Judgment — ECLI:EU:C:2009:217
Date: 2009-04-02
Language of the case: Italian
Court formation: Fourth Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Approximation of laws
Concepts: Terms of sale
Procedure: Reference for a preliminary ruling
Origin: Italy

summary of the national legislation shows that the main proceedings concern medicinal products in Class A of the Italian Pharmacopoeia, that is to say, essential medicinal products and medicinal products for chronic illnesses, the cost of which is wholly to be borne by the SSN pursuant to Article 32 of the Italian Constitution. The price of those products is the same as the retail price because if the latter had to be set higher than that shown on the tariff established by the Agenzia Italiana del Farmaco (Italian Medicines Agency ‘the AIFA’), the AIFA would immediately transfer the medicinal product in question to Class C in the Italian Pharmocopoeia, which is the class for medicinal products the cost of which is wholly to be borne by the patient. 13. The referring court also points out that since 1997, the shares of the sale price accruing to the various operators are 66.65% for the producer, 6.65% for the wholesaler, and 26.7% for the pharmacist. 14. Chapter IV entitled ‘Agreement between the State and the Regions in respect of health’ of Decree-Law No 269 of 30 September 2003 laying down urgent provisions for promoting development and correcting the situation of the public finances, (4) converted into law, after amendment, by Law No 326 of 24 November 2003 (5) (‘Decree-Law No 269/2003’), contains various provisions, including Article 48, entitled ‘Upper limit for expenditure on pharmaceutical aid’. That article includes provisions on the upper limit for expenditure borne by the SSN, on the functions and powers of the AIFA and a reference to the rules in force concerning the detailed arrangements and criteria for setting prices. The AIFA measures which are challenged in the main proceedings were adopted under Decree-Law No 269/2003. 15. In particular, Article 48 of Decree-Law No 269/2003 provides: ‘1. From 2004 …, the share to be borne by the SSN for overall pharmaceutical aid, including that relating to the treatment of in-patients shall, for the first time, be set at 16% as the reference figure at the national level and in each region. … … 5. … [the AIFA] is, in accordance with the agreements between the State and the regions concerning setting the upper limit for pharmaceutical expenditure and the annual percentage adjustment, assigned the following task: … (b) monitoring the territorial and hospital consumption of and expenditure on pharmaceutical products to be borne by the [SSN] as well as the consumption of and expenditure on pharmaceutical products to be borne by the citizen. The results of such monitoring shall be reported monthly to the Ministry for the Economy and Finance; (c) providing, before 30 September of each year, or half-yearly if the upper limit of expenditure specified in paragraph 1 is exceeded, for the drawing up of the list of medicinal products reimbursable by the [SSN] on the basis of cost-efficiency criteria so as to ensure, on an annual basis, that the levels of planned expenditure comply with the accounting requirements for the public finances…; … (f) if the upper limit of expenditure specified in paragraph 1 is exceeded, resetting, even provisionally, the share accruing to the producer at up to 60% of the excess. The share accruing to the pharmacist for the costs of products refunded by the [SSN] shall be recalculated, taking into account the reduction in the share accruing to the producer which is to be repaid to the [SSN] by the pharmacist as an increase in the discount. The remaining 40% of the excess shall be covered by the regions by adopting specific measures in the pharmaceutical sector. … … 33. With effect from 1 January 2004, the prices of products the cost of which is reimbursed by the [SSN] shall be determined in the framework of negotiations between the Agency and the producers in accordance with the detailed rules and criteria laid down in Decision No 3 of the CIPE [Comitato Interministeriale di Programmazione Economica – Joint Ministerial Committee for Economic Planning] of 1 February 2001.’ 16. It was only after the material events of the main proceedings that Law No 296 of 27 December 2006 relating to the provisions for drawing up the annual and pluriennial budget of the State (6) (‘Law No 296/2006’) was enacted, Article 1(796)(f) of which lays down measures to reduce health expenditure and, for that purpose, mentions the decisions of 8 and 21 June 2006 which are challenged in the main proceedings. 17. According to the referring court, Law No 296/2006, while leaving intact the pre-existing system of price bargaining and the medicinal products tariff, as well as the provisions relating to the fixing of upper limits for pharmaceutical expenditure, amends the conditions for intervention in cases where those limits are exceeded. Law No 296/2006 reverses the existing pricing procedure in so far as it no longer follows actual changes in health expenditure, but is based on prior predictions of that expenditure, subject to later rectification on the basis of expenditure actually incurred. 18. Article 1(796)(f) of Law No 296/2006 provides: ‘To ensure the fulfilment of Community obligations and the attainment of the objectives in respect of the public finances for the three-year period 2007-2009 …: … (f) the measures for monitoring pharmaceutical expenditure adopted by the Administrative Board of the [AIFA] by decisions No 34 of 22 December 2005, No 18 of 8 June 2006, No 21 of 21 June 2006, No 25 of 20 September 2006 and No 26 of 27 September 2006 with the aim of adhering to the upper limits set by Article 48(1) of [Decree-Law No 269/2003] are confirmed for 2007 and the following years subject to reassessment of those measures by the AIFA itself on the basis of an analysis of the actual changes in the expenditure.’ 19. According to the referring court, under Article 1(796)(g) of Law No 296/2006, pharmaceutical undertakings may apply for suspension, for their medicinal products, of the 5% price increase ordered by the AIFA in the decision of 27 September 2006 provided that they undertake to pay the regions (7) an equivalent amount. III – Facts of the main proceedings and the questions referred for a preliminary ruling 20. The applicants in the main proceedings are pharmaceutical companies holding marketing authorisations for medicinal products (8) in Class A of the Italian Pharmacopoeia the prescription of which, in accordance with that classification, is at the expense of the SSN. 21. In the main proceedings, the various applicants seek the annulment, wholly or in part, of various AIFA decisions and resolutions approving the ‘action to regulate agreement-covered and non-agreement-covered pharmaceutical expenditure’, (9) providing for a 5% reduction in the retail price of medicinal products used or dispensed by the SSN and requiring the producer to allow a 1% discount on the ex-factory price, equivalent to 0.6% of the retail price. 