Report for the Hearing delivered in Joined Cases 266 and 267/87
I — Facts and written procedure
The appellants in the main proceedings, the Association of Pharmaceutical Importers and other parties (hereinafter referred to as the Association), are a trade association incorporated in the form of a company limited by guarantee and the members of the said association. Their principal activity is the importation from other countries in the EEC of so-called parallel pharmaceutical products and their marketing in the United Kingdom.
In these proceedings, the Association's contention is that the measures introduced by the respondents in the main proceedings, the Secretary of State for Social Services (hereinafter referred to as the Secretary of State) and the Royal Pharmaceutical Society of Great Britain (hereinafter referred to as the Society), which is the pharmacists' professional body in the United Kingdom, infringe Article 30 of the EEC Treaty on the ground that their effect is equivalent to imposing quantitative restrictions on the importation of some of the parallel pharmaceutical products in which the Association deals.
After the Association's contention had been rejected on 10 April 1987 by the Divisional Court of the Queen's Bench Division of the High Court of Justice, the Association appealed to the Court of Appeal against that decision.
The marketing in the United Kingdom of proprietary medicinal products, that is to say medicinal products prepared in advance and marketed under special names, is subject to the issue of a licence under the Medicines Act 1968 and Council Directive 65/65 of 26 January 1965 on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products (Official Journal, English Special Edition 1965-66, p. 20). In order to comply with the judgment of the Court of Justice of 20 May 1976 in Case 104/75 de Peijper [1976] ECR 613, the Department of Health and Social Security introduced in May 1984 a simplified procedure applicable to parallel imports of proprietary medicinal products. The licence granted under that procedure is known as a Product Licence (Parallel Import), hereinafter referred to as a PL(PI) licence.
The grant of such a licence is subject to certain conditions, namely that the product must be imported from an EEC Member State in which it has already obtained a marketing authorization under Article 3 of Council Directive 65/65, that it has no differences, having therapeutic effect, from a product covered by a product licence already granted in the United Kingdom and that it must be made by the same manufacturer or by a member of the same group of companies as the product covered by the United Kingdom licence, or by a licensee of such manufacturer. In the event of the grant of a PL(PI) licence satisfying those requirements, the scope of the grant was defined as follows:
PL(PI) licences covering about 220 products have been granted. The incentive for the importation into the United Kingdom of proprietary medicinal products is that in many instances the licensed products are at present marketed in other EEC Member States at considerably lower prices. In most cases the parallel imports have the same brand name as the United Kingdom domestic product. However, about 50 of the products are marketed under a different brand name from that of the product already marketed in the United Kingdom. In a number of cases, both within the category of products marketed under a different name, and the remainder of about 170 which have identical names, the parallel products may vary from the United Kingdom product in their appearance, such as their colour, size, shape or packaging.
Section 58 of the Medicines Act, concerning medicinal products on prescription only, gives the appropriate ministers power to specify by order descriptions or classes of medicinal products. According to subsection (2), concerning the scope of the provisions, no person is to sell by retail, or supply in circumstances corresponding to a retail sale, a medicinal product of a description, or falling within a class, specified in an order under Section 58 except in accordance with a prescription given by an appropriate practitioner. Furthermore, no person is to administer any such medicinal product unless he is an appropriate practitioner or a person acting in accordance with the directions of an appropriate practitioner.
Under Paragraph 2(1) of the Terms of Service for Chemists under the National Health Service, which are regulations adopted under the authority of the Secretary of State, a chemist is to supply to any person who presents on a prescription form an order for drugs such drugs as may be so ordered. Any breach of those terms must be investigated by the pharmacist's local Pharmaceutical Service Committee and report it to his local Family Practitioner Committee, which can then take disciplinary action against the pharmacist. Doctors in the National Health Service issue 95% of all prescriptions.
Nearly all pharmaceutical products have an approved nonproprietary name which is the name given by the competent authorities to the formulation of drugs which the product contains. The manufacturer of a product may market it either using the appropriate approved nonproprietary name or using a particular name chosen by him. Although the competent authorities encourage doctors to prescribe generically, doctors are generally free to prescribe by specifying a named proprietary product.
Paragraphs 1.4.(ii) and (iv) of a Code of Ethics adopted by the Society in 1984 and the accompanying Guidance Notes provide as follows:
...
On 12 July 1986, the Society published an official statement which drew attention, inter alia, to the relevant parts of the Guidance Notes and continued as follows:
On 12 August the Society rejected a request from the Association to revoke the abovementioned statement.
