On 19 October 2016, the Court of Justice of the European Union (CJEU) issued an important judgment concerning the German law on fixing prices of retail prescription drugs.

In the case before the Higher Regional Court of Düsseldorf, the German Parkinson’s Disease Association teamed up with the Dutch mail-order pharmacy DocMorris to obtain better terms for German patients.

In Germany there is a uniform retail price on medicinal products sold to patients in Germany, irrespective whether they are sold online or in a traditional German pharmacy. Patients covered by Germany’s statutory medical insurers pay a certain proportion of drug expenses from their own pockets, and Dutch-based mail-order pharmacies have in the past offered to return some of that money, using their non-German domicile to get around minimum prices. This systems gets around the German fixed price laws.

This system was challenged by the German Association against Unfair Competition as violating provisions of the German Medicinal Products Act as well as the German Regulation on Prices for Medicinal Products. Germany’s fixed price rules aimed to keep traditional pharmacies in business in rural areas. Initially, the German court’s ruled the practises that got around the German fixed price rules to be illegal because of the national fixed-price system for supply of prescription only medicines and prohibited discounts or bonuses.

However, on reference from a German court of appeal, the CJEU determined that the German law on binding retail price maintenance for prescription drugs “constitutes an unjustified restriction of the free movement of goods” in the European Union.

The German government, in support of its laws, argued that fixed prices were needed to ensure safety and high quality supplies, and to prevent the closure of traditional pharmacies.

The CJEU found that Germany had failed to provide any specific evidence that the price controls were an appropriate means to protect public health. The CJEU found that the price competition could benefit patients as it would allow them access to prescription-only medicines in Germany at more attractive prices. The supply of such drugs in rural areas would not be negatively affected by allowing price competition, nor that the patient’s health would be put in jeopardy. The CJEU’s reasons for the decision are:

(1) the price maintenance might make it harder for foreign pharmacies to enter the German market and, thus, has an equivalent effect to a quantitative restriction on imports within the meaning of Art. 34 TFEU;

(2) although a restriction on the free movement of goods can be justified for health reasons, price maintenance is not appropriate for attaining this objective. Thus, the system of fixed prices for prescription-only medicinal products is not justified under Art. 36 TFEU.