22. According to the referring court, the applicants criticise the abovementioned measures and the decisions and resolutions adopted in that connection on the grounds that they were adopted immediately after other, virtually identical, measures (10) which had the same purpose, and that they were based on an estimate of the excess to be contained derived by aggregating the amounts by which the upper limits fixed for 2005 and 2006 had been exceeded, the 2006 figure being calculated on the basis of a projection rather than on ascertained figures for the first six months. 23. With regard to the context, the referring court states that the need for reform and control of public expenditure, including public health expenditure, led to the fixing of ceilings for the SSN’s expenditure on pharmaceutical products. After the ceiling was set by law in 2001 at 13% of regional health expenditure (via pharmacists), Article 48(1) of Decree-Law No 269/2003 confirmed that percentage and added to it, with effect from 2004, 3% of hospital expenditure on medicinal products, thereby arriving at an overall percentage of 16% of planned health expenditure. 24. According to the referring court, it is clear from the national legislation that the cost of a pharmaceutical product can be charged to the SSN if it is listed, on the basis of cost-efficiency, in the tariff drawn up and periodically updated by the AIFA. The reimbursement price for the product is a result of bargaining between the parties to the main proceedings, that is to say, the AIFA on the one hand and the producers of medicinal products on the other. 25. According to the referring court, that procedure is in principle retained by all the measures for containing health expenditure, but it is modified in so far as the amount by which it is predicted that the expenditure on pharmaceutical products will exceed the ceiling, and not only on the excess actually ascertained, may be taken into account for reducing the price of reimbursable products. This was done at first by way of AIFA resolutions and decisions (11) and finally confirmed, after the main proceedings were instituted before the referring court, by Law No 296/2006. Thus, according to the referring court, this new measure changes the conditions for intervention in cases where the ceiling has been exceeded. In addition, Article 1(796)(g) of Law No 296/2006 made it possible to apply for the suspension of the measure reducing the price. 26. The referring court points out that the parties to the main proceedings differ as to the relevance of Law No 296/2006 to those proceedings. In the referring court’s view, that Law is relevant to the main proceedings. However, it considers that the defendants’ objection that the AIFA resolutions and decisions which are challenged by the applicants have become devoid of purpose cannot be accepted. Law No 296/2006 legislates for the future since it takes effect from 1 January 2007, whereas the measures challenged in the main proceedings relate to a past period which started on 1 October 2006, so that the applicant companies have a continuing interest in bringing proceedings. 27. From the referring court’s viewpoint, both the new and the previous legislation give rise to questions in relation to Directive 89/105. 28. The referring court considers that the provisions of Directive 89/105 constitute a system which appears to incline towards permitting the adoption of decisions based on ‘co-determination’. The characteristics of this are, for example, that the various provisions of the directive are accompanied by constant dialogue between the authority which fixes the price of the medicinal product and the pharmaceutical company concerned, to the point that such dialogue governs the phases of the procedure. According to the provisions of the directive, the competent authorities are required to adopt reasoned decisions at fixed intervals and the reasons for decisions refusing applications must be based on objective, verifiable criteria. Likewise, before such a decision is adopted, the parties concerned must be given an opportunity to present their arguments. It is also characteristic that if the competent authority fails to give a decision in due time on a price approval application under Articles 2 and 3 of Directive 89/105, the price or price increase proposed by the pharmaceutical company will apply. Substantive transparency prevails throughout. In that regard, the determination of a reference value for reimbursement would constitute a reason or an objective criterion because that is a general policy aim, not a criterion that is truly objective or, above, all, verifiable. That is the effect of the judgment in Duphar and Others. (12) According to the referring court, that judgment, which was before Directive 89/105, like the directive later, emphasises the freedom of action of the Member States in relation to social security schemes, including measures to maintain the financial stability of sickness insurance schemes, whilst affirming the need for procedures to be transparent and verifiable. 29. Against that background, the Tribunale amministrativo regionale del Lazio (Regional Administrative Court for Lazio) (Italy) decided to stay the proceedings in Cases C-352/07, C‑354/07 to C-356/07, C‑365/07 to C‑367/07 and C-400/07, and to refer the following questions to the Court for a preliminary ruling: ‘1. In that it refers to “decreases in prices …, if any”, is [Article 4(1) of Directive 89/105] to be interpreted as meaning that, as well as the general remedy of freezing the prices of all categories, or certain specific categories, of medicinal product, another general remedy may be applied in the form of a reduction in the prices of all categories, or of certain specific categories, of medicinal product, or must “decrease in prices …, if any” be interpreted as referring exclusively to the medicinal products which are already subject to the price freeze? 2. In requiring the competent authorities of a Member State to verify, at least once a year, in the case of price freezes, whether the macro-economic conditions justify continuing that price freeze, may Article 4(1) [of Directive 89/105] be interpreted as meaning that, if the reply to Question 1 is that a price reduction is permissible, it is possible to have recourse to such a measure even more than once in the course of a single year, and to do that again for many years (from 2002 until 2010)? 3. Under the terms of [such] Article 4 … – read in the light of the preamble [to Directive 89/105] emphasising that the principal aim of measures controlling the prices of medicinal products is “the promotion of public health by ensuring the availability of adequate supplies of medicinal products at a reasonable cost” and the requirement to prevent “disparities in such measures [which] may hinder or distort intra-Community trade in medicinal products” – is it compatible with the Community rules to adopt measures which refer to economic values attributed to that expenditure on the basis of “predictions” rather than values which have been “ascertained” (this question relates to both situations)? 