Noting that, according to the Association, the said statement and the corresponding interpretation of the terms of service applied at the same time by the authorities acting on behalf of the Secretary of State had caused imports of parallel products bearing a name different from the corresponding product initially authorized practically to dry up, the Court of Appeal decided that such measures could be contrary to Articles 30 and 36 of the EEC Treaty. It therefore decided to stay proceedings in Case 266/87 and referred the following questions to the Court of Justice for a preliminary ruling:
On the basis of the same arguments, the Court of Appeal stayed the proceedings in Case 267/87 and referred the following questions to the Court of Justice for a preliminary ruling:
The orders for reference were received at the Court Registry on 7 September 1987.
By order of 11 November 1987, the Court decided to join Cases 266/87 and 267/87 for the purposes of the written procedure, the oral procedure and the judgment.
In accordance with Article 20 of the Protocol on the Statute of the Court of Justice, written observations were submitted to the Court by the appellants in the main proceedings, the Association of Pharmaceutical Importers and other parties, represented by David Vaughan QC, assisted by Derrick Wyatt, barrister, instructed by Stephen Kon of S. J. Berwin and Company, Solicitors, London; by the respondent in the main proceedings in Case 266/87, the Royal Pharmaceutical Society of Great Britain, represented by Robert Webb, barrister, instructed by E. J. R. Hill of Walker Martineau, Solicitors, London; by the United Kingdom, represented by S. J. Hay, of the Treasury Solicitor's Department, acting as Agent, assisted by John Laws and Nicholas Paines, barristers; by the Kingdom of Belgium, represented by A. Reyn, Director of European Affairs in the Ministry of Foreign Affairs, acting as Agent; by the Kingdom of Denmark, represented by Jørgen Molde, Legal Adviser at the Ministry of Foreign Affairs, acting as Agent; and by the Commission of the European Communities, represented by Eric L. White, a member of its Legal Department, acting as Agent.
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. However, the Court requested the Commission to submit a synopsis of the relevant rules governing the relations between doctors and pharmacists in the other Member States, except Denmark, the situation in that country being dealt with in the observations of the Danish Government.
By letter of 26 August 1988 the Commission replied to that question as follows:
II — Written observations
The Association of Pharmaceutical Importers claims that the decisions adopted by the Society and the Secretary of State amount to measures within the meaning of Article 30 of the Treaty and observes, with reference to the judgment of the Court of 3 February 1983 in Case 29/82 F. van Unpen en Zonen BV[1983] ECR 151 that Article 30 applies to bodies established under private law where such bodies exercise public functions or act in reliance upon national law.
Referring to the settled case-law of the Court, in the first place, the judgment of 11 July 1974 in Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837, the Association observes that the prohibition in Article 30 extends beyond frontier formalities and restrictions to any national measure capable of affecting the marketing prospects of imported products, that is to say, those which have an indirect effect on imports.
The Association adds that decisions such as those at issue in the proceedings before the national court constitute restrictions on imports contrary to Article 30 of the Treaty because of their discriminatory effects. Decisions such as those at issue prevent the product which is prescribed from being dispensed whenever it bears a trade name used in another Member State which is different from the domestic trade name.
The Association also claims that the decisions at issue do not fall outside the scope of Article 30 on the ground that they give effect to consumer choice. The choices involved are not for the most part made by independent commercial operators or by customers but by doctors employed under public law who take no account of commercial considerations in taking their decisions.
The Association also points out that in its judgment of 7 February 1984 in Case 238/82 Duphar BV and Others v Netherlands [1984] ECR 523, the Court recognized the special nature of the market in pharmaceutical products in Member States where that market is subject to supervision and control for reasons of social policy. The applicable test under Article 30 in such a context is whether the rules in question permit imports to compete in price on the national market. The effect of the decisions of the Society and the Secretary of State is virtually to exclude from the market imported products which are therapeutically identical to, or without distinction from, domestic products made by the same company or group of companies, or under licence, and which differ only in bearing a trade name which is different from the domestic trade name.
The Association contends that no therapeutic grounds could possibly exist for preferring a product bearing a United Kingdom trade name over the same product or a product without therapeutic distinction made by the same manufacturer bearing a non-United Kingdom trade name. Prescribing by the United Kingdom trade name authorizes the dispensing of the United Kingdom product, or of a product bearing a name affixed in another Member State which happens to be the same.
The Association claims that the national rule at issue in these proceedings has had the same effect as revocation of a valid marketing authorization. It also emphasizes that for all purposes material to the present proceedings, PL(PI) products are to be treated as identical to or without distinction in regard to their domestic counterparts, irrespective of whether the trade name they bear is the same or different from the domestic name.
