Case C-141/07, Commission v Germany

>> German Law on Pharmacies infringing Art. 28 but justified on grounds of public health

By its application the Commission sought a declaration from the Court that, by providing in Paragraph 14(5) and (6) of the German Law on Pharmacies that the conclusion of a contract for the supply of medicinal products was subject to cumulative conditions whose effect was to make it impossible in practice for a hospital in Germany to be supplied on a regular basis by pharmacies established in other Member States, Germany had failed to fulfil its obligations under Arts 28 EC and 30 EC.

In support of its action, the Commission claimed that the cumulative conditions laid down by the contested provisions relating to contracts for the supply of medicinal products constituted a selling arrangement within the meaning of Keck and Mithouard but none the less fell within the scope of Art. 28 EC, given that the effect of those conditions was that access to the market was more difficult for goods from Member States other than Germany than it was for domestic products.

The Commission pointed out that under the contested provisions the contracting pharmacy was responsible for the provision of all of the services associated with the supply of medicinal products. Since some of those services, such as provision of emergency supplies, could only be provided by a pharmacist who had his dispensary in the vicinity of the hospital to be supplied, the choice of such a pharmacy was necessarily restricted to those situated near to that hospital. In this way, goods from other Member States had access to the market which was more restricted than that of domestic products.

The Court first of all held that Community law did not detract from the power of the Member States to organise their social security systems and to adopt, in particular, provisions intended to govern the consumption of pharmaceutical products in order to promote the financial stability of their health-care insurance schemes and the organisation and delivery of health services and medical care.

However, in exercising that power, the Member States must comply with Community law, in particular the provisions of the Treaty on the free movement of goods. Accordingly, this action was restricted to determining whether the Member States had acted in compliance with the rules of that Treaty relating to the free movement of goods. As Community law stood at present, since there had been no harmonisation at Community level of the rules on the provision of medicinal products to hospitals, the Member States continued to be empowered to lay down rules on that subject, subject to compliance with the provisions of the Treaty, in particular the provisions on the free movement of goods (see also
Case C‑120/95 Decker [1998] and C‑372/04 Watts [2006]).

Reiterating its Dassonville case law, the Court held that the free movement of goods was a fundamental principle of the Treaty which was expressed in the prohibition, set out in Art. 28 EC, on quantitative restrictions on imports between Member States and all measures having equivalent effect. The prohibition of measures having equivalent effect to quantitative restrictions which was set out in Art. 28 EC covered all legislation of the Member States that was capable of hindering, directly or indirectly, actually or potentially, intra-Community trade.

The Court added that national provisions restricting or prohibiting certain selling arrangements which, first, applied to all relevant traders operating within the national territory and, second, affected in the same manner, in law and in fact, the marketing of domestic products and those from other Member States were not liable to hinder, directly or indirectly, actually or potentially, trade between Member States within the meaning of the Dassonville line of case-law.

The Court held that paragraph 14 of the Law on Pharmacies laid down the requirements which external pharmacies must meet if they were to be eligible to supply medicinal products to hospitals in Germany. However, the contested provisions did not concern the characteristics of the medicinal products, but concerned solely the arrangements permitting their sale. Consequently. Therefore , they had to be regarded as concerning selling arrangements within the meaning of Keck and Mithouard.

Pharmacies established in other Member States, unless they were in a border region and near to the German hospital concerned, which wished to conclude a supply contract with such a hospital must either transfer their dispensary to the vicinity of the hospital concerned or open another pharmacy near to the hospital. Consequently, as regards the supply of medicinal products to German hospitals, those provisions did not affect in the same way products marketed by pharmacies established in the territory of Germany and those marketed by pharmacies situated in another Member State.

For a national measure to be characterised as discriminatory or protective within the meaning of the rules on the free movement of goods, it was not necessary for it to have the effect of favouring national products as a whole or of placing only imported products at a disadvantage and not national products. Equally irrelevant was the circumstance, that a pharmacy established in another Member State had the opportunity to supply medicinal products to the hospital’s internal pharmacy or to an external pharmacy which satisfied the cumulative conditions laid down in the contested provisions.

Since the contested provisions were liable to hinder intra-Community trade, they must be considered as a measure having equivalent effect to a quantitative restriction on imports within the meaning of Art. 28 EC, without it being necessary to prove that they had had an appreciable effect on such trade. (see also
Case C‑166/03 Commission v France [2004]).

The Court, however, added that the contested provisions reflected concerns for public health which were within the ambit of Art. 30 EC. Consequently, they were, in principle, capable of justifying a restriction on the free movement of goods. However, legislation which was such as to restrict a fundamental freedom guaranteed by the Treaty, such as the free movement of goods, could be justified only if it was appropriate for securing the attainment of the objective pursued and did not go beyond what was necessary in order to attain it.

The Court held that since Art. 30 EC was an exception, to be strictly interpreted, to the rule of free movement of goods within the Community, it was for the national authorities to demonstrate that those provisions were necessary in order to achieve the declared objective, and that this objective could not be achieved by less extensive prohibitions or restrictions of lesser extent or having less effect on intra-Community trade.

When assessing whether the principle of proportionality had been observed in the field of public health, account must be taken of the fact that a Member State had the power to determine the degree of protection which it wished to afford to public health and the way in which that degree of protection was to be achieved. Since that degree of protection might vary from one Member State to the other, Member States must be allowed discretion. Consequently, the fact that one Member State imposed less strict rules than another Member State did not mean that the latter’s rules were disproportionate.

The Court held that the contested provisions could be seen to be necessary to the achievement of the objective of ensuring a high level of public health protection and clearly did not go beyond what was necessary.

While objectives of a purely economic nature could not justify a restriction on the fundamental principle of free movement of goods, none the less, as regards interests of an economic nature concerning the maintenance of a balanced medical and hospital service open to all, such an objective might also fell within one of the derogations, on grounds of public health, in so far as it contributed to the attainment of a high level of health protection.

In the light of the foregoing, the contested provisions must be considered to be justified on grounds relating to the protection of public health. The Court held that the Commission’s action must therefore be dismissed.

Text of Judgment