Parties Grounds Operative part

In Case C‑141/07,

ACTION under Article 226 EC for failure to fulfil obligations, brought on 9 March 2007,

Commission of the European Communities , represented by B. Schima, acting as Agent, with an address for service in Luxembourg,

applicant,

v

Federal Republic of Germany , represented by M. Lumma and C. Schulze-Bahr, acting as Agents,

defendant,

THE COURT (Fourth Chamber),

composed of K. Lenaerts, President of the Chamber, R. Silva de Lapuerta, E. Juhász, J. Malenovský (Rapporteur) and T. von Danwitz, Judges,

Advocate General: Y. Bot,

Registrar: R. Grass,

after hearing the Opinion of the Advocate General at the sitting on 10 April 2008,

gives the following

Judgment

1. By its application the Commission of the European Communities seeks a declaration from the Court that, by providing in Paragraph 14(5) and (6) of the Law on Pharmacies (Apothekengesetz) in the version applicable from 21 June 2005 (the ‘ApoG’) that the conclusion of a contract for the supply of medicinal products is subject to cumulative conditions whose effect is to make it impossible in practice for a hospital in the Federal Republic of Germany to be supplied on a regular basis by pharmacies established in other Member States, the Federal Republic of Germany has failed to fulfil its obligations under Articles 28 EC and 30 EC.

National law

2. The provisions on the supply to hospitals of medicinal products are contained in Paragraph 14(1) to (6) of the ApoG.

3. Under that paragraph, hospitals have the choice of obtaining their supplies of medicinal products either from an internal pharmacy, that is to say, a pharmacy within the premises of the hospital concerned and in general not accessible to the public, or from the pharmacy of another hospital, or from a pharmacy situated outwith hospital premises (an ‘external pharmacy’). Where a hospital decides to obtain its supplies from the pharmacy of another hospital or from an external pharmacy, it must enter into a contract with that pharmacy which is subject to the conditions laid down in Paragraph 14(4) to (6) of the ApoG (‘the contested provisions’).

4. Paragraph 14(1) to (6) of the ApoG provides:

‘(1) A licence to operate a hospital pharmacy must be granted on request to the body responsible for a hospital if:

1. it demonstrates that it has recruited a pharmacist who satisfies the conditions laid down in Paragraph 2(1), points 1 to 4, 7 and 8, and (3), in conjunction with (2) or (2a), and

2. it demonstrates that it has the premises prescribed for hospital pharmacies by the Apothekenbetriebsordnung [Regulations on the Operation of Pharmacies].

The manager of the hospital pharmacy or a pharmacist authorised by him must give information and advice to the medical staff of the hospital on the medicinal products, in particular for the purposes of effective and economical pharmacotherapy; the same applies in relation to out-patient treatment.

(2) The licence must be withdrawn if it is subsequently discovered that, at the time of issue, one of the necessary conditions under the first sentence of subparagraph (1) was not satisfied. It must be revoked if one of the necessary conditions under subparagraph (1) is no longer satisfied or if the conduct of the licence holder or a person authorised by him grossly or persistently infringes the provisions of this Law, the regulation adopted on the basis of Paragraph 21 or the provisions relating to the manufacture or marketing of medicinal products. The same action must be taken, as regards the approval issued in accordance with the first and third sentences of subparagraph (5), if the conditions laid down in the second sentence of subparagraph (5) were not satisfied or are no longer satisfied.

(3) A holder of a licence to operate a hospital pharmacy, under subparagraph (1), who intends to supply medicinal products to another hospital for which he is not responsible must for that purpose conclude a contract in writing with the body responsible for that hospital.

(4) If the body responsible for a hospital intends to obtain supplies for the hospital from the holder of a licence to operate a pharmacy under Paragraph 1(2) or under laws of another Member State of the European Union or of another State Party to the Agreement on the European Economic Area, it must conclude a contract in writing with that licence-holder. The place of performance of the contractual supplies shall be the address of the hospital. The applicable law shall be German law.