With regard to the possible application of Article 36 of the Treaty in order to safeguard national trademark rights, the Association argues that there are no grounds whatsoever based on the enjoyment of national trademark rights which would justify the national rule at issue in these proceedings. It is difficult to see upon what basis the Society can claim an interest in protecting trademark rights of commercial operators.
With regard to the possible application of the same article on public health grounds, the Association argues that exceptions to the free movement of goods are to be construed strictly and cannot be justified if other measures, less burdensome to freedom of trade, are capable of achieving the same aim (see the judgment of the Court of 20 May 1976 in de Peijper, cited above). On the basis of the same judgment, the Association adds that the burden of establishing that measures derogating from Article 30 can be justified lies upon the national authorities. Furthermore, a derogation is permissible only if it can be established that there is a sufficiently serious threat to public health to justify a restriction on imports or sales and even if it can, the measure taken must be proportionate. Even on grounds of public health, it is not open to national authorities to differentiate between medical products which are recognized as being therapeutically identical or without distinction.
In any event, the Association contends that the possible loss of placebo effect and the remote risk of patient anxiety if the patient received a drug with a name other than that indicated by his doctor cannot amount to a sufficiently serious threat to public health to justify a restriction on the free movement of goods. In any event, national restrictions on the importation of PL(PI) products bearing a name different from the United Kingdom name could never be justified on grounds of public health under Article 36 of the Treaty since they would amount to a disguised restriction on trade between Member States within the meaning of the second sentence of Article 36 of the Treaty.
Consequently, the Association proposes that the Court should reply as follows to the first question in both Case 266/87 and Case 267/87:
The Association proposes that the Court should reply to the second question in Case 266/87 as follows:
The Association proposes that the Court should reply to the second question in Case 267/87 as follows:
The Association contends that the third question referred by the Court of Appeal in Case 266/87 should be answered in the affirmative both with regard to the statement in the Pharmaceutical Journal of 12 July 1986 and to its letter of 12 August 1986.
The Royal Pharmaceutical Society of Great Britain contends, in regard to the first question, that its statement of 12 July 1986 does not discriminate against licensed imported drugs but makes it clear that pharmacists should treat them in the same way as other licensed drugs, imported or domestic. The principle is that if a medicinal product is prescribed by its product's name, the pharmacist should dispense the product marketed under that name.
The Society is not against the policy of encouraging prescribing by generic or nonproprietary name. When a drug is so prescribed, the pharmacist may dispense any medicinal product meeting the requirements of the prescription. It is for the prescriber to choose the drug, or the actual product which contains it. In either event what the pharmacist is doing is dispensing the prescription, not altering it, for example, to a generic version of a drug, when the prescriber has made a specific choice of product.
Referring to the judgment of the Court of 7 February 1984 in Duphar, cited above, the Society remarks that national provisions such as those in this case are compatible with Article 30 of the Treaty if there is no discrimination between domestic goods and parallel imports. It adds that if importers wish to import more goods, all they have to do is persuade the doctors, dentists or veterinarians, who are the exclusive market, to prescribe them.
The Society proposes that the reply to the first question should be in the negative.
With regard to the second question, the Society points out that it asks only whether a rule is justifiable as opposed to being justified. It adds that the Association have put in no evidence to contradict the authoritative and detailed evidence of the potential danger to health.
Any anxiety caused to the patient through the dispensing of a drug of quite a different name to that expected, or by the expected name on the container not matching that on the tablets themselves could effect compliance with the dose regimen and hence treatment, to the detriment of the health of the patient.
If there be a restriction on imports, then any such restriction is justifiable because without it a doctor cannot be so sure that his patient receives what he prescribes and unless he can be so sure, the evidence shows that patients' confidence may be lost and treatment adversely affected.
As regards the protection of property, the Society points out that it has a legitimate interest in protecting its pharmacist members from numerous actions for breach of trade mark. According to the Court's judgment of 10 October 1978 in Case 3/78 Centrafarm v American Home Products [1978] ECR 1823, drug companies have the right to preserve their trade mark within the various jurisdictions of the European Community, even where a single company may be the proprietor of both marks.
The Society proposes that the Court should reply in the affirmative to the second question.
With regard to the third question, the Society points out that it operates as a body independent of Parliament. Under the Pharmacy Act 1954, Parliament has set up a Statutory Disciplinary Committee of the Society, which acts autonomously. It does not report nor make recommendations to the Council of the Society. Moreover, the Pharmacy Act allows the Committee to remove pharmacists from the register for, inter alia, misconduct but what constitutes misconduct is solely for the Committee to determine.