4. Must the requirements relating to compliance with the ceilings for pharmaceutical expenditure which each Member State is competent to determine be linked, point by point, to pharmaceutical expenditure alone, or is it within the powers of the Member States to take account also of data relating to other health expenditure? 5. Must the principles, to be inferred from … Directive [89/105], of transparency and of participation on the part of the undertakings with an interest in measures freezing the prices of pharmaceutical products or reducing them across the board be interpreted as requiring provision to be made, always and in any circumstances, for the possibility of derogation from the price imposed (Article 4(2) [of Directive 89/105]) and for genuine participation by the applicant company, with the consequent need for the administrative authorities to state the reasons for any refusal?’ 30. In Case C-353/07, the first to third questions and the fifth question are identical to those referred in the abovementioned cases. In Case C‑353/07 the fourth question is worded as follows: ‘4. May the requirements relating to the indication of criteria which are objective and transparent, and of such a nature that the intervention of the relevant competent authorities (as regards the period up to 31 December 2006) and of the legislature (as from 1 January 2007) is verifiable be taken to be fully satisfied by the indication of the requirements relating to the ceiling for pharmaceutical expenditure which each Member State is competent to determine and to the containment of that expenditure and, in particular, by data relating to health expenditure overall or, more specifically, to pharmaceutical expenditure alone?’ IV – Procedure before the Court 31. The orders for reference in Cases C-352/07 and C-353/07 (dated 28 March 2007 and 26 April 2007 respectively), Case C-354/07 (dated 14 February 2007), and Cases C-355/07 and C-356/07 (both dated 28 March 2007) were received by the Court Registry on 31 July 2007. Those in Cases C‑365/07, C‑366/07 and C‑367/07 (all dated 28 March 2007) were received on 2 August 2007. The order for reference in Case C‑400/07 (dated 26 April 2007) was received at the Court Registry on 29 August 2007. 32. On 23 October 2007 the President of the Court of Justice ordered that the cases be joined. 33. During the written procedure, the applicants in the main proceedings (with the exception of FIRMA Srl and Abbott SpA), the Italian Government and the Polish Government lodged observations. 34. At the hearing on 10 September 2008, the applicants in the main proceedings (with the exception of FIRMA Srl and Abbott SpA), the Italian Government and the Commission presented oral submissions and answered the questions asked by the Court of Justice. V – Essential arguments of the parties 35. First of all, the Commission points out that in certain respects the present references for a preliminary ruling are unclear. There is insufficient detail with regard to the relevant national law. (13) Furthermore, it is not clear to what extent the questions referred are material to the decision in the actions pending before the referring court. 36. Before dealing with the essential arguments of the parties, I should like to mention that, like the Commission in its observations, I intend to deal with the questions referred in two parts. In the first part, I shall summarise the questions relating to the interpretation of Article 4(1) of Directive 89/105 (the first four questions in each case) and in the second part I shall consider the fifth question in each case, relating to the interpretation of Article 4(2) of Directive 89/105. In conformity with this approach, I shall summarise the parties’ submissions in the appropriate order. A – Essential arguments of the parties on the first four questions referred (interpretation of Article 4(1) of Directive 89/105) 37. The applicants in the main proceedings, in so far as they have lodged observations, interpret Directive 89/105 as meaning that price freeze measures relating to medicinal products should be of the nature of an exception and can therefore be applied only exceptionally under special circumstances. The measures to reduce the prices of medicinal products which are challenged in the main proceedings are disproportionate and are not justified by the level of expenditure on medicinal products in Italy. Contrary to the objectives pursued by Directive 89/105, those measures have not been applied by way of exception, but are of a permanent structural nature. 38. With regard to the first question, the applicants consider that Article 4(1) of Directive 89/105 must be interpreted as meaning that the competent authorities can order price reductions on medicinal products only if they impose beforehand a price freeze for the products concerned. Price reduction measures are permissible only exceptionally, if a price freeze is unreasonable having regard to the macro-economic conditions. In any case, price freeze and price reduction measures are permissible only if they are based on an actual review in accordance with objective and verifiable criteria. 39. On the second question, the applicants in the main proceedings assert that a price reduction which is applied more than once in the course of a single year and is repeated for many years is incompatible with Directive 89/105. A price reduction within the meaning of the directive can, in an extreme case, be only temporary and cannot be extended without limit. Under Article 4(1) of Directive 89/105, where a price freeze is imposed, a review must be carried out at least once a year to ascertain whether the macro-economic conditions justify the continuance of the freeze. In the nature of the case, a sufficiently long period must elapse between two such reviews in order to be able to establish changes in the macro‑economic conditions. In any event, only new and/or significant changes in the situation can justify a price reduction; the continuation of an existing price freeze may be justified only if the macro-economic conditions remain unchanged. A price freeze at least preserves the price of a medicinal product previously set on the basis of objective criteria by way of consensus in negotiations. 40. On the third question, the applicants in the main proceedings state that it is not compatible with Article 4 of Directive 89/105 to adopt measures based on amounts of expenditure which have been ‘estimated’ only rather than ‘ascertained’. Only data which is factual at the time when the measure in question is adopted can fulfil the requirements of transparency and verifiability. 