(5) In order to be valid, a contract concluded under subparagraph (3) or (4) must be approved by the competent authority. Approval shall be given where it is established that the hospital has concluded a contract with a pharmacy under subparagraph (3) or (4) for the supply of medicinal products to the hospital, which satisfies the following requirements:

1. proper provision of supplies of medicinal products is ensured; the pharmacy must, in particular, possess the premises, equipment and staff required under the Regulations on the operation of pharmacies or, in the case of pharmacies established in another Member State of the European Union or in another State Party to the Agreement on the European Economic Area, under the provisions in force in that State;

2. the pharmacy supplies the hospital with the medicinal products it has ordered directly or, where they are to be sent, in accordance with the requirements laid down in Paragraph 11a;

3. the pharmacy makes available to the hospital, without delay and in accordance with what is needed, the medicinal products it requires particularly urgently for acute medical treatment;

4. the manager of the pharmacy within the meaning of subparagraph (3) or (4) or the pharmacist of the supplying pharmacy authorised by him, personally advises hospital staff in accordance with what is needed and, in an emergency, without delay;

5. the supplying pharmacy ensures that it provides hospital staff with advice on a continuous basis with a view to effective and economical pharmacotherapy;

6. the manager of the supplying pharmacy within the meaning of subparagraph (3) or (4), or the pharmacist authorised by him, is a member of the hospital’s medicinal products committee.

Authorisation from the competent authority shall also be required for a hospital pharmacy to supply another hospital for which the same body is responsible. The provisions of the second sentence shall apply mutatis mutandis with regard to the grant of such authorisation.

(6) The manager of the hospital pharmacy within the meaning of subparagraph (1) or of a pharmacy within the meaning of subparagraph (4), or a pharmacist authorised by him, must check stocks of the medicinal products at the hospital to be supplied, in accordance with the Regulation on the operation of pharmacies, and must in particular in that regard ensure that the medicinal products are of faultless quality and are properly stored. …’

The pre-litigation procedure

5. Until 20 June 2005 the original version of the ApoG contained rules, known as the ‘regional principle’, which imposed the restriction that contracts for the supply of medicinal products by external pharmacies could be entered into only with those pharmacies which were established in the same town, city or district as the hospital to be supplied. By letter of formal notice dated 11 July 2003, and then by reasoned opinion dated 19 December 2003, the Commission challenged the compatibility of that principle with Community law; in particular, with the provisions of the EC Treaty on the free movement of goods.

6. On 4 November 2004 the German Government approved a draft law amending Paragraph 14 of the ApoG, the purpose of which was to ensure that hospitals could also enter into separate supply contracts with a number of pharmacies. However, the Bundesrat (Upper Chamber of the Federal Parliament) did not approve that draft law. The German Government therefore made changes to the draft law, with the result that on 21 June 2005 Paragraph 14 of the ApoG, in the form set out in paragraph 4 of this judgment, was adopted.

7. On 18 October 2005, since it considered that, notwithstanding the amendments made to Paragraph 14, the Federal Republic of Germany had not yet brought to an end its failure to comply with the obligations in question, the Commission sent to that Member State an additional letter of formal notice. In that letter it stated that the cumulative conditions imposed on the conclusion of a contract for the supply of medicinal products, in accordance with Paragraph 14 of the ApoG, were equivalent to maintaining a disguised ‘regional principle’, which was incompatible with the provisions of the Treaty on the free movement of goods as laid down in Article 28 EC.

8. In its reply of 14 December 2005 to that letter of formal notice, the Federal Republic of Germany questioned whether Article 28 EC applied and expressed the view that, in any event, the domestic legislation was justified in the light of Article 30 EC. On 10 April 2006 the Commission sent that Member State a reasoned opinion in which it adhered to the analysis set out in the letter of formal notice.

9. On 2 June 2006 the Federal Republic of Germany informed the Commission that it also adhered to its views as regards Paragraph 14 of the ApoG.

10. The Commission accordingly decided to bring this action.

The action

Arguments of the parties

11. In support of its action, the Commission claims that the cumulative conditions laid down by the contested provisions relating to contracts for the supply of medicinal products constitute a selling arrangement within the meaning of Joined Cases C‑267/91 and C‑268/91 Keck and Mithouard [1993] ECR I‑6097 but none the less fall within the scope of Article 28 EC, given that the effect of those conditions is that access to the market is more difficult for goods from Member States other than the Federal Republic of Germany than it is for domestic products.

12. Under the contested provisions the contracting pharmacy is responsible for the provision of all of the services associated with the supply of medicinal products. Since some of those services, such as provision of emergency supplies, can only be provided by a pharmacist who has his dispensary in the vicinity of the hospital to be supplied, the choice of such a pharmacy is necessarily restricted to those situated near to that hospital, which amounts to the introduction of an ‘unwritten’ regional principle. In this way, goods from other Member States have access to the market which is more restricted than that of domestic products.

