EJC Uproots German Drug Price Floor

24.10.2016 -

Germany’s drug regulation climate was clouded last week by a European Court of Justice (ECJ) ruling that the country’s fixed prices for prescription drugs constitutes an unjustified restriction of the free movement of goods in the European Union. The case was initially brought by a non-profit organization representing Parkinson’s sufferers and their families, whose cut-price agreement with Dutch mail-order pharmacy DocMorris – which is coupled with a bonus system – German authorities were trying to block. A district court in Düsseldorf maintained that the arrangement breached the fixed-price rule, but the Parkinson’s group appealed, and the case eventually reached the ECJ.

In the EU court’s view, Germany’s fixed-priced system (aimed at ensuring stable prices and a better distribution of pharmacies across the country) makes it difficult for pharmacies in other EU member states to gain access to the German market. In a somewhat murky argument, the court countered that price competition would “encourage the establishment of pharmacies in regions where the scarcity of dispensaries allows for the charging of higher prices.”

The verdict would pave the way for mail-order drug companies in other EU countries to compete with domestic German pharmacies on prescription drug prices, even though the latter would still not be allowed to compete with each other. While the German Parkinson Association and the Federation of German Consumer Organizations applauded the ECJ ruling, the Federal Association of Pharmacists (ABDA), which represents some 20,000 pharmacies, has vowed to fight it.  In the view of its president, Friedemann Schmidt, the decisionmeant the triumph of “unbridled market forces” triumph over consumer protection and public health.”

As the discussion continues, the German Federal Health Ministry said it would review the judgment with an eye to maintaining a nationwide drug supply service “at a high level through local pharmacies” Patients covered by the country’s statutory medical insurance schemes pay a varying percentage of drug expenses themselves. In many cases, the fee is   minimal, but people with chronic illnesses who regularly need high-priced drugs bear a higher burden.   According to estimates, the German pharmaceutical market is worth around €50 bllion annually and is growing at around 5% per year.