41. With regard to the fourth question(s) referred, (14) the applicants in the main proceedings express different views. They all agree that Italian practice, which consists in a simple link to the amount (16%) by which the upper limit, fixed on a discretionary basis (and long since unchanged), of planned health expenditure is exceeded, cannot be compatible with the directive. In addition, the upper limit was set so low that exceeding it was unavoidable. However, opinions differ as to what criteria are to be taken into account, other than the concept of ‘macro-economic conditions’ used in Article 4(1) of Directive 89/105, in the review to be carried out at least once a year. Proposals range from including changes in expenditure on medicinal products alone (possibly even excluding pharmaceutical expenditure by hospitals, where the rules governing prescription differ from those applying to sale outside hospitals), including additional expenditure in the health sector, and even including all macro-economic data for the State in question, which would include the most important variable economic indicators such as, for example, the gross domestic product, gross national income, rate of inflation, general price level, purchasing power, supply and demand, as well as figures for the employment situation and/or unemployment. Finally, another criterion proposed to be taken into account consists in the selling prices of medicinal products in neighbouring States. (15) 42. The Italian Government considers that, under Article 4(1) of Directive 89/105, price reductions for medicinal product may be ordered not only when preceded by a price freeze. This is shown by the fact that policy on the pricing of medicinal products and on the social insurance system falls within the exclusive competence of the Member States, which follows from Directive 89/105 and Article 4(3) of Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use. (16) In the alternative, should the Court reply to the first question that a price freeze must precede a price reduction, contrary to the Italian Government’s suggestion, that Government observes that such a restriction cannot apply in every case. It submits that in any event it does not apply where, as in Italy, producers of medicinal products can withdraw their products from the list which is subject to official price setting and sell them at whatever price they choose. In the Italian Government’s submission, in the Italian context, producers may remove their products from Class A of the Italian Pharmacopoeia and, thereby, from the system of prescription at the SSN’s expense, which results in transfer to Class C. Medicinal products listed in Class C are charged in full to the patient (17) and are not subject to price-setting. 43. The Italian Government submits that the second question should be answered in the affirmative because it is clear from the wording of Article 4 of Directive 89/105 that intervention is possible even more than once a year provided that it is justified by the macro-economic conditions. With regard to the third question, Article 4(1) of Directive 89/105 should be interpreted as meaning that estimated values are allowed that are based on the foreseeable changes in expenditure, provided that the criteria are transparent and comprehensible. Finally, the reply to the fourth question should be that Article 4(1) of Directive 89/105 permits not only expenditure on medicinal products in the strict sense, but also overall health expenditure to be taken into account in the review of the macro‑economic conditions. 44. The Polish Government submits that Article 4(1) of Directive 89/105 should, in conformity with an Opinion of the EFTA Court of 24 November 1998 (18) on the interpretation of that Article, be interpreted as meaning that price reductions on medicinal products need not be preceded by a price freeze. However, the second sentence of Article 4(1) concerns only price reduction measures which have been preceded by a price freeze. 45. The Polish Government, like the Italian, submits that the second question should be answered in the affirmative, that is to say, a price reduction may be applied more than once in the course of a single year and may be repeated for several years. With regard to the third question, the Polish Government takes the view that Article 4(1) of Directive 89/105 should, taking account of the recitals of the preamble to the Directive, be interpreted as meaning that measures based on estimated rather than ascertained expenditure are compatible with the directive, provided that they are transparent and provide for a correction mechanism which is appropriate to trigger an automatic review of the upper limits on expenditure in cases of inaccurate estimates. On the fourth question, the Polish Government states that, when setting the maximum levels of expenditure for the purpose of Article 4(1) of Directive 89/105, Member States may exercise their own discretion in deciding which items of health expenditure should be included. 46. The Commission submits that Article 4(1) of Directive 89/105 does not preclude national legislation which, in order to control public expenditure on medicinal products, empowers the competent national authorities to: – adopt general measures to reduce the prices of all, or certain categories of, medicinal products, including those not already subject to a general price freeze; – adopt any such measure more than once a year and for several years; – justify such measures by reference to ‘estimated’ rather than ‘ascertained’ expenditure levels and to take into account health expenditure overall and not expenditure on medicinal products alone; provided that the procedural and transparency requirements under the above provision are met in full, particularly the requirement for a review of the macro‑economic conditions at least once a year and the requirement that the outcome of such a review should justify, on a case-by-case basis, the continuation of the measure and/or its adjustment by means of amendment. 47. To prevent discrimination between market participants from different Member States and the resulting effects on the internal Community market, the Directive is confined to laying down procedural requirements for attaining a high level of transparency in the medicinal products sector. B – Essential arguments of the parties concerning the fifth question referred (interpretation of Article 4(2) of Directive 89/105) 48. In relation to the fifth question, the applicants in the main proceedings observe that Article 4(2) of Directive 89/105, in conjunction with the principles of transparency and participation referred to in that directive, (19) should be interpreted as meaning that the Member States must always give the undertakings affected by price freeze or price reduction measures the right to apply for derogation from any such measure. 49. It is clear from the objectives and from Article 4(2) of Directive 89/105 that the relevant decisions must be made in reasoned form in a transparent procedure with the effective participation of the applicant in accordance with objective and verifiable criteria. Any other interpretation would be contrary to the principles of proportionality and the protection of legitimate expectations. The Italian procedure of the virtually automatic continuation of measures without examination of individual cases does not comply with Directive 89/105. 50. The Italian Government submits that the Italian measures are compatible with Article 4(2) of Directive 89/10, because it is open to the producers, as already mentioned, (20) to remove their products from Class A in the Italian Pharmacopoeia and thereby withdraw them from the Italian price-setting system. In addition, under the national legislation (21) it is possible to obtain an alteration in the agreed price after and, in special cases, even before the end of a two-year period. 