In two decisions on June 06, 2019 (ref. I ZR 206/17 and I ZR 60/18), the I. Civil Senate of the German Federal Court of Justice (BGH), which is responsible for competition law, decided that the price fixing regulations for prescription drugs (Sec. 78 para. 2 sentence 2 and para. 3 Sentence 1 German Medicinal Products Act – AMG) must be strictly observed. Any donation or other promotional gift that violates the AMG’s price regulations is therefore legally inadmissible, even if the promotional gift has only a small financial value. According to the European Court of Justice’s (ECJ) decision in the case "Deutsche Parkinson Vereinigung/Zentrale" (ref. C-148/15, GRUR 2016, 1312 = WRP 2017, 36), the German pharmaceutical price fixing regulations only apply to pharmacies located in Germany and not to mail-order pharmacies in other EU Member States. However, according to the decisions of the I. Civil Senate they do not constitute any constitutionally inadmissible discrimination of German pharmacies.

1.    The BGH (German Federal Court of Justice) had to decide in two parallel proceedings on the admissibility of promotional gifts by pharmacies: In the proceedings I ZR 206/17, a pharmacy located in Darmstadt was held liable by the Zentrale zur Bekämpfung unlauteren Wettbewerbs (a German association for the enforcement of the law against unfair competition) for the violation of the pharmaceutical price fixing regulations. The pharmacy had given customers a voucher for a bun for a nearby bakery on the occasion of the sale of a prescription drug. The Regional Court of Darmstadt upheld the complaint. The appeal of the pharmacy against the decision to the Higher Regional Court of Frankfurt a.M. was unsuccessful. The Higher Regional Court of Frankfurt a.M. assumed a violation of the price fixing provision of Sec. 78 para. 2 sentence 1 and 3 AMG and thus at the same time an unfair violation of a market conduct provision (Sec. 3a German Act Against Unfair competition – UWG). This against the background that according to Sec. 7 para. 1 sentence 1 no. 1 German Pharmaceutical-Advertising Law (HWG), since an amendment to the law in 2013, grants or promotional gifts that are granted against the AMG’s price regulations are inadmissible (I ZR 206/17, para. 5). Furthermore, in the case to be decided neither the free movement of goods (Art. 34 TFEU) was affected nor the AMG’s price regulations could be applied or interpreted restrictively for constitutional reasons.

In the parallel proceedings I ZR 60/18, the Zentrale zur Bekämpfung unlauteren Wettbewerbs also sued a pharmacy located in Berlin. The pharmacy had given customers buying a prescription drug a shopping voucher in the amount of one euro, which they could redeem on their next purchase. The Regional Court of Berlin upheld the complaint. However, the pharmacy’s appeal against the Regional Court’s decision to the Higher Regional Court of Berlin (Kammergericht) was successful. The Kammergericht found that there had been a violation of the AMG’s price fixing regulations, which did not constitute an inadmissible discrimination in relation to other pharmacies in other EU Member States. However, the violation of the price-fixing provisions was not unfair since it did not appreciably harmed the interests of consumers, other market participants or competitors (I ZR 60/18, para. 7).

In both proceedings, the I. Civil Senate decided with almost identical reasons that promotional gifts are anti-competitive and, accordingly, rejected the appeal of the Darmstadt-based pharmacy in the case I ZR 206/17 and upheld the appeal of the Zentrale zur Bekämpfung unlauteren Wettbewerbs in in the case I ZR 60/18, which led to the annulment of the Kammergericht’s decision.

 

2.     The I. Civil Senate states in its decisions that the provisions of Sec. 7 para. 1 sentence 1 HWG in conjunction with Sec. 78 para. 2 sentence 2 and para. 3 sentence 1 AMG constitute a statutory provision which is also intended to regulate market conduct within the meaning of Sec. 3a UWG (para. 10 / para. 12).

According to Sec. 7 para. 1 sentence 1 no. 1 HWG it is inadmissible to grant benefits or other promotional gifts (goods or services), unless it concerns objects of small value, which are characterized by a durable and clearly visible designation of the advertiser or the advertised product or both, or low-value things. By an amendment to Sec. 7 para. 1 sentence 1 no. 1 half sentence 2 HWG introduced in 2013, benefits or other promotional gifts for drugs are now inadmissible "insofar as they are granted contrary to the price regulations applicable under the AMG ".

According to Sec. 78 para. 2 sentence 2 and 3 AMG, a uniform pharmacy retail price shall be guaranteed for drugs which are to be dispensed exclusively in pharmacies and which are subject to prescription and to reimbursement of the statutory health insurance. The uniform retail price for such drugs is determined in accordance with Sec. 78 para. 3 sentence 1 AMG in accordance with the German drug price regulation (para. 11 / para. 14).

