By a decision dated 29 March 2017, Paris Court of appeal has fined two companies (GACD and Promodentaire (the “Companies”)) and their director, for having organized a customer loyalty program towards dental surgeons in infringement of the anti-gift law (article L. 4113-6 of the Public Health Code (“PHC”)). 

I. A loyalty program disclosed and fined

In the field of dentistry, the Companies commercialize a wide range of products and equipment, including medical devices (“MDs”) and medicinal products used in the provision of dental care. The Companies established a customer loyalty program upon which each order placed by a dental practitioner provided the purchaser with a credit note to be used in three different ways:

  • To obtain a financial reimbursement;
  • To obtain a price reduction on next products’ purchase;
  • To obtain goods from the “privilege program catalogue” (including TVs, watches, bags, etc.).

The way the case was brought to the Court is peculiar: first, a dentistry professional association alerted the annual account auditor of GACD on misbehaviors it considered in breach of the anti-gift law, and the auditor, pursuant to its legal and professional duties, referred the case to the public prosecutor. In parallel, from January to September 2011, dentists complained to a local branch of the Directorate General for Competition Policy, Consumer Affairs, and Fraud Control (DGCCRF) for not having received the trips to New York they were eligible to according to the loyalty program.

The public prosecutor decided to prosecute the Companies and their director but on 22 May 2015, the first instance Tribunal decided to acquit the defendants because it considered that the Companies did not produce or commercialize products reimbursed by French social security system (“FSS”) but products used to provide services reimbursed by such system.

The public prosecutor appealed the case before the Paris appeal Court which, without surprise, reversed the Tribunal judgement and fined the Companies and their director between 40 and €75.000 each.

II. Take aways

First, the Court of appeal reminds that the determining factor in assessing the submission of a company to the anti-gift law is the fact a company provides services, produces or commercializes products reimbursed by FSS, even if the product is a MD and if only one products is reimbursed by FSS. Furthermore, it is not necessary that the product itself is reimbursed. It is sufficient that it is prescribed as part of a therapeutic act which is reimbursed, as long as “products are a direct component of the care”.

In contrast, the Court excludes “accessories and tools enabling the performance of the care” as being part of the reimbursed care. In practice, the borderline is therefore very difficult to draw and a cautious approach would be for companies supplying medical equipment to hospitals to comply with the anti-gift law, all the more that the distinction between reimbursed products and not reimbursed products will soon no longer apply (as of 1st July 2018 or before).

Second, the Court reminds that direct or indirect benefits in cash or in kind “are to be broadly understood, and include for instance diverse gifts and liberalities, support of travel expenses, free provision of equipment […]”, the sole limit being negligible value in relation with the medical art and normal professional relationships. In the case at stake, the Court dismissed without surprise the argument.

The Court namely provides an interpretation of what is to be considered a prohibited gift as opposed to rebates that could have been granted as part of normal professional relationship: “whatever its calculation method, rebates constitute a commercial benefit granted to the dental practice as they reduce a purchase price immediately or with postponement; in contrast, the gift does not have this function and is only provided to a person (dentist, assistant) and has no consequence on the account of the professional structure”.

Ancillary to the loyalty program, the Court also sanctioned the deficient invoicing system put in place by the Companies in order to hide the loyalty program.

III. Penalties

In this action, only the Companies and their director were prosecuted, not the physicians. One may wonder whether this is due to their role as whistleblower, as otherwise most of the fines in this field were imposed against HCPs.

The Court fined:

  • The director to a €75.000 fine;
  • GACD to a €75.000 fine;
  • Promodentaire to a €40.000 fine

The total amount of the benefits provided by the Companies was superior to €5.300.000 in 2011 and the infringement lasted for at least five years. The fines might therefore not be seen as very dissuasive but the sanction against the Companies and their director should be seen as a clear signal, and we cannot exclude that fines become higher once the reform of the anti-gift law will become effective in July 2018.