51. The Polish Government takes the view that the principles, arising from Directive 89/105, of transparency and the participation of the companies concerned in price freeze or price reduction measures mean that producers affected by those measures must have the right to apply for derogation from them and to participate in the procedure for examining that application. If an application is refused, the competent authority must state the reasons for its decision. 52. The Commission submits that Article 4(2) of Directive 89/105 is to be interpreted as meaning that, when price freeze or price reduction measures are adopted for all, or certain classes of, medicinal products, there must be a right to apply for a derogation from the price imposed. There is provision for the effective participation of an applicant undertaking since it is to submit a reasoned application and, if necessary, additional information. The competent national authority must state the reasons for refusing any such application. VI – Legal assessment A – Preliminary observations on the admissibility of the reference for a preliminary ruling 53. To begin with, it must be said that the Commission’s remarks concerning the lack of clarity in the present references for a preliminary ruling are correct. The orders for reference do not set out the applicable national law in such a way as to give an adequate idea of the legal position. It is only thanks to various observations in the written procedure that a complete account is available. Furthermore, it is not clear that a decision is necessary on all the aspects of the questions referred, particularly with regard to the national court’s statement that, in its view, both the new legislation and that which preceded it raise questions concerning Directive 89/105. The national court does not even state what the preceding legislation was or how it is subject to the actions before it, or what questions it raises. 54. However, I do not think that those shortcomings lead to serious problems regarding admissibility. Although not all the dimensions of the relevance of the national court’s questions to the outcome of the main proceedings are apparent, there are nevertheless sufficient indicators to show that the interpretation of Community law sought has a bearing on the facts and issues in the main proceedings and that the problem is not hypothetical. The Court also has at its disposal, although partly as a result of the observations submitted in the written procedure, the factual and legal particulars necessary to give a pertinent reply to the questions referred to it. (22) In the framework of the cooperation between the Court of Justice and the national courts, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it refers to the Court. B – Preliminary observations on the Member States’ measures for setting prices for medicinal products 55. Under Article 152(5) EC, the organisation and delivery of health services and medical care are expressly excluded from the scope of Community action in the field of public health. 56. The health services of the Member States are organised in very different ways. They may be classified generally in two groups: on the one hand there are the Member States whose health care is organised in the framework of a national health service (for example, the United Kingdom, Finland, Spain, Malta and Italy, where the main proceedings are pending); on the other, there are those where the health service is organised in the framework of a social insurance scheme (for example, France, Austria, Germany, Hungary, Luxembourg, Latvia and Slovenia). (23) There are further differences within the two groups depending on whether, for example, patients receive benefits in kind (24) or by way of reimbursement of the costs incurred. 57. Public expenditure on medicinal products has risen in recent years in almost all Member States and general measures to contain costs have been taken. Many different kinds of strategies have been developed for that purpose and they are being applied in many different combinations. (25) 58. State price-setting, State price freezes and reductions, reference price or fixed price systems, pharmaceutical budgets, positive and negative lists, non‑prescription pharmaceuticals, exclusion of pharmaceuticals from reimbursement, greater contribution by the patient and promotion of generic drugs are all typical devices for limiting expenditure in the pharmaceuticals market. (26) In some cases some of these measures are used simultaneously with others, while in other cases they are applied one after the other, for example where the aims of the relevant policy are changed. 59. Direct price control measures, particularly price setting, price freezes and reductions, are applied in many Member States only to pharmaceuticals which are charged to the public health service (including Italy, which is the source of the present references for a preliminary ruling), and in some cases to all pharmaceuticals. (27) C – Preliminary observations on the context of regulating the prices of medicinal products in the European internal market 60. The subject of the State pricing of pharmaceuticals has many important implications in the European internal market. The issue raised touches upon sometimes conflicting interests, for example, the fundamental freedoms (in particular the free movement of goods), the need to take into account the Member States’ power in the organisation of public health, (28) and economic policy questions, (29) particularly with regard to industrial policy (including promotion of research and development of medicinal products). 61. For example, market intervention in the pharmaceuticals sector in the form of price setting was repeatedly considered by the Court in cases even before the adoption of Directive 89/105 which is relevant here, particularly in relation to the Community fundamental freedoms. (30) 62. Accordingly the Court has made it clear in various judgments, for example in 1983 in Roussel Laboratoriaand Others, (31) that price control systems applicable to domestic products and imported products alike, (32) although not in themselves constituting measures having an equivalent effect to a quantitative restriction, may nevertheless have such an effect when the prices are fixed at a level such that the sale of imported products becomes either impossible or more difficult than that of domestic products. (33) This means that Member States’ pricing systems do not as such fall within the scope of the prohibition laid down by Article 28 EC of measures having equivalent effect to quantitative restrictions, but they do have to be assessed by reference to the prohibition of discrimination. (34) 63. In the Duphar case (35) in 1984 the Court, with reference to the principle, repeated later in settled case-law, that Community law does not detract from the power of the Member States to organise their social security systems, (36) explained that this