EU court quashes German prescription drug price floor

[October 19, 2016]  FRANKFURT (Reuters) - Europe's highest court has ruled that a floor on retail prices for prescription drugs in Germany violates free trade in Europe's single market, potentially opening the door for foreign mail-order pharmacies to undercut German rivals

Patients covered by Germany's statutory medical insurers have to pay a certain proportion of drug expenses from their own pockets, though Dutch-based mail-order pharmacies have in the past offered to return some of that money, using their non-German domicile to circumvent minimum prices.

Such offers were mainly used by chronically ill patients -- and fiercely attacked by Germany's powerful pharmacy lobby -- until the practice was blocked by Germany's highest court in 2014 after years of legal wrangling.

Germany has strict rules on prices as well as wholesale and retail margins for prescription drugs to ensure that small bricks-and-mortar pharmacies are not pushed out of the market by bigger rivals, keeping essential drugs available across the country, even in rural areas.

In Wednesday's ruling, however, the European Court of Justice said that it was not convinced that setting fixed prices served that purpose.

On the contrary, it said that price competition may be more likely to encourage the addition of new pharmacies in regions where there are few of them.

Germany has a fragmented pharmacy market with ownership of pharmacies is restricted to certified dispensing chemists and the number of outlets in a drug retail chain is limited to four.

(Reporting by Maria Sheahan; Editing by David Goodman)

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