Case C-276/15, Hecht-Pharma – incensed at the competition in Frankincense-extract capsules [judgment 2016, ECLI:EU:C:2016:801]

Frankincense has been used by man for centuries. Its healing properties are recognised to this day and it is a normal ingredient which is present in many of the medicinal products dispensed by any pharmacy. However, pharma companies also use frankincense as an ingredient in the nutritional supplements which they sell to consumers. In this case, Hecht-Pharma objects to a German pharmacy which is making frankincense-extract capsules, and selling them in batches of 100 or 200 capsules. Hecht-Pharma claims that the pharmacy is trading unfairly and selling a medicine without a marketing authorisation. The pharmacy says that it is doing absolutely nothing wrong because frankincense-extract capsules have a particular status under German law. The question is whether German law complies with the EU’s Directive 2001/83/EC, which is the Community code regulating medicinal products for human use.

Background
Hecht-Pharma sells a frankincense-based nutritional supplement in capsule form. Its product can be bought in bulk throughout Germany. However, Hecht-Pharma objects to a pharmacy in Germany that is also selling frankincense-based ‘medicine’ in packs of 100 or 200 capsules.

Hecht-Pharma’s claim is rather nuanced. Namely, the pharma company admits that frankincense will be used in any normal pharmacy. Moreover, it is at pains to point out that this particular little German pharmacy has not breached any of the applicable laws that govern pharmacies in Germany.

What Hecht-Pharma objects to is that the pharmacy has been advertising and selling the pharmacy’s home-made incense-based capsules as ‘medicine’. Hecht-Pharma believes this is in breach of both German unfair competition law, and German law’s ban on the sale of unlicensed medicines.

‘Not so’, say the pharmacy, ‘under German law, a frankincense-based product is deemed by German statute to be a ‘Defekturarzneimittel’ – and those types of medicine can be sold to the public without the selling needing any licence whatsoever’.

The parties disagree as to the interpretation of the relevant provisions of the law, and they have engaged in repeated bouts of litigation such that the dispute has washed up at the German Supreme Court.

At the German Supreme Court
The German judges appreciate that German law is very clear: the seller of a Defekturarzneimittel does not need a licence. The problem facing them is that if EU law is applicable, and EU law deems a frankincense-based capsule to be a ‘medicinal product’, then it could be that the seller would then need a marketing authorisation. If so, and Hecht-Pharma’s interpretation of the law is correct, then they are legally entitled to stop the pharmacy from selling its frankincense-based capsules.

The problem is rather a delicate one. The initial difficulty is the raft of provisions in the EU’s Directive 2001/83/EC on the Community code relating to medicinal products for human use (OJ [2001]L311/67).

This code has completely harmonised this area of the law. The CJEU has already decided that issue in a case about national legislation that banned the advertising of medicinal products by way of statements of third parties or prize draws. The CJEU’s judgment was Case C-274/05 Gintec ECLI:EU:C:2007:654, and the court explained:

39 In those circumstances, the answer to Question 1 must be that Directive 2001/83 brought about complete harmonisation in the field of advertising of medicinal products and lists expressly the cases in which Member States are authorised to adopt provisions departing from the rules laid down by that directive. The directive must therefore be interpreted to the effect that a Member State may not provide, in its national legislation, for an absolute and unconditional prohibition, in the advertising of medicinal products to the general public, on the use of statements from third parties, whilst their use can be limited, under that same directive, only by reason of their specific content or the type of person making the statement.

Thus, national law is not really relevant when it comes to placing medicinal products on the market.

With that in mind, the German judges looked more closely at the wording of the Directive. The basic rule is that medicinal products must have a marketing authorisation. Article 6 on ‘marketing authorisations’ expresses this basic rule in more sophisticated language:

1. No medicinal product may be placed on the market of a Member State unless a marketing authorization has been issued by the competent authorities of that Member State in accordance with this Directive or an authorization has been granted in accordance with Regulation (EEC) No 2309/93.

Besides this basic rule, there is another one: Article 87 prohibits the advertising of any medicinal product which does not have a marketing authorisation. That is to say:

1. Member States shall prohibit any advertising of a medicinal product in respect of which a marketing authorization has not been granted in accordance with Community law.
2. All parts of the advertising of a medicinal product must comply with the particulars listed in the summary of product characteristics.
3. The advertising of a medicinal product:
– shall encourage the rational use of the medicinal product, by presenting it objectively and without exaggerating its properties,
shall not be misleading…
…
5. Homeopathic medicinal product: Any medicinal product prepared from products, substances or compositions called homeopathic stocks in accordance with a homeopathic manufacturing procedure described by the European Pharmacopoeia or, in absence thereof, by the pharmacopoeias currently used officially in the Member States.
A homeopathic medicinal product may also contain a number of principles.

