EU Advocate General Finds Against Fixed Retail Prices for Online Sales of Prescription Medicines

On June 2, 2016, Advocate General (AG) Szpunar issued an Opinion advising the Court of Justice of the EU (CJEU) in a case concerning cross-border internet sales of prescription medicines.¹

The case relates to attempts by a patient association to work with an online pharmacy from outside Germany to get better terms for German patients. German law imposes a uniform retail price upon medicinal products sold to patients in Germany, regardless of whether those products are sold in a traditional German pharmacy, or sold online by a supplier outside Germany. The case considers whether this uniform price obligation creates disadvantages for non-German suppliers, thereby limiting their access to the German market and infringing the EU’s free movement rules.

AG Spzunar found that the German price control law does affect non-German pharmacies more than domestic pharmacies. He found that non-German pharmacies have a natural disadvantage in that German law prohibits them from owning or operating a brick-and-mortar pharmacy in Germany. They can only sell to German customers via mail/internet order, whereas German pharmacies offer products from physical premises and use online sales only as an extra sales method. Non-German pharmacies are prepared to offset their disadvantage and compete by offering lower prices or patient bonuses, but the German pricing restrictions prevent them from doing so. In this sense the German law impedes access to cross-border pharmacies.

Germany argued that its price controls were necessary to ensure consistent supply of medicines across Germany and that price competition would force local pharmacies to lower the quality of their services. The Opinion rejected these arguments saying that the link between the price controls and “consistency of supply” was “too tenuous,” and that price competition was in fact likely to lead to better service. Germany had also invoked the “precautionary principle,” arguing that a Member State can impose restrictions in response to a risk (such as inconsistent supply) “without having to wait” until the reality of the perceived risks becomes fully apparent. The Opinion rejected that argument as well, and encouraged the CJEU to limit reliance on the precautionary principle to cases where there is scientific uncertainty as to the existence or extent of a risk to human health. In cases where there is no uncertainty about the science, but merely uncertainty as to the effectiveness of a policy option aimed at tackling that uncertainty, the precautionary principle should not come into play.

The AG further emphasized that the burden of proof lies on the Member State wishing to justify a restrictive measure on public health grounds. In this case, he found that Germany had not provided any evidence justifying the pricing measure as a suitable or proportionate way to protect public health.

If the CJEU follows the Opinion, the case would set an important precedent: if online sales are the only method to access local consumers, fixed retail prices are in principle prohibited. Generally, retail price controls require proper substantiation. Abstract references to the risks of competition at retail level will not be sufficient.

¹ Case C-148/15 Deutsche Parkinson Vereinigung. Sidley is representing the German patient association Deutsche Parkinson Vereinigung before the CJEU.

Sidley EU Law Practice

To receive Sidley Updates, please subscribe at www.sidley.com/subscribe.

Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.

Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.