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30 October 2019
This article discusses two recent Federal Civil Court decisions regarding the granting of gifts in connection with the purchase of price-bound, prescription-only medicinal products.
On 19 August 2019 the legal grounds of two decisions of the First Senate of the Federal Civil Court (dated 6 June 2019) were published. The decisions concerned the granting of gifts when price-bound prescription-only medicinal products (RX products) are purchased and whether this practice complies with Sections 3 and 3a of the Act Against Unfair Competition.
In the first case (I ZR 206/17), a pharmacy granted the purchaser of a price-bound RX product a free bread bun voucher, which could be redeemed in a nearby bakery. In the second case (I ZR 60/18), the purchaser of a price-bound RX product received a €1 voucher from a pharmacy, which could be redeemed with another purchase in the pharmacy.
In both cases, the Association for Protection Against Unfair Competition filed claims for injunctive relief, arguing that the pharmacies had not complied with Sections 3 and 3a of the Act Against Unfair Competition and had violated Section 7(1.1) of the Act on the Advertising of Medicinal Products in connection with Section 78,(2) and (3) of the Act on Medicinal Products.
The Act on the Advertising of Medicinal Products contains strict provisions on advertising and the granting of gifts in connection with medicinal products. Section 7(1.1) of the act prohibits the granting of gifts to exclude the improper influence of purchasers regarding the purchase of a specific medicinal product or any medicinal product.
Further, insofar as Section 7(1.1) generally prohibits the granting of gifts in connection with medicinal products that fall under the price regulations based on the Act on Medicinal Products, it aims to prevent ruinous competition between pharmacies and ensure a comprehensive and uniform supply of medicinal products.
The Act on the Advertising of Medicinal Products sets out only limited exceptions to the general prohibition on advertising and the granting of gifts in connection with medicinal products.
Under Section 7(1.1), such gifts are admissible provided that they are objects or trivia of insignificant value. However, this exception does not apply to medicinal products if the gifts are granted contrary to price regulations under the Act on Medicinal Products.
The price regulations (ie, Section 78(2) and (3) of the Act on Medicinal Products) stipulate that a uniform pharmacy retail price must be guaranteed for medicinal products dispensed exclusively in pharmacies; this does not apply to RX products, which are not subject to reimbursement by statutory health insurance.
For the latter products, pharmaceutical companies must guarantee a uniform sales price, provided that prices and price ranges have been specified by the ordinance on medicinal product prices. Therefore, not only price reductions, but also any other benefit which makes a medicinal product purchase appear more economically advantageous will violate pricing regulations.
In the two cases under review, the medicinal products represented price-bound RX products. The purchasers had received a free bread bun voucher or a €1 voucher upon purchase. The Federal Civil Court held that these vouchers violated the pricing regulations under Section 78(2) and (3) of the Act on Medicinal Products because they made the purchase appear more economically advantageous. This violation also contravened Section 7(1.1) of the Act on the Advertising of Medicinal Products.
These provisions must be strictly upheld and objects or trivia of insignificant value are no longer admissible since the legislature introduced the current version of Section 7(1.1) in 2013. The current version requires strict compliance with the pricing regulations; in this regard, it is impossible to argue that a violation of the regulations is insignificant within the meaning of Section 3a of the Act Against Unfair Competition.
The Federal Civil Court also held that the European Court of Justice (ECJ) decision in Deutsche Parkinson Vereinigung v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV (C-148/15 of 19 October 2016) agrees with this approach. The ECJ ruled that German pricing regulations do conflict with the principle of free movement of goods under Article 34 of the Treaty on the Functioning of the European Union.
However, this decision does not apply to pharmacies located in Germany, since there is no cross-border issue. According to the Federal Civil Court, the inapplicability of the ECJ decision does not discriminate national pharmacies under the principle of equality, which is a constitutional principle (Article 3 of the German Constitutional Law).
The unequal treatment of national pharmacies is justified due to the particularities of the German pharmacy market and the minor impact on German pharmacies. Further, there is also no conflict with the principle of occupational freedom under Article 12(1) of the German Constitutional Law – the pricing regulations are proportionate in respect of a public interest in the comprehensive and uniform supply of medicinal products and are therefore justified.
These Federal Civil Court decisions strengthen the strict understanding of Section 7(1.1) of the Act on the Advertising of Medicinal Products, under which the granting of gifts constitutes a violation of German pricing regulations.
As Section 7 of the Act on the Advertising of Medicinal Products represents a market behaviour rule, its violation is – by Section 3 and 3a of the Act Against Unfair Competition – suitable for a claim for injunctive relief. Apart from this, these decisions reiterate that the unequal treatment of national pharmacies is justified due to the particularities of the German pharmacy market and the minor impact on German pharmacies.
For further information on this topic please contact Fabian Huber or Caroline von Nussbaum at Simmons & Simmons LLP by telephone (+49 2 11 4 70 53 0) or email (email@example.com or caroline.vonnussbaum@Simmons-Simmons.com). The Simmons & Simmons LLP website can be accessed at www.simmons-simmons.com.
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