The contested statement does no more than confirm a longstanding practice of many years, by which pharmacists are to dispense, without discrimination, whichever drug or product it be, general or specific, which a prescriber has chosen to prescribe for a patient, whose clinical details he will know, but the dispenser may not.
The Society therefore proposes that the Court should decide that its statement does not constitute a measure within the meaning of Article 30 of the Treaty.
In conclusion, it argues that if there is a measure, it does not have an effect equivalent to a restriction on imports. It is nondiscriminatory and applies only to the supply of a product once prescribed. It does not affect the question of what is prescribed (imported or not). If there is such a restriction, it is not only justifiable but in fact justified on grounds of the protection of health and of trade marks.
The United Kingdom observes, in regard to the scope of Article 30, that the dispensing of pharmaceutical products is in essence a commercial supply of goods by a private supplier. However, it has certain important characteristics: first, the selection of the particular goods to be supplied is a skilled operation; secondly, the task of selecting the goods is entrusted to the doctor, and is one of a number of decisions which the doctor has to make concerning the treatment of the patient; thirdly, the person who chooses the goods is different from the person who consumes them.
Furthermore, Article 30 does not call into question the principle in a commercial transaction that the supplier must supply what has been ordered, a principle which must apply, in particular, when it is a doctor who chooses and prescribes the medicine for a patient.
The contested rules do not themselves restrict imports. The products in question can at present be imported and dispensed against a generic prescription or a prescription using the name under which they are marketed.
The contested rules are not the cause of the pharmacists' inability to dispense the parallel imported product. The real reason lies in the fact that the imported product bears a trade mark other than that indicated on the doctor's prescription and, as the Court decided in its judgment of 10 October 1978 in Centrafarm, cited above, the law of trade marks prevents importers from placing such marks on products which they import.
The United Kingdom does not consider that it is obliged to set up a special system in order to increase imports of particular products by enabling them to circumvent the effects of trademark law as interpreted by the Court of Justice.
Such a system would be artificial because it would involve discrimination in favour of one particular category of imports and, moroever, would be unsatisfactory and even dangerous from the point of view of public health.
It would be artificial inasmuch as it would permit pharmacists to dispense a product named B on the basis of a prescription ordering product A. It would also be inconsistent with the requirements of the regulations on labelling, which require the dispensed product to be labelled with the name used by the doctor on the prescription.
It would be discriminatory inasmuch as it would favour parallel products over other proprietary medicinal products which are therapeutically equivalent to those prescribed by the doctor.
It would be unsatisfactory and dangerous because of the confusion on the part of the patient which would result therefrom and which might well lead him not to take the product dispensed even though failure to do so might well cause him harm.
The United Kingdom submits that if the contested rules fall within the scope of Article 30 at all, the considerations referred to above constitute a justification of the rules either as being necessary to satisfy mandatory requirements of the sort recognized by the Court in the Cassis de Dijon case or on grounds of the protection of health under Article 36 of the Treaty. Those objectives cannot be achieved by other means.
Finally, the United Kingdom contends that the special system which the Association seeks to have introduced would violate the essential subject-matter of trade marks. It observes that, according to the judgment of the Court of 10 October 1978 in Centrafarm, cited above, the essential function of the trade mark is to guarantee the identity of the origin of the trademarked product to the consumer or ultimate user. A situation in which the product supplied would not even bear the trade mark selected by the doctor would frustrate the attainment of the objectives which it is the essential function of the trade mark to secure.
With regard to the third question in Case 266/87, the United Kingdom observes that the Society is a body composed of members of the pharmaceutical profession and is not under government control, although certain statutory functions are entrusted to it.
The United Kingdom submits that the answers to be given to the questions raised in this reference are as follows:
The Government of the Kingdom of Belgium emphasizes that in Belgium a pharmacist must dispense exactly the same drug prescribed in the prescription. To authorize the pharmacist to dispense another medicinal product would open the door to all kinds of substitution of more or less identical or similar products. Furthermore, a right of substitution would not reestablish fair competition between parallel imported products and other products. The problems raised in these cases can be resolved only by Community action to harmonize prices, if necessary supplemented in the long term by harmonization of the trade marks and names of medicinal products.
The Danish Government points out first of all that by insisting that the pharmacist must only dispense precisely the product indicated by the doctor in the prescription, responsibility towards the patient is unequivocally laid on the doctor. Furthermore, the fact that the doctor, being the best-qualified person, himself makes the choice which he is best placed to make excludes any danger of confusion or anxiety on the part of the patient if the pharmacist, motivated, possibly, by a direct economic interest, was free to dispense products other than the one prescribed.