The German judges also explained that notwithstanding the fact that there was a complete harmonisation in the field covered by the Directive, and the fact that medicinal products needed a marketing authorisation, and indeed the fact that there was an advertising ban on all unlicensed medicinal products, two further things needed to be borne in mind.

The first was that the advertising ban does not apply to all the advertising for non-state-licensed medical products. This is because there are medicines which are not covered by the Directive! In that context, Article 3 explains:

This Directive shall not apply to:
1. Any medicinal product prepared in a pharmacy in accordance with a medical prescription for an individual patient (commonly known as the magistral formula).
2. Any medicinal product which is prepared in a pharmacy in accordance with the prescriptions of a pharmacopoeia and is intended to be supplied directly to the patients served by the pharmacy in question (commonly known as the official formula).
…

Consequently, if medicines were prepared in a pharmacy as per the Article 3 exception, then the Article 87 advertising ban also does not apply. Accordingly, companies running pharmacies would be free to advertise those goods irrespective.

From this interpretation of EU law, it was clear that the frankincense-based capsules in this case were made in the pharmacy, and they were prepared in accordance prescriptions written by doctors and dentists.

What is the problem then? The German judges were uncertain as to whether these capsules came within the scope of the Article 3 exception to the Directive notwithstanding the fact that they were made by, and in, a pharmacy.

The German judges could not decide which legal interpretative technique should be used to determine the scope of the Article 3 exception. Their difficulty stemmed from the fact that EU law seemed to provide no clear answer.

On the one hand, there was some legal authority to suggest that the scope of Article 3 should be interpreted restrictively. After all, the CJEU in Case C-535/11, Apozyt ECLI:EU:C:2013:226, the CJEU had explained:

46 It should be borne in mind in that regard that Article 5(1) of Directive 2001/83 is a specific derogating provision, which must be interpreted strictly, applicable in exceptional cases where it is appropriate to meet special medical needs, in circumstances in which a doctor, following an actual examination of his patients and on the basis of purely therapeutic considerations, prescribes a medicinal product which does not have a valid marketing authorisation in the European Union and for which there is no authorised equivalent on the national market or which is unavailable on that market (see, to that effect, Case C‑185/10 Commission v Poland [2012] ECR, paragraphs 35, 36 and 48). The Court pointed out in particular, in paragraph 37 of that judgment, that Article 5(1) cannot be relied on where medicinal products having the same active substances, the same dosage and the same form as those which the doctor providing treatment considers that he must prescribe to treat his patients are already authorised and available on the national market.

On the other hand, was a restrictive interpretation the correct technique to apply? Should the Article 3 exception of the Directive not really be interpreted ‘teleologically’ instead? Even then, further uncertainty arose.

If a teleologic interpretation was the appropriate one, then the resolving the dispute turned on correctly identifying the policy-goal behind the need to obtain a marketing authorisation in the first place.

Namely, if the health and the safety of medicines was the goal, then this did not seem to be at risk in a situation in which products were being prepared in a pharmacy. They were being prepared in such large quantities that the chance of the pharmacy making a mistake was limited. Furthermore, the pharmacy was said to be preparing the products in accordance with the relevant the prescriptions of the German pharmacopoeia. That said, the judges were also aware that if an error were to be made in the preparation of the frankincense-containing capsules, then that mistake would affect hundreds of patients every single day!

Therefore, the German Supreme Court did not know whether Article 3(1) and (2) of the Directive precluded a product which German law had already deemed to be a Defekturarzneimittel – thereby obviating by statute the need for the seller to possess a marketing authorisation. In that context, the German Supreme Court decided to ask the CJEU two intricate questions.

Questions Referred
According to the Curia website, the German Supreme Court has asked:

1. Do points (1) and (2) of Article 3 of Directive 2001/83/EC […] preclude a national provision such as point (1) of Paragraph 21(2) of the Arzneimittelgesetz (Law on medicinal products) according to which no marketing authorisation is required for medicinal products that are intended for administration to humans and, on account of the proven frequency with which they are the subject of medical and dental prescriptions, the essential manufacturing steps for such are carried out in a pharmacy as part of the normal pharmacy business producing in the course of one day up to one hundred packages ready for dispensation and intended for supply under the existing pharmacy operating licence?

If Question 1 is answered in the affirmative:

2. Does this conclusion also apply where a national provision such as point (1) of Paragraph 21(2) of the Arzneimittelgesetz is interpreted to mean that no marketing authorisation is required for medicinal products that are intended for administration to humans and, on account of the proven frequency with which they are the subject of medical and dental prescriptions, the essential manufacturing steps for such are carried out in a pharmacy as part of the normal pharmacy business producing in the course of one day up to one hundred packages ready for dispensation and intended for supply under the existing pharmacy operating licence, provided that the medicinal product is either supplied to an individual patient in accordance with a medical prescription, not necessarily submitted before the preparation of the medicinal product, or is prepared in the pharmacy in accordance with the prescriptions of a pharmacopoeia and is intended to be supplied directly to patients?