“1.

In the light of the argument put forward by the Netherlands, a Member State of the Community, is the Prices of Registered Medicines Decree 1982 to be regarded as:

2.

Do Articles 3 (f) and 5, in conjunction with Articles 85 and 86 of the EEC Treaty, have direct effect?

3.

If Question 2 is answered in the affirmative, has the Netherlands by adopting the Prices of Registered Medicines Decree infringed those articles?

4.

Do the principles of equality, proportionality, legal certainty and proper and exact preparation have direct effect in a case such as this?

5.

If Question 4 is answered in the affirmative, has the Netherlands by adopting the Prices of Registered Medicines Decree contravened one or more of those principles?”

1.

The Treaty does not provide for the establishment of a common organization of markets accompanied by a common system of prices in the sector of proprietary medicinal products and, without prejudice to Articles 85 to 90, it does not prohibit the charging, in respect of a single product, of different prices on different markets. Therefore, whilst under an obligation to comply with existing provisions of Community law, the Member States retain the power to regulate the prices of such products.

The Treaty thus empowers the Community institutions to ensure the approximation of national laws on prices where they directly affect the establishment or functioning of the common market (Article 100) or where the differences between national laws distort the conditions of competition in the common market and the resultant distortion needs to be eliminated (Article 101). The Court's judgment in the Centrafarm case, which I have already cited, throws considerable light on the meaning of those conditions. The Court held that

“it is part of the Community authorities' task to eliminate factors likely to distort competition within Member States, in particular by the harmonization of national measures for the control of prices and by the prohibition of aids which are incompatible with the common market, in addition to the exercise of their powers in the field of competition” (paragraph 16 of the decision);

and that

“the existence of factors such as these in a Member State ... cannot justify the maintenance or introduction by another Member State of measures which are incompatible with the rules concerning the free movement of goods, in particular in the field of industrial and commercial property” (paragraph 17 of the decision).

2.

In its judgment of 24 January 1978 in the Van Tiggele case, ( 8 ) the Court clarified the position further still by pointing out that

“Article 30 of the Treaty prohibits in trade between Member States all measures having an effect equivalent to quantitative restrictions” (paragraph 11 of the decision),

and that

“for the purpose of this prohibition it is sufficient that the measures in question are likely to hinder, directly or indirectly, actually or potentially, imports between Member States (paragraph 12 of the decision),

and finally that

“whilst national price-control rules applicable without distinction to domestic products and imported products cannot in general produce such an effect they may do so in certain specific cases” (paragraph 13 of the decision).

Therefore national price-control rules which apply specifically to imported products will produce such an effect. If account is taken of the origin of the goods — that is to say the country in which they were produced — and of the manufacturer's basic price normally charged on the market in that country, a measure such as that laid down by the contested prices decree reconstructs, as it were, “the value for customs purposes” of the imported goods and their “reference price”.

The common organization of agricultural markets shows that freedom of movement is not incompatible with the approximation or harmonization of prices. However, a disparity in prices increases the flow of trade from “cheap” countries to “expensive” countries, if only as as result of parallel imports which, according to the case-law of the Court, prevent the importation and marketing of a product from being monopolized by the manufacturer and his authorized representatives.

3.

The Netherlands Government states that approximately 80% of the medicines consumed in the Netherlands are imported from abroad, for the most part from the other Member States. Consequently, the general decree of 1981 affects no more that approximately 20% of domestic consumption.

In those circumstances, the Netherlands Government found it necessary to adopt the 1982 decree in order to step up its intervention in the formation of prices for imported medicines.

The Netherlands Government observes that discrimination arises only where equivalent situations are treated dissimilarly, that is to say where legislation on prices for domestic products and legislation on prices for imported products are concerned with similar situations. In its view, different situations are involved. Manufacturers of pharmaceutical products established in countries whose authorities keep prices artificially low seek to compensate for the low profit margin, imposed- upon them by -raising their- export; prices, to the detriment either of consumers in the importing country or of the importing country itself.