13. Those provisions are therefore a measure having equivalent effect to a quantitative restriction, which is prohibited by Article 28 EC.

14. Those cumulative conditions are moreover not justified on grounds of the protection of public health. On that point, the Commission explains that it does not challenge the requirement that only one pharmacist should supply a hospital with medicinal products, but solely the fact that only a local pharmacist can enter into a supply contract with a German hospital.

15. As regards the need to enter into a comprehensive supply contract, the Commission claims that to separate the provision of standard supplies from the provision of emergency supplies does not adversely affect the quality of the supply of products to the hospital concerned. In addition, while it cannot be denied that a hospital needs, in order to select its medicinal products, the advice of a pharmacist who is familiar with the needs of the hospital, such advice need not necessarily be given by the pharmacist who is subsequently to provide supplies to that hospital. Similarly, if a second pharmacist were responsible for the monitoring of stocks of medicinal products, that would not affect the quality of the supply of products. On the contrary, it is advisable to separate the responsibility for monitoring from the responsibility for providing supplies in order to guarantee optimal quality in both respects. Lastly, given the communication technology now available, it is not necessary for advice to given in situ in order to ensure a high level quality of supply. The Commission observes, in that context, that the Court, in Case C‑322/01 Deutscher Apothekerverband [2003] ECR I‑14887, paragraph 113, accepted that medicinal products might be sold to patients on the internet.

16. The Federal Republic of Germany does not accept that the contested provisions are a measure having equivalent effect to a quantitative restriction on imports. In its opinion, those provisions satisfy the conditions stated by the Court in Keck and Mithouard and therefore fall outside the scope of Article 28 EC.

17. The Federal Republic of Germany contends first that, in general, medicinal products authorised in Germany are not available in a pharmacy established in another Member State. Consequently, the fact that a lesser quantity of medicinal products from other Member States is supplied to German hospitals is not due to the contested provisions. Moreover, pharmacies established in other Member States have the opportunity to supply medicinal products to a hospital’s internal pharmacy or to an external pharmacy which satisfies the conditions laid down by the contested provisions, and are not obliged to conclude a supply contract for that purpose. Article 28 EC does not require that it should be possible for medicinal products to be supplied to hospitals situated in one Member State by pharmacies established in other Member States. The Federal Republic of Germany also contends that the sale of medicinal products from other Member States is no more affected than the sale of medicinal products from regions of Germany which are remote from the hospital to be supplied. Furthermore, a pharmacy established outside German territory is able to enter into a supply contract with a German hospital provided that it satisfies the conditions.

18. In addition, according to the Federal Republic of Germany, the specification of arrangements for the provision of supplies to hospitals, which is a fundamental decision of the national legislature, falls exclusively within the powers of the Member States, in accordance with Article 152(5) EC. The Commission’s action seeking a declaration that the contested provisions are contrary to Article 28 EC is a way of circumventing the limits on Community action in the field of public health.

19. Alternatively, the Federal Republic of Germany contends that those provisions are justified on grounds of protection of public health within the meaning of Article 30 EC and do not undermine the principle of proportionality. Indeed they are such as to guarantee that the supply of products is reliable and of high quality, since everything relating to the provision of medicinal products to a hospital is the responsibility of one pharmacist.

20. The Federal Republic of Germany contends in particular that the separation of the standard provision of supplies from the emergency provision of supplies is a measure which is impracticable and lacking in any objectivity. Further, to separate the standard provision of supplies from the selection of medicinal products is neither truly suited to the overall needs of the hospital nor economically viable. Similarly, the separation of tasks associated with the standard provision of supplies from those associated with the quality and proper storage of stocks of medicinal products does not guarantee optimal provision of supplies. Personal contact between the pharmacist who is supplying the medicinal products and the hospital staff also contributes to improving the reliability of the supply. Lastly, the principle that the products should be provided by one single supplier makes possible an optimal synergy between the supply of medicinal products, advice and monitoring.

Findings of the Court

Preliminary observations

21. First, it is necessary to address the argument of the Federal Republic of Germany that the Commission’s action seeking a declaration that the contested provisions are contrary to Article 28 EC is a way of circumventing the limits on Community action in the field of public health.

Whether there is a restriction on intra-Community trade

34. As regards the second of those conditions, it is undisputed that the contested provisions lay down a series of cumulative criteria which in practice require, as the Federal Republic of Germany moreover expressly acknowledges, a degree of geographical proximity between the pharmacy supplying the medicinal products and the hospital for which those products are intended.

