Introduction

The Supreme Administrative Court recently handed down a long-awaited judgment in the case between the Dental and Pharmaceutical Benefits Agency (TLV) and the Skane Region. The court departed from the judgments of the first-instance and appellate courts and stated that county councils and regions are permitted to enter into discount agreements with pharmaceutical companies for medicinal products which are included in the reimbursement scheme (ie, those for which the TLV decides the prices) (for further information please see "Discount agreements for medicinal products in reimbursement system").

Facts

Skane entered into an agreement with a pharmaceutical company for discounts on medicinal products which were included in the reimbursement scheme (ie, those sold at outpatient pharmacies). The TLV prohibited Skane from entering into such an agreement, arguing that the Pharmaceutical Benefits Act should be interpreted to mean that only the TLV can decide on prices for products in the reimbursement scheme, and that those prices cannot be circumvented through pricing agreements. The TLV argued that its supervisory role means that it can prohibit such agreements.

Skane argued that the TLV can decide on the purchase and sale prices for retail pharmacies only. In this respect, the TLV referred to the legislative history of the Pharmaceutical Benefits Act and the predecessor of the existing version of the act. The legislative history states that the TLV will decide on the prices for medicinal products which are to be included in the reimbursement scheme – without any reference to the scheme, the prices would be limited to retail pharmacies.

The administrative court and administrative court of appeal ruled in favour of the TLV. The administrative court of appeal referred to the EU Transparency Directive and stated that a system with discount agreements cannot be considered compliant with EU law.

Decision

The Supreme Administrative Court granted leave to appeal only as regards to the limited issue of whether the TLV can prohibit pricing agreements.

In its brief judgment, the court held that the Pharmaceutical Benefits Act should be interpreted to mean that the TLV can decide whether a product is to be included in the benefit and can then determine the purchase and sale prices for pharmacies. According to the court, nothing in the law can be interpreted to mean that other parties are obliged to use the prices set by the TLV or cannot agree on other prices.

The court did not examine whether the objective of the pricing agreement conformed with the directive and it remains unclear whether pricing agreements are permitted.

Comment

The court interpreted the law literally and did not comment on the statements regarding the legislative history on which the TLV had based its arguments. To add to the confusion, the court did not comment specifically on the fact that the pricing agreement at issue did in fact relate to sales in retail pharmacies, over which (according to the court) the TLV has sole discretion to decide on pricing. The court did not consider the practical consequences of the decision. This could mean that the prices which the TLV now sets for retail pharmacies (and, by extension, for county councils which stand the costs of the reimbursement scheme) could, in practice, be circumvented through pricing agreements.

Considering that mandatory substitution in retail pharmacies takes place regardless of any agreements that the county councils may have, the decision will in practice affect mainly those areas where there is no substitution of medicinal products.

The decision is also interesting in light of the developments that the TLV has pioneered together with the county councils within the framework of the coordinated introduction of new medicinal products in the county councils. When handling pricing decisions, the TLV has facilitated agreements between county councils and pharmaceutical companies for products included in the reimbursement scheme as a side agreement to its pricing decision. Such side agreements have been based on risk sharing between the parties, since the TLV's attitude has been that pricing agreements are impermissible for products in the reimbursement scheme. Now that it is clear that the TLV cannot, for the time being, prohibit pricing agreements in respect of products within the reimbursement scheme, these side agreements may change.

In a previous report to the government, the TLV stated that the court ruling may lead to a change in legislation. It therefore remains to be seen what effect this decision will have in the longer term. The permissibility of pricing agreements under the EU Transparency Directive has not yet been tried; but it is clear that, for the time being, the TLV cannot legally forbid pricing agreements between pharmaceutical companies and county councils.

For further information on this topic please contact Jonas Löfgren or Annie Kabala at Advokatfirman Lindahl KB by telephone (+46 8 527 70 800) or email (jonas.lofgren@lindahl.se or annie.kabala@lindahl.se). The Advokatfirman Lindahl KB website can be accessed at www.lindahl.se.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.