 

3.     The I. Civil Senate continues that the fundamental prohibition of promotional gifts pursuant Sec. 7 para. 1 sentence 1 HWG is to counter the abstract danger that consumers are unobjectively influenced by the prospects of promotional gifts while making their decision on whether and, if so, which drugs they should use. Insofar as Sec. 7 para. 1 sentence 1 no. 1 half sentence 2 HWG generally prohibits promotional gifts granted contrary to the AMG’s price regulations, this is also intended to prevent ruinous price competition between pharmacies and therefore to ensure a nationwide and uniform supply of drugs to the consumer (no. 12 / no. 15).

 

4.     According to the I. Civil Senate, the ECJ’s decision in the case "Deutsche Parkinson Vereinigung/Zentrale" (C-148/15, GRUR 2016, 1312 = WRP 2017, 36) does not preclude the application of the AMG’s price regulations for domestic (German) pharmacies referred to in Sec. 7 para. 1 sentence 1 no. 1 HWG. According to the ECJ’s decision a national legislation that provides for a system of fixed prices for the sale by pharmacies of prescription-only drugs for human use, constitutes a measure having equivalent effect to a quantitative restriction on imports within the meaning of Art. 34 TFEU (para. 31 / para. 30).

However, according to the I. Civil Senate, the principles established by the ECJ were not applicable to domestic cases without cross-border implications. There was also no infringement of the general principle of equality (Art. 3 para 1 German Basic Law – GG). It does not follow from Art. 3 para.1 Basic Law that rules for nationals must be similar to those for other citizens of the EU as long as the unequal treatment is based on objective reasons (para. 35 / para. 33).

An important objective reason for the unequal treatment of domestic pharmacies and pharmacies in other EU Member States is already apparent from the fact that, although the German legislature is restricted in its freedom to organize the cross-border sale of drugs by the principle of free movement of goods pursuant Art. 34 TFEU and the caselaw of the ECJ on this subject, there is no corresponding restriction on the marketing of drugs within Germany. The difference in treatment is also justified by the fact that, keeping in mind the specific conditions of the German market, the fixed retail price of prescription drugs has less effect on pharmacies established in Germany than on pharmacies established in other Member States. They are particularly dependent on mail-order sales for the direct access to the German market (para. 36 / para. 35).

 

5.      The I. Civil Senate also states that the AMG’s price regulations do not violate the freedom to practice an occupation guaranteed in Art. 12 para. 1 Basic Law. The impact on the freedom to practice an occupation by the AMG’s price regulations is proportionate and within the public interest to ensuring that the population is provided with medicinal products on a nationwide and uniform basis. The legislature may set rules governing the exercise of a profession if they are justified by sufficient reasons of public interest, if the means chosen are suitable and necessary for achieving the objective pursued and if the restriction are reasonable for the persons concerned (para. 37 / para. 36). The proportionality of the AMG’s price regulations is only questionable if mail-order pharmacies from other Member States actually sell prescription drugs on the German market to such an extent that a serious threat to the existence of domestic pharmacies would arise and the financial equilibrium of the statutory health insurance system would no longer be guaranteed, which is currently not the case (para. 43 / para. 41).

 

6.       The I. Civil Senate comes to the conclusion that the violation of the market conduct regulation of Sec. 7 para. 1 sentence 1 HWG committed by the pharmacies appreciably harmed the interests of other market participants despite the small value of the promotions gifts (para. 51 / para. 57). The question whether there is an appreciable impairment of interests must be assessed on the basis of the legal purpose of the respective market conduct provision. The prohibition under medicinal product advertising law of advertising with any services that violate the AMG’s price regulations intends in particular to prevent price competition between pharmacies in the field of prescription drugs. The legal provision must not be undermined by the fact that such an infringement is not classified as appreciable and is therefore not considered anti-competitive. A reference to the small financial value of the promotion gift is excluded, since the price fixing shall be strictly observed according to the legislator’s clear will (para. 59 / para. 58).

 

7.       Against this background pharmacists will no longer be able to give even the smallest promotional gifts to customers, such as bonbons or a packet of handkerchiefs, when selling prescription drugs. However, this prohibition does not apply to over-the-counter drugs (OTC).

The German Federal Government would like to take action against the unequal treatment of German pharmacies in relation to mail-order pharmacies, which offer drugs in Germany from other Member States, with the planned pharmacy strengthening law. The draft law proposed by Federal Health Minister Spahn (CDU) provides for the deletion of the price fixing for prescription drugs from the AMG and for it to be incorporated in social law: Discounts undermined the principle of benefits in kind and the principal of solidarity, the draft law states. The federal cabinet has already cleared the way with its approval. It remains to be seen whether the ECJ will accept this new regulation or whether it will again assume a violation of the principal of free movement of goods guaranteed in Art. 34 TFEU. However, lawsuits filed by foreign mail-order pharmacies against the planned law are as good as certain if the draft law should enter into force unchanged.