includes, in order to maintain the financial stability of their sickness insurance systems, power to regulate the consumption of medicinal products. (37) The Court also held that, in view of the special nature of the trade in pharmaceutical products, namely the fact that social security institutions are substituted for consumers as regards responsibility for the payment of medical expenses, a measure regulating the consumption of pharmaceutical products cannot in itself be regarded as constituting a restriction on the freedom to import guaranteed by Article 30 EEC (which became Article 30 EC and is now, after amendment, Article 28 EC) if certain conditions are satisfied. In particular, there must be no discrimination against imported medicinal products. (38) It is true that those findings related to so-called negative lists, (39) but they may also be applied to measures for pricing systems of pharmaceutical products, as shown by the adoption of Directive 89/105, where the requirement of transparency is based on the findings in Duphar and Others. (40) With regard to the requirement of transparency, it was held in Duphar and Others that measures regulating the consumption of medicinal products must be adopted in accordance with objective criteria, without reference to the origin of the products, and must be verifiable by any importer. (41) 64. It should be mentioned that in AOK Bundesverband and Others, a 2004 case, (42) the determination at national level of maximum fixed amounts for the cost of medicinal products and dressings, operated on a statutory basis by sickness insurance funds and their central associations in the sector of obligatory benefits, which system also has, in practice, limiting effects on the prices of medicinal products and may therefore be numbered among the market interventions by Member States in that respect, was the subject of the Court’s case-law concerned with competition law. However, in that case the German sickness insurance funds and their central associations which were parties to the main proceedings could not be regarded as undertakings within the meaning of Articles 81 EC and 82 EC, when they determine fixed maximum amounts up to which the cost of medicinal products is to be borne by the sickness insurance funds. 65. Consequently Directive 89/105 is embedded in the Community law framework described above. Since, without consensus on the role of State authorities in regulating pricing, it has been impossible to harmonise the pricing of medicinal products in the Community, (43) Directive 89/105 was intended as part of a step-by-step approach (44) which regarded transparency as an objective that could be achieved and was therefore aimed at from the beginning. (45) Many of the aspects discussed in the foregoing paragraphs can also be found in the preamble to the Directive. 66. The fact that, under Article 152 EC, on the basis of the distribution of powers between the Community and the Member States, health policy is fundamentally a matter for the Member States (46) and that this has various consequences in relation to budgetary policy, among other things, is expressed as follows in the second recital of the preamble to Directive 89/105: ‘whereas Member States have adopted measures of an economic nature on the marketing of medicinal products in order to control public health expenditure on such products; whereas such measures include direct and indirect controls on the prices of medicinal products as a consequence of the inadequacy or absence of competition in the medicinal products market and limitations on the range of products covered by national health insurance systems.’ 67. Following on from this, general implications regarding health policy and industrial policy (47) in relation to the pricing of medicinal products are summarised as follows in the third recital in the preamble to Directive 89/105: ‘whereas the primary objective of such measures is the promotion of public health by ensuring the availability of adequate supplies of medicinal products at a reasonable cost; whereas, however, such measures should also be intended to promote efficiency in the production of medicinal products and to encourage research and development into new medicinal products, on which the maintenance of a high level of public health within the Community ultimately depends.’ This last-mentioned aspect addresses, for example, the situation of pharmaceutical companies which hold new patents and which may have a legitimate interest in this factor being taken into account when prices are set. It may, in turn, be in the interest of maintaining a high level of health to take that into account. (48) On the other hand, patent protection gives the companies concerned a monopoly position in the market for some time and the Member States sometimes meet this with price control measures because their governments are already making increasing contributions to the financing of development. (49) 68. Finally, the fourth recital of the preamble to Directive 89/105 formulates the internal market dimension in the following terms: ‘whereas disparities in such measures may hinder or distort intra-Community trade in medicinal products and thereby directly affect the functioning of the common market in medicinal products.’ On that point the Court has stated that a barrier to intra-Community trade does not constitute a requirement for the application of that directive. (50) 69. Within these sometimes conflicting interests it is, according to the fifth recital in the preamble, the declared aim of Directive 89/105 ‘to obtain an overall view of national pricing arrangements, including the manner in which they operate in individual cases and all the criteria on which they are based, and to provide public access to them for all those involved in the market in medicinal products in the Member States.’ In the first part of the sixth recital it becomes clear what Directive 89/105 is intended to achieve: ‘whereas, as a first step towards the removal of these disparities, it is urgently necessary to lay down a series of requirements intended to ensure that all concerned can verify that the national measures do not constitute quantitative restrictions on imports or exports or measures having equivalent effect thereto.’ Consequently the intention is to give the persons concerned the right to ensure that the official listing of medicinal products satisfies objective criteria and that there is no discrimination between national medicinal products and those from other Member States. (51) 70. This expression of what the Directive is intended to achieve indicates at the same time, by contrary inference, the limits to what it can achieve. The task of the Directive, as its title shows, is to govern the transparency of measures regulating the prices of medicinal products for human use and their inclusion in the scope of national health insurance systems. That task, which clearly relates to transparency, must, by contrary inference, be strictly differentiated from any substantive management of prices on the medicinal products market. (52) 71. As regards the Member States’ powers in the health sector, the sixth recitals in the preamble to Directive 89/105 expressly states as follows: ‘however, these requirements do not affect the policies of those Member States which rely primarily upon free competition to determine the price of medicinal products; whereas these requirements also do not affect national policies on price setting and on the determination of social security schemes, except as far as it is necessary to attain transparency within the meaning of this Directive.’ This recognises that, although a directive calling for transparency is bound to have some effect on the sector in question, (53) Directive 89/105 has as its underlying principle the idea of minimum interference in the organisation by Member States of their domestic social security policies. (54) 72. As already mentioned, conflicting interests appear to be at work in the aims of Directive 89/105. Great care will often be necessary in reconciling them (55) in the way implied in the recitals of the Directive in order to take them into account when interpreting the directive’s various provisions. (56) 73. It remains to be said that Directive 89/105 lays down no substantive regulation or management of pricing on the pharmaceuticals market. (57) It is a directive which lays down general conditions of procedural framework for any national measure to control the prices of medicinal products for human use or to restrict the range of medicinal products covered by State national sickness insurance systems. (58) It formulates, in accordance with the criteria laid down in Duphar and Others, (59) a procedural-law prohibition of discrimination and a requirement for transparency. (60) 74. It is clear from the recitals and structure of the Directive that those general conditions include, most importantly, (61) requirements for transparency, for public access to pricing agreements for all those involved in the market in medicinal products in the Member States and for verifiability on the basis of objective criteria, including a requirement to state reasons. (62) That framework also relates to specific requirements for the duration of the procedure before the competent national authorities and limited requirements in relation to the consequences of failure to adhere to prescribed time-limits in that connection. (63) In addition, the Directive lays down requirements for effective judicial protection. (64) Thus, as the Commission rightly observed in the oral procedure, the Directive does not regulate what the Member States can do with regard to pricing, but only how they can do it. 75. In the light of the foregoing considerations, I shall now discuss the interpretation of Article 4(1) and (2) of Directive 89/105 to be given in reply to the questions referred in this case. D – The first four questions (interpretation of Article 4(1) of Directive 89/105) 76. The first four questions from the national court (65) concern the interpretation of Article 4(1) of Directive 89/105. The national court wishes to ascertain whether a national system for the control of public expenditure on medicinal products which permits the competent national authorities to adopt general measures for reducing the prices of all, or certain classes of, medicinal products, even if those products were not previously subject to a price freeze, is compatible with the provision. The national court is also asking whether it is compatible with the abovementioned provision if such measures are adopted or repeated more than once a year and/or for many years. Finally, the national court is asking whether Article 4(1) of Directive 89/105 requires such measures to be based exclusively on expenditure which has already been ascertained, or whether they may also be based on estimated expenditure and, if so, whether the expenditure must be on medicinal products alone or whether it may include other health expenditure. 1. The first question referred 77. The reply to the first question from the national court depends on the meaning of ‘price freeze’ in Article 4(1) of Directive 89/105, which refers to ‘price freeze’, ‘increase in price ‘and ‘decrease in price’ without explaining the relationship between those terms. In particular, there is no mention in Article 4(1) or elsewhere in the directive of the scope to be given to the meaning of ‘price freeze’. What is beyond doubt is only that it relates to general measures, not individual ones. (66) As the reply to the national court’s question cannot be inferred from the wording of the provision, it will depend on the directive’s general scheme, including its preamble. 78. First of all, it must be borne in mind that Article 1 of the Directive provides that any national measure to control the prices of medicinal products for human use or to restrict the range of medicinal products covered by national health insurance systems must comply with the directive’s requirements. (67) The use of the indefinite adjective ‘any’ shows that there are no exceptions, that is to say, no national measure is excluded from the scope of the directive. (68) Since the directive, as discussed above with reference to the recitals in its preamble and the case-law, (69) cannot, and is not intended to, introduce substantive regulation or management of pricing on the pharmaceuticals market, it is not for the directive to prescribe the measures to be taken by the Member States or in what sequence. Therefore, all relevant national measures are covered without exception, including measures such as those of the main proceedings, which effect a price reduction without a preceding price freeze. 79. The relationship between the expressions ‘price freeze’, ‘increase in price’ and ‘decrease in price’ can therefore only be taken to mean, against the background of the foregoing submissions concerning the recitals in the preamble to the directive, that the ambit of the term ‘price freeze’ is to be construed broadly and includes price reductions that were not preceded by a price freeze. That interpretation accords with that of the EFTA Court. (70) 80. If the reverse argument is tried, it will be found that the conclusion reached in the preceding paragraph is the only one compatible with the directive. 