The end of the “free price” saga: long-awaited Spanish Supreme Court ruling on the merits confirms free price policies are valid
The “free price” policies that various pharmaceutical laboratories started implementing in the early 2000s have faced legal and administrative challenges from the outset. Although the pharmaceutical industry has won most of its cases, there is still a degree of uncertainty as to the future of these free price policies. On 7 March 2023, the Spanish Supreme Court (Tribunal Supremo) took a definitive step towards ending the siege of constant legal challenges that laboratories applying free price policies have been facing, by issuing a ruling upholding the Spanish National Markets and Competition Commission’s (CNMC) and the Spanish National Court’s (Audiencia Nacional) rulings that these policies are lawful.
Although over the last 20 years some cases have reached the Spanish Supreme Court, it had yet to issue a decision on the merits of these cases. It had warned that the cases should be assessed in light of the case law of the Court of Justice of the European Union on “dual pricing” systems and particularly the Glaxo judgment (C-519/06 P) handed down by the Court of Justice of the European Union (CJEU) on 6 October 2009. The Spanish National Court annulled two decisions by the CNMC’s predecessor, the then National Competition Commission (CNC, now the CNMC), of 21 May and 14 September 2009, in favour of these policies (and the Supreme Court subsequently upheld the National Court judgments) precisely because both the National Court and the Supreme Court understood (in essence and without prejudging the merits) that the CNC had not sufficiently analysed the Glaxo judgment and its possible application to the case.
The CNC had issued those first rulings without pursuing formal proceedings and without an exhaustive analysis of all aspects of the case, which lead to those decisions being annulled by the Courts and meant that the proceedings continued for several more years. However, as the Spanish Supreme Court now reminds us, the previous judgments of the National Court and of the Supreme Court itself did not rule on the possible infringement of Article 1 of the Spanish Competition Law nor Article 101 of the Treaty on the Functioning of the European Union, but simply ordered the CNC to assess the issue in light of the CJEU’s Glaxo decision, “without, however, prejudging the conclusions that the National Competition Commission may reach regarding the existence of prohibited punishable conduct”.
Pursuant to this mandate, the CNMC carried out exhaustive investigations, including a specific analysis of the Glaxo decision and the similarities and differences between the free price policies under investigation and Glaxo’s policy. As a result of this analysis, the CNMC issued two rulings (on 19 January 2017 and 30 August 2018) confirming its previous position. Both the Spanish National Court and more recently the Spanish Supreme Court upheld the first CNMC ruling; the Spanish National Court has yet to issue its decision on the second CNMC ruling.
The Spanish Supreme Court found that the CNMC had complied with its mandate to carry out a proper investigation into the policy of the pharmaceutical laboratory in question [Pharmaceutical Laboratory] which had been brought to the forefront in light of the Glaxo decision, sharing the conclusions reached by the CNMC, and stating in particular that:
- the cases are too different for the CJEU’s criteria in the Glaxo case to apply to [Pharmaceutical Laboratory]’s policy;
- “while Glaxo used dual pricing in its contracts on the basis of a broad interpretation of the regulations in force at the time (1998), a matter to which we will return later, [Pharmaceutical Laboratory] set a minimum price in a contract which fully complied with the dual-pricing mechanism established by the legislation in force at the time (2005) in order to apply an intervention price, given that it was a medicine financed by Social Security funds and dispensed in Spain”;
- Glaxo and [Pharmaceutical Laboratory] were operating under different regulations and therefore dual-pricing for medicines, depending on whether they were dispensed in pharmacies or hospitals, was a correct interpretation in Glaxo’s case;
- in [Pharmaceutical Laboratory]’s case, the regulation underpinning the contracts in question establishes – as an exception to the freedom of pricing principle – that the intervention price fixed by the Spanish government must be applied when the medicine is both financed by the Social Security and dispensed in Spain.
The Spanish Supreme Court fully and unequivocally agrees with the CNMC’s arguments. Considering the nature of these proceedings, the case that is still pending decision by the Spanish National Court will undoubtedly have the same outcome. Although the possibility of further legal challenges in this area can never be ruled out, this upcoming ruling should put an end to all controversies in relation to free pricing policies.