Back in 2009, a German self-help organisation for Parkinson’s sufferers set up a bonus system for its members with Dutch mail-order company, DocMorris. This enabled patients to save on their drugs bills by purchasing from the online retailer. A German court ruled the system illegal because of national price-control rules. These provided for a fixed-price system for the supply of prescription-only medicines, and effectively prohibited discounts, bonuses, promotional gifts, etc.
This has now been reversed by the European court. Why?
The "free movement" principle
A core principle of EU law is the free movement of goods. This prohibits "quantitative restrictions on imports and all measures having equivalent effect". But the free movement principle can be watered down where one of a number of reasons apply, including the “protection of health and life of humans”.
The health justification
The German government said that this justification supported its pricing rules. They were needed to ensure “safe and high-quality supplies, especially in cases of emergency, tailored advice and effective checks on the medicinal products supplied”.
Without the controls, it said, mail-order suppliers might engage in “ruinous price competition” resulting in “the closure of traditional pharmacies, especially in rural or underpopulated areas which are less attractive areas for traditional pharmacies to set up business.”
For pharmacies outside Germany, the only realistic way of selling to German consumers was through the internet. Previous cases ruled that banning mail-order sale of prescription-only medicines was illegal. What about the pricing rules?
European court's view
The European court ruled in favour of DocMorris’s bonus system. Competitive pricing was the only real advantage for online pharmacies. Unable to offer individual advice to consumers sellers like DocMorris would not be able to compete except on price. So the German pricing rules affected non-German pharmacies more and should not be allowed to stand. The health issues emphasised by the German government were not enough to justify them – German pharmacies would have to make the most of their other opportunities.
Promoting competition and the effect of Brexit
National rules controlling the sale of medicines and other healthcare products have been whittled away by the EU courts to free up competition and cross-border commerce. Overall this has been good for competition and the consumer, if challenging to traditional patterns of doing business. For the UK, assuming Brexit is at the "harder" end of the spectrum, these free movement considerations will no longer apply. This may give UK legislators a new freedom to control drug and other healthcare product markets.