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10 September 2014
On June 12 2014 the Administrative Court of Appeal delivered its long-awaited judgment on whether it is possible for county councils and regions to obtain a discount on the price of medicinal products in the reimbursement system (ie, a medicinal product which has been granted a price following a decision of the Dental and Pharmaceutical Benefits Agency (TLV)). The court held that this is not possible.
In early 2012 Skane – the southernmost region in Sweden – requested tenders for tumour necrosis factor (TNF) alpha inhibitors, with the intention of entering into a discount agreement with one bidder. The agreement was entered into in March 2012 and was valid for one year. It contained an obligation for Skane, with regard to prescriptions, to recommend a certain TNF-alpha inhibitor which offered the "best total economic value". Offering this recommendation would secure Skane a 15% discount on all sales prices for that product in the region as a refund from the relevant pharmaceutical company.
In order to fulfil its obligation to recommend the specific TNF-alpha inhibitor, Skane issued a letter to prescribers in the region informing them of the discount agreement. The final part of the letter was contested. Apart from the specific TNF-alpha inhibitor, the only product competition that existed was from parallel distributed products (ie, identical products to the specific TNF-alpha inhibitor). However, in Sweden, parallel-distributed and parallel-imported medicinal products are subject to mandatory substitution. The mandatory provision can be set aside on medical grounds only by the prescriber ticking a box on the prescription. According to the TLV, Skane ended the letter by instructing the prescribers to set aside the mandatory legal substitution by ticking the box and thus preventing substitution at the pharmacy.
The Swedish Pharmacy Association notified the TLV of the existence of the discount agreement and letter. After corresponding with Skane, the TLV issued a decision in early 2013 which prohibited Skane from entering into or extending pricing agreements with regard to medicinal products prescribed within the reimbursement system. It also prohibited Skane from barring compliance with the legal provisions on substitution by instructing it to set aside substitution for any reason other than the medical needs of the individual patient.
Skane appealed to the Stockholm Administrative Court.
The Stockholm Administrative Court rejected the appeal with regard to the prohibition to enter into or extend pricing agreements based on an interpretation of the Transparency Directive.
However, the TLV's decision with regard to the letter to prescribers was reversed based on the finding that the relevant provision was applicable to retail pharmacies only, and that another act set the rules for county council and region recommendations to healthcare personnel.
Both parties appealed to the Administrative Court of Appeal. The TLV's appeal was granted, making its initial decision correct on all accounts. Consequently, Skane's appeal was rejected.
In the absence of any clear preparatory works to the act, the Administrative Court of Appeal began by mentioning European Court of Justice (ECJ) Decision 14/83 (von Colson), which entitled the principle that all national legislation will be interpreted considering the wording and intentions of any directives or other relevant EU legislation in the relevant area. It further provided that transparency with regard to pricing of medicinal products and their integration in a national reimbursement system at EU level is regulated by the Transparency Directive. The court then referred to ECJ C-229/00 (Commission v Finland), and stated that the directive's intention would be jeopardised if a member state could introduce a double parallel reimbursement system, where one system fulfilled the requirements of the directive and the other system was exempt from these requirements.
The court found that there was a risk that entering into discount agreements for medicinal products in the reimbursement system could lead to such a double parallel system. The discount agreement procedure would not be covered by the requirements on justification for such a decision, transparency and possibility of appeal. The directive's intentions were therefore jeopardised, since there was no national legislation covering discount agreements securing these requirements, and hence it was not compliant with EU law. A county council or region cannot enter into discount agreements with regard to medicinal products in the reimbursement system. The TLV therefore had grounds for its decision to prohibit such agreements.
The court then examined whether there was sufficient basis for the TLV to prohibit Skane from barring compliance with the legal provisions on substitution by instructing prescribers in the region to set aside substitution for any reason other than the medical needs of the individual patient. As an initial point, the court explained that medical grounds are connected to individual patient needs and therefore an instruction to prescribers to set aside the mandatory substitution due to entering into a discount agreement would be a breach of that provision.
The court found that between January and August 2012 (during which time the challenged discount agreement for the TNF-alpha inhibitor was in force), the mandatory substitution in Skane had been set aside 105 times for that medicinal product, compared with nine times for the rest of Sweden. There was also contact with media and pharmacies which stated that prescribers agreed with Skane and would set aside the mandatory substitution. It was therefore clear to the court that Skane had in fact instructed prescribers to set aside the mandatory substitution. The TLV therefore had grounds for its decision to prohibit such instructions.
Skane has appealed to the Supreme Administrative Court, where it is awaiting a decision on leave to appeal.
Before the re-regulations of the pharmacy sector, the state-owned pharmacy monopoly controlled virtually all sales of medicinal products (for further details please see "Cooperation framework for introduction of new innovative medicinal products"). There was little need to distinguish between sales to patients or hospitals, since the reimbursement system applied on a national basis to all medicinal product sales (ie, the pricing decision by the TLV (or its predecessors) also applied to a medicinal product when sold to a hospital).
Since re-regulation, the situation has been unclear, as the previous order has been questioned by county councils and regions and challenged in court. The uncertainty prompted many county councils and regions to initiate procedures to enter into discount agreements with pharmaceutical companies during the two-year court period, and a number of such agreements still exist. This case has brought long-awaited clarity to the situation and is surprisingly clear in its references to the directive. It remains to be seen what will happen to existing discount agreements for medicinal products within the reimbursement system should leave to appeal not be granted.
An official government review has noted that the case's outcome is still awaited, and new legislation could be considered if the outcome is not in line with the government plan for the reimbursement system.
For further information on this topic please contact Jonas Löfgren at Westerberg & Partners Advokatbyrå Ab by telephone (+46 8 527 70 800) or email (email@example.com). The Westerberg & Partners Advokatbyrå Ab website can be accessed at www.westerberg.com.
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