The European Court of Justice has ruled that non-German internet/mail-order pharmacies can offer discounts on prescription-only medicines, in spite of German regulations applying fixed prices for these medicines.
Implications | There has been a strong negative reaction from many interested groups in Germany, with calls for the internet/mail-order trade of all prescription medicines to be banned in the country, a measure that could not be challenged at an EU level. |
Outlook | The effects of the ruling are difficult to foresee, since the reaction of Germany's lawmakers could be to seek to challenge it and restore the integrity of the fixed-price system. If this does not happen, it will probably have the effect of exerting downward pressure on the prices of prescription-only medicines in Germany. |
The European Court of Justice (ECJ) ruled on 19 October that foreign internet/mail-order pharmacies had the right to offer discounts on prescription medicines sold to customers in Germany. This verdict comes despite German laws requiring prescription drugs to be sold at a fixed, official price, without discounts.
The ECJ decided that the fixed-price rule had "a greater impact on the sale of prescription-only medicinal products by pharmacies established in other Member States than on the sale of the same medicinal products by pharmacies within the national territory". Referring to the fundamental principles of the free movement of goods, the ECJ added that it did not find that the fixed-price rule for prescription-only medicines "can be justified on grounds of the protection of health and life of humans".
The case derives from a proposal in 2009 by the Dutch online pharmacy Doc Morris to the German Parkinson's Association (DPV) to supply prescription medicines with a discount of 0.5%. This was seen by Germany's competition authority, the Wettbewerbszentrale, as a contravention of German law, based on which fixed prices are applied for prescription drugs. The Regional Court in Düsseldorf initially upheld the verdict of the Wettbewerbszentrale, but, when the DPV appealed, the Higher Regional Court of Düsseldorf referred the case to the ECJ in March 2015. The court asked the ECJ to clarify whether the fixed-price rule was consistent with the principle of the free movement of goods within the European Union, and whether the rule was justified as a measure to protect health and life, applied with the aim of ensuring the comprehensive coverage of the German population with medicines.
The reaction to the ECJ's ruling from Germany has been mostly negative. Elmar Mand, an expert in pharmacy law from the University of Marburg, is quoted by Deutsche Apotheke Zeitung as saying that it is "an affront" that five judges in a "small chamber" of the ECJ have been able to overturn a verdict of the Joint Senate of the Federal Supreme Courts of Justice of Germany. Friedmann Schmidt, the head of the Federal Union of German Associations of Pharmacists (ABDA), is quoted by the same source as saying that it appears that the ECJ has transferred principles relating to the mail-order trade of shoes or clothes to that of medicines. Schmidt is one of a number of commentaters, including eminent political figures, to call for a complete ban of mail-order/internet trade in prescription-only medicines in Germany, a measure that could not be challenged at the EU level. Doc Morris has already announced that it would challenge such a move.
The full judgment of the ECJ can be accessed here.
Outlook and implications
The long-awaited decision has wide-ranging implications for the German pharmaceutical market, as well as the markets of other EU countries. One of the most powerful arguments raised by the pharmacy sector in Germany against allowing non-German internet pharmacies to offer discounts is that the fixed-price system means that prescription medicines are priced the same in every pharmacy. This ensures a level playing field for the pharmacies, and means that patients do not need to search for lower prices. Price competition already exists within the German prescription-drug market, with discount contracts between producers and statutory health insurance funds.
However, the fixed-price ruling continues to be in force for all German pharmacies, whether they are 'bricks-and-mortar' or internet pharmacies. The extent of the impact of the ECJ's ruling debatable, considering the convenience of picking up prescription medicines in a local pharmacy, against buying them from an internet vendor. However, in certain cases, the price offered by the internet vendor may be more attractive than the fixed co-payment required by the German pharmacy.
It also remains to be seen whether statutory health insurance funds will benefit from the ruling. So far, they have not commented on the development, but there is concern that they could seek to benefit from the ruling, which could have important implications for pharmacies in Germany as well as for pharmaceutical producers. The reaction of Germany's lawmakers is difficult to predict. They may indeed wish to restore the integrity of Germany's fixed-price system very quickly. If they do not, with or without the involvement of the statutory funds, the ruling is likely to cause a reduction in the prices of prescription medicines in Germany.
It is also likely that the ruling will have significance for other countries, such as Poland, in which fixed prices are applied for prescription medicines.