The Netherlands Government contends that the “dual pricing” system applied by multinational undertakings, that is to say the charging of prices which vary arbitrarily from one Member State to another and which are not justified by normal factors (transport costs and so on), has as its purpose to exploit each national market to the limit of “what it can bear” and leads to a partitioning of the common market which is incompatible with the principle of the free movement of goods within the meaning of the EEC Treaty.

It also contends that trade between Member States is not restricted where the effect of a measure adopted by the public authorities is to frequent an artificial partitioning of the common market and that, consequently, there is no breach of Article 30 of the EEC Treaty.

Finally, any decline in patterns of trade does not constitute a restriction within the meaning of Article 30 where the decline concerns, as in the present case, situations which are fundamentally incompatible with the principle of freedom of movement.

4.

Those arguments call for the following observations:

Even on the assumption that the legislation in question does not, in practice, create discrimination between domestic products and imported products, it leads to discrimination between products from so-called “cheap” countries and products from so-called “expensive” countries, in which prices are not regulated by legislation, and between proprietary medicinal products “imported” into the. Netherlands and proprietary medicinal products “manufactured” in the Netherlands following importation in bulk into that country. Any increase in the domestic resale price for medicines imported from so-called “expensive” countries is prevented altogether by a provision such as Article 2 (3) of the contested decree. Accordingly, importers may no longer sell those medicines at such profitable prices on the domestic market. Moreover, the result is a freeze in the pattern of trade since, after the reference date of 15 May 1982, a change in the country of origin does not entail a change in the maximum price.

Furthermore, the Netherlands Government states that preference should be given to a more restricted, though “natural”, pattern of trade, as opposed to a more extensive pattern resulting from price discrimination practised by suppliers and from the defective functioning of the “market”.

Along with technical barriers to the free movement of medicines which harmonization directives seek to remove by means of mutual recognition of marketing authorizations, the fact that a medicine does not qualify for reimbursement under the social security system (which covers 70% of consumers in the Netherlands) or that prices are fixed by the public authorities or by private undertakings may constitute obstacles which are just as considerable.

The plaintiff undertakings consider it of paramount importance that the legal protection afforded to “the citizen” should be effective vis-à-vis the public authorities. They contend that “to be sure legal protection of that kind may to some extent inhibit effective intervention by the national or Community authorities but ... a degree of inefficiency is inevitable if a State governed by the rule of law is to give the citizen the feeling that he too is not without redress against injustices committed by the authorities”.

5.

In that area, however, account must be taken, in particular, of the protection of health and life of humans (Article 36 of the EEC Treaty).

According to the case-law of the Court, that provision applies only to situations which are not of an economic nature. In point of fact, a medicine is unlike other products. Its distribution involves a manufacturer, a prescribing doctor, a dispensing chemist, a consumer and a social security institution. A medicine is an element in the course of treatment contributing to an improvement in a person's state of health and the assumption of responsibility by sickness insurance institutions — which also involves public and community financing — for payment of the cost of pharmaceutical products may affect the volume of sales by undertakings.

If the price to be paid by sickness insurance schemes or the share of the price to be borne by the insured for medicines prescribed by doctors were too high, and presumably the most effective medicines are prescribed, public health policy might be placed in jeopardy. The cost of health care and of sickness benefits which is borne by social security schemes forms an integral part of public health policy. ( 9 ) There is a risk that an excessive growth in costs may lead to selective medicine. Accordingly, it is insufficient to rely on the principle of the free movement of goods in order to reconcile such differing essential interests as:

Moreover, that was the approach taken by the Court in the De Peijper judgment of 20 May 1976 ( 10 ) when it held that: “... the effective protection of health and life of humans also demands that medicinal preparations should be sold at reasonable prices”. ( 11 ) Article 36, which in the matter of public health leaves residual powers, which are still substantial, to the Member States, may be relied upon to justify legislation containing restrictions which are explained primarily by a concern to reduce public expenditure where, in the absence of such legislation, that expenditure would clearly exceed the limits of what can reasonably be required. ( 12 )