When a doctor issues a prescription for certain pharmaceutical products, he is making a choice which may be influenced by advertising but is based both on his knowledge of the patient and of the various pharmaceutical products, and which takes no account of economic considerations.
The Danish Government adds that in many Member States, including Denmark, pharmacists have a duty to supply, and at the same time an exclusive right to sell, medicinal products for which a prescription is necessary. Furthermore, Danish pharmacists may themselves be producers of medicinal products both through their own businesses and to some extent through the manufacturing business that is jointly owned by them, which could give rise to doubt whether they have made an unbiased consumer choice.
The situation under discussion in no way falls within the scope of Article 30 of the Treaty because the rules are applied without distinction to imported and nationally produced medicinal products. The only question is therefore who makes the choice.
If the Court should none the less find that the rules at issue in this case are incompatible with Article 30, the Danish Government considers that they are fully justified on the grounds mentioned in Article 36, namely, inter alia, grounds of public health.
The Commission points out first of all that, although the Society is not a State body, certain public law supervisory functions conferred on it by statute are measures attributable to the State.
Consequently, the Commission is of the opinion that the positions taken by the Society and the Secretary of State, who is part of the Government of the United Kingdom, constitute measures for the purposes of Article 30 of the Treaty.
With regard to the compatibility of the contested measures with Article 30 of the Treaty, the Commission points out that they apply to all pharmaceutical products, whether imported or not, but that they are capable of favouring domestic production.
The Commission points out that doctors prescribing medicines under the National Health Service are acting as agents of a State body. In that regard, the Commission draws attention to the second sentence of Article 7(2) of Council Directive 77/62/EEC of 21 December 1976 coordinating procedures for the award of public supply contracts (Official Journal 1977, L 13, p. 1) according to which the indication of trade marks is prohibited unless the product cannot otherwise be described, in which case the words or equivalent are to be added.
The Commission does not accept the argument that the contested measures are no more than an expression of the normal rule of commerce that the supplier must supply what has been ordered. In so far as the customer is considered to be the patient who will consume the product, the contested measures go further than the normal rule of commerce. The customer is entitled to accept an identical product to that prescribed, even if it bears a different name and has a different trade mark and, in that case, the supplier is not of course obliged to supply the trademarked product. However, the contested measures constitute an instruction from an authority of the State to the pharmacist, backed up with the threat of disciplinary action, requiring him to supply the trademarked product even if the patient would have been prepared to accept the identical product with a different trade mark.
The Commission is therefore of the opinion that the contested measures constitute measures having an effect equivalent to quantitative restrictions within the meaning of Article 30 of the Treaty.
The Commission accepts, with regard to the possible justification of the contested measures, that the prevention of anxiety and the maintenance of the confidence of a patient in his treatment are justified objectives coming within the protection of the life and health of humans under Article 36 of the Treaty. The problem arises in particular in the case of older patients and those who receive long-term treatment.
According to the Commission, those objectives could well justify a decision by a doctor to specify a particular trademarked product in certain circumstances. However, the Commission considers that the measures adopted in this case are more restrictive than necessary to achieve that objective. It can conceive of two methods of achieving those objectives which would be less restrictive.
First, it would be a simple matter to provide that all National Health Service prescription forms contain a notice advising the pharmacist that where a medicine is specified by a trade mark he is free to dispense an alternative medicine which has been officially recognized as presenting no differences having therapeutic effect from the specified trademarked product. The prescribing doctor should be free to strike out this notice if he considers that the equivalent product would not be suitable for his patient for some reason. In such a case the pharmacist would be required to dispense only the product with the specified trade mark.
The second solution would be to allow a pharmacist to dispense a therapeutically equivalent product against a prescription specifying a trademarked product but to require him in such circumstances clearly to bring to the attention of the patient (for example, through the affixing of a label) that the dispensed medicine may differ in name (and possibly colour, taste and shape) from that prescribed or that to which the patient has become accustomed, but that the therapeutic effect is identical.
With regard to the question whether the contested measures may be justified on grounds related to the protection of industrial and commercial property rights, the Commission points out that the contested measures not only amount to an instruction to pharmacists not to infringe trademark rights but also prohibit pharmacists from providing an alternative product even where the proprietor of the trade mark permits or acquiesces in such action or where the exercise of the trademark right would be incompatible with the EEC Treaty. In so far as the measures go further than is necessary to protect actual trademark rights which can be legally exercised, they cannot be justified on the grounds of the protection of industrial and commercial property.
For the reasons set out above the Commission concludes that the Court should reply to the questions of the Court of Appeal as follows:
1 Language of the case: English.
2 [1976] ECR 613