinder foreign pharmacies from entering the German market. This while the Court, on the other hand, deemed that there was no evidence of a risk of traditional pharmacies being driven out of competition by such foreign pharmacies offering low prices, had the restricting legislation not been in place, given the local pharmacies’ competitive advantages of being able to provide individual advice and emergency supplies.
Furthermore, the court reasoned that price competition from mail-order pharmacies could further encourage traditional pharmacies to improve its provision of individual advice and emergency care services, while it rejected the argument that such price competition would lead to traditional pharmacies being shut down and necessary access to individual advice and emergency care no longer ensured. Furthermore, it set forth that an increased price competition between pharmacies could advance the establishment of pharmacies in underpopulated regions which would allow for higher prices to be charged by traditional pharmacies. Finally, it stated that price competition would ultimately benefit the patients in terms of the products being offered at lower prices.
As a result of the judgment, foreign mail-order pharmacies shipping to Germany are no longer obligated to comply with the local legislation on applying fixed prices. Moreover, it remains to be seen in which manner local legislators will handle fixed retail price regulations, once such local restrictions’ incompatibility with the court’s judgment is declared by local courts in Germany and throughout other relevant Member States. Sweden, naturally, being one of particular interest.
For further information on the judgment and the implications thereof, please do not hesitate to contact the Life Sciences practice at Hannes Snellman.