35. It follows that the contested provisions are such as to make the supply of medicinal products to German hospitals more difficult and more costly for pharmacies established in Member States other than the Federal Republic of Germany than for pharmacies established in the latter State. Pharmacies established in other Member States, unless they are in a border region and near to the German hospital concerned, which wish to conclude a supply contract with such a hospital must either transfer their dispensary to the vicinity of the hospital concerned or open another pharmacy near to the hospital.

36. Consequently, as regards the supply of medicinal products to German hospitals, those provisions do not affect in the same way products marketed by pharmacies established in the territory of the Federal Republic of Germany and those marketed by pharmacies situated in another Member State.

37. That conclusion cannot be rebutted by the circumstance, relied on by the Federal Republic of Germany, that, in relation to the sale of medicinal products to German hospitals, the contested provisions do not place pharmacies established outside that Member State at any greater disadvantage than pharmacies situated in Germany which have their dispensaries situated at some distance from the hospital for which the medicinal products are intended.

39. Nor can it be maintained that the marketing of medicinal products from other Member States is no more affected than the marketing of medicinal products from regions of Germany which are remote from the hospital to be supplied. For a national measure to be characterised as discriminatory or protective within the meaning of the rules on the free movement of goods, it is not necessary for it to have the effect of favouring national products as a whole or of placing only imported products at a disadvantage and not national products (Joined Cases C‑1/90 and C‑176/90 Aragonesa de Publicidad Exterior and Publivía [1991] ECR I‑4151, paragraph 24, and TK-Heimdienst , paragraph 27).

40. Equally irrelevant is the circumstance, relied on by the Federal Republic of Germany, that a pharmacy established in another Member State has the opportunity to supply medicinal products to the hospital’s internal pharmacy or to an external pharmacy which satisfies the cumulative conditions laid down in the contested provisions.

41. As pointed out by the Advocate General in point 81 of his Opinion, although the Community rules on the free movement of goods do not require that it should be possible for hospitals situated in Member States to obtain supplies of medicinal products from external pharmacies, when a Member State provides for such a possibility, it opens that activity to the market and is accordingly bound to comply with the Community rules.

42. The Court must also reject the argument of the Federal Republic of Germany that the contested provisions are not the cause of there being a lesser quantity of medicinal products supplied to German hospitals by pharmacies situated outside that Member State, because, as a general rule, adequate quantities of medicinal products authorised in Germany are not available in such pharmacies.

43. Since the contested provisions are liable to hinder intra-Community trade, they must be considered as a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 28 EC, without it being necessary to prove that they have had an appreciable effect on such trade (see Case C‑166/03 Commission v France [2004] ECR I‑6535, paragraph 15).

44. It follows from all of the foregoing that the contested provisions are liable to hinder intra-Community trade and constitute a measure having equivalent effect to a quantitative restriction on imports prohibited by Article 28 EC.

45. In those circumstances, it must be examined whether the contested provisions can be justified on grounds such as those relied on by the Federal Republic of Germany relating to the protection of public health.

Whether there is justification in the protection of public health

49. First, in relation to whether the contested provisions are appropriate, it must be observed that in so far as they require that all the services associated with the supply contract must be entrusted to a pharmacist in the vicinity, those provisions are such as to achieve the objective of ensuring that the supply of products to German hospitals is reliable and of good quality and therefore of protecting public health, which the Commission does not dispute.

58. On the other hand, the approach upheld by the Commission, in that it permits the services linked to the system of external provision of supplies to be entrusted to contracting pharmacists whose dispensary is not situated in the vicinity of the hospital to be supplied, is likely to undermine the unity and balance of the system for the supply of medicinal products to hospitals in Germany and, consequently, the high level of public health protection which the Federal Republic of Germany seeks to achieve.

62. From those two points of view, it is equally clear that the requirement that one local pharmacist should be given responsibility for all the tasks involved in the supply of medicinal products to German hospitals is not a measure which goes beyond what is necessary to achieve the objective pursued by the Federal Republic of Germany, namely to achieve a high level of public health protection.

63. In the light of the foregoing, the contested provisions must be considered to be justified on grounds relating to the protection of public health.

64. The Commission’s action must therefore be dismissed.

Costs

65. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Federal Republic of Germany has applied for costs and the Commission has been unsuccessful, the Commission must be ordered to pay the costs.

On those grounds, the Court (Fourth Chamber) hereby:

1. Dismisses the action;

2. Orders the Commission of the European Communities to pay the costs.