It would be desirable if freedom of competition, parallel imports and the removal of technical barriers to trade were in themselves sufficient to bring about an ideal market. However, in this respect the strategy pursued by the large pharmaceutical groups must be reckoned with. Although many proprietary medicinal products are sold in numerous countries, the price of a given product varies considerably from one country to another. Differences in production costs, in research, in the amortization of investments, in currency fluctuations and in the rate of inflation are not sufficient in themselves to account for the disparity in prices. Accordingly, both the commercial policy pursued by those groups and national legislation on prices must also be taken into account.

6.

The problem of controlling the cost of health care must, moreover, be seen in the wider context of “economic policy”. The explanatory memorandum to the legislation in question, which formed part of the measures adopted to combat inflation, refers to the increase in prices and to the concern expressed by the Netherlands Government regarding the need to contain national health expenditure within certain limits. Thus, a measure of that kind, which is applicable for a limited period, is undeniably a short-term economic measure.

Conjunctural policy is the subject of a chapter in the EEC Treaty which contains only one provision, namely Article 103; paragraph (1) of that article provides as follows:

“Member States shall regard their conjunctural policies as a matter of common concern. They shall consult each other and the Commission on the measures to be taken in the light of the prevailing circumstances.”

Furthermore, Article 104 of the EEC Treaty, which is included in the chapter on the balance of payments, imposes an obligation on the Member States to take care “to ensure ... a stable level of prices”.

Although, according to the case-law of the Court, Article 103 does not relate to areas which are already subject to common rules, such as the common organization of agricultural markets, ( 13 ) it continues to apply in other areas.

Admittedly, a government which intends to adopt a measure of that kind must consult the other Member States and the Commission, but the absence of consultation cannot validly be relied upon by individuals before a national court.

The Council has acted under Article 103 on several occasions.

In a resolution adopted in 1973, ( 14 ) it stated in particular that as regards prices the Member States could have recourse, inter alia, to “strict surveillance of the conditions in which prices are fixed for goods and services, and possibly [to] limiting profit margins.”

On 18 February 1974, the Council adopted a directive ( 15 ) which provides in Article 10 that, in so far as they deem it expedient, the Member States are to take “the measures necessary to enable them to impose, where necessary, without delay and temporarily, an overall or selective restriction on the rise in prices and incomes”.

Finally, on 4 July 1974 the Council adopted a decision ( 16 ) which provides that the Member States are to pursue an economic policy which is in keeping with the guidelines laid down in an annex which, as regards the Netherlands, contains the following sentence: “... the imposition of temporary controls on prices and all incomes ... seems appropriate ...”

If the Community institutions are unable to decide upon the measures appropriate to the situation and to adopt the directives needed to give effect to the measures decided upon (Article 103 (2) and (3) of the EEC Treaty), a Member State is entitled to adopt legislation containing restrictions which are explained primarily by a concern to reduce public health expenditure where, in the absence, of such legislation, that expenditure “clearly would exceed the limits of what can reasonably be required”.

7.

The question which arises is who is to set the limit beyond which what can reasonably be required is clearly exceeded.

For its part, the Commission states that “it is unable to confirm that the level of prices of pharmaceutical products in all the Member States is at present an accurate reflection at least of the actual cost price of those products”. The Commission also states that it lacks sufficient information “to ascertain the extent to which price legislation relating to domestic products are concerned with similar situations”. In its view, it is for the national court to resolve that question. I do not share that opinion.

In common with certain Advocates General of the Court, ( 17 ) I incline to the opposing view that the establishment of such a balance is not a matter for a national court giving judgment in interlocutory proceedings but is first and foremost a matter for the Commission acting in conjunction with the trade and with the competent authorities of the Member States.