E.U. Ruling

Guaranteed Pharmacy Margins Under Threat

ARCHIV - Medikamente liegen in den Regalen eines Kommissionierautomaten, am 29.04.2015 in einer Apotheke in Hamburg. Foto: Daniel Reinhardt/dpa (zur Berichterstattung über die juristische Klärung, ob die Preisbindung für verschreibungspflichtige Medikamente in Deutschland mit dem freien Warenverkehr vereinbar ist) +++(c) dpa - Bildfunk+++
Facing policy headaches, some of the good stuff?
  • Why it matters

    Why it matters

    Germany’s pharmacy industry has long relied on the state price-margin guarantee for profits as other areas of its business are open to intense competition.

  • Facts

    Facts

    • German 20,000 pharmacies are guaranteed a price-margin on all prescription drugs.
    • The European Court of Justice is now ruling on whether the guarantee must be upheld by foreign countries with German customers.
    • It is widely expected to ban the guarantee, opening up opportunities for Germany’s mail-order pharmacies.
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    Audio

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Germany’s 20,000 pharmacies are used to being given the occasional health policy headache by the government in Berlin. But up to now they were always able to rely on one banker: fixed trading margins for prescription drugs.

These work in a similar way to fixed prices in book retailing, and have long been relied on by the pharmacy sector, which otherwise only has to worry about competition on non-prescription drugs and non-medicinal products.

But that could soon change. In September the European Court of Justice will announce its decision on whether the ban on discounts to protect the state-price guarantee is compatible with E.U. law, in so far as it affects foreign mail-order companies.

In the dock is the mail-order pharmacy Doc Morris. It is facing the case because it pays E.U. patients with Parkinson’s disease a bonus if they send their prescriptions to its base in the Netherlands instead of collecting them in a local pharmacy.

Such a ruling would only overturn the ban on discounts on international business, not domestic transactions.

The advocate general of the ECJ has already come to the conclusion that the ban on discounts clearly violates the law on the free movement of goods in the European Union. German mail-order companies are now hoping that the court itself will make a similar ruling – especially as it has done so in 80 percent of similar cases in the past.

“If that is what happens, we are prepared,” said Christoph Buse, chairman of the federal association of German mail-order pharmacies and joint owner of the Mycare mail-order pharmacy.

But such a ruling would only overturn the ban on discounts on international business, not domestic transactions. This would leave Germany’s domestic mail-order pharmacies, of which there are currently about 150, at a disadvantage vis-à-vis Doc Morris. In Mr. Buse’s words: “A classic case of unlawful discrimination against domestic suppliers.”

If the ruling goes as expected, it’s likely that a domestic mail-order pharmacy will then begin offering a bonus on prescription medicines to the domestic market to trigger a prosecution for violating the ban and thus a legal challenge. “I am pretty sure Germany’s Federal Supreme Court (BGH) will then have no alternative but to permit domestic mail-order companies to give bonuses,” Mr. Buse said.

That would be the end of the pharmacies’ price-margin guarantee, concedes Friedemann Schmidt, the boss of the pharmacy association ABDA.

Mr. Buse knows from personal experience that such a decision by the BGH would not take long. When the mail-ordering of medicine was first permitted in 2004, lawmakers forgot all about veterinary drugs. “So I decided to create a precedent and started mailing out veterinary medicines,” he said. “I was cautioned and there was a court case where the BGH decided very quickly in my favor.”

If anyone wanted to step in to save the pharmacies’ rock-solid price-margin guarantee, which has always been upheld by the highest courts in the land, there would be only one way. They would have to impose a general ban on mail-order retailing of prescription drugs in Germany. The ECJ ruled that this was permissible in 2004, and there is already support for such a move from the governing center-right Christian Democratic Union and its Bavarian sister party the CSU.

A proposal on the issue was being put together ahead of the party conference earlier this year but the idea was dropped following an intervention by the pharmacy lobby. The reason given was: “Don’t wake sleeping dogs with premature resolutions.”


Peter Thelen writes about social security, the job market and labor topics. To contact the author: thelen@handelsblatt.com

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