81. The interpretation proposed by the applicants in the main proceedings should be considered as the first argumentum e contrario. They submit that the competent authorities could order reductions in pharmaceutical prices only if they had previously imposed a ‘price freeze’ for the medicinal products in question as an initial measure. In my view, that interpretation, which is not supported, but not unambiguously excluded, by the wording, is incompatible with Directive 89/105. As the analysis of the recitals in the preamble and the case-law relating to them (71) and to the Community law framework in which it is embedded (72) has shown, the Member States’ powers with regard to the organisation of their health service systems, including the pricing of medicinal products, are not substantively affected by the directive. In particular, it does not prescribe the nature of the measures. (73) On the contrary, the fifth recital in the preamble expressly recognises the existence of different national arrangements, concerning which (only) an overall view is to be obtained. This means that the directive recognises the scope of the Member States’ powers. The proposed interpretation would, however, not be consistent with this as that interpretation (‘price reduction only after price freeze’) would be tantamount to imposing on the Member States substantive requirements for pricing on the pharmaceuticals market. So daring a departure would be contrary to the purpose of the directive and the Court’s case-law to the effect that Community law does not affect the Member States’ power to organise their own social security systems and to adopt provisions intended to regulate the consumption of medicinal products in order to promote the financial stability of their health insurance schemes. (74) 82. It is possible to imagine a further, ‘narrow’, interpretation of Article 4(1) of Directive 89/105 which I would like to broach as a second argumentum e contrario, namely that although the Member States would not be prohibited from adopting measures reducing prices without a preceding price freeze, such measures are not covered by Article 4(1). However, this interpretation would be in striking contrast to Article 1 of Directive 89/105 which, as noted above, (75) states that the directive applies to any national measure, without exception, to control the prices of medicinal products. Furthermore, it would be paradoxical to exclude price reduction measures from the procedural requirements of the Directive, but to refrain from doing so in the case of prize freeze measures which are relatively less drastic. Incidentally, for the same reasons, I am unable to follow the Polish Government’s argument that the second sentence of Article 4(1) relates only to price reduction measures that have been preceded by a price freeze. 2. The second question 83. As Article 4(1) of Directive 89/105 does not preclude measures, such as those in the main proceedings, which reduce the price of medicinal products but have not been preceded by a price freeze, it is necessary to establish whether it is consistent with that provision for such measures to be adopted more than once a year and/or repeated for many years. 84. It is clear from the wording of Article 4(1) that a review is to be carried out at least once a year to ascertain whether the macro-economic conditions justify the continuation of the freeze unchanged. Accordingly, Article 4(1) prescribes an annual review as a minimum, but is not necessarily confined to that minimum. Consequently, Article 4(1) does not preclude a review from being carried out more than once a year. 85. Furthermore, it is also clear from the wording of Article 4(1) of Directive 89/105, reproduced at paragraph 9 of this Opinion, that in the course of such review it is necessary to determine regularly whether the continuation of the measure unchanged is justified. Logically there are two possible outcomes to this: either continuation unchanged is justified or continuation unchanged is not justified. The second alternative likewise has two very different implications. The need for change being indicated, it will point in the direction of an increase or in the direction of a further reduction in the respective pharmaceutical price. The wording of Article 4(1) says no more on this point, apart from stating that within 90 days of the start of the review, the competent authorities are to announce what increases or reductions in prices are being made, if any. 86. Nothing in Article 4(1) of Directive 89/105 suggests that it would be forbidden to adopt or repeat such measures, if need be, more than once a year and/or for several years, provided that the directive’s procedural and transparency requirements are fulfilled. Consequently, the question whether such need exists is a matter for the respective Member State alone. 3.The third question 87. The third question from the national court is whether Article 4(1) of Directive 89/105 requires the measures in question to be based solely on expenditure which has already been ascertained or whether it would also be compatible with the directive if they are based on estimated expenditure. 88. The wording of Article 4(1) offers no explicit guidance on this question. 89. The reply to the question must take into account the need to maintain a sensitive balance between the transparency requirements and the rule that health policy, which includes the actual form of price controls in the national pharmaceutical market, is a matter for the Member States. In this connection reference should be made to the sixth recital in the preamble to Directive 89/105, cited above, (76) which states that the directive’s requirements do not affect national policies on price setting or on social security schemes, except as far as it is necessary to attain transparency within the meaning of the directive. 90. It must be acknowledged that, of course, a measure based on expenditure which has already been ascertained offers a safer framework for reference than one based on estimated expenditure. Nevertheless, subject to certain conditions, a measure based on estimated figures may meet the directive’s requirements. 91. Generally speaking, it cannot be denied that estimates, projections and forecasts based on macro-economic analysis, using mathematical statistical methods, which may as a result be transparent, are likely to fulfil the requirements of Directive 89/105 provided that they are based on objective and transparent criteria. Forecasts based on formalised methods are everyday tools in many sectors of the economy and politics. State planning cannot rely on an ex post approach alone, the ex ante perspective is a matter of course and an inherent element in planning. The Polish Government correctly points out that forecasts are a basic tool of State planning. If estimates and forecasts were, as a matter of principle, to be deemed incompatible with Directive 89/105, it would automatically entail interference in the powers of the Member States, going beyond what is necessary to create and maintain transparency for the purposes of the Directive. 92. As suggested in Duphar and Others (77) and in the fifth recital in the preamble to Directive 89/105, it is essential that any measures, including those relating to pricing, which regulate the consumption of medicinal products be drawn up on the basis of objective, verifiable criteria, irrespective of whether they are based on estimates of future expenditure or on expenditure already ascertained. 93. Therefore on the assumption that estimates that ensure transparency for the purposes of Directive 89/105 are, generally, appropriate from the viewpoint of the directive, the next step is to refer once again to the wording of Article 4(1), which requires a review at least once a year, accompanied by decisions on the continuation or not of the measure in question. Thus, regular review and adjustment, which can correct inaccuracies arising from earlier estimates, is required for all measures, including those based on estimates, as the Polish Government points out. 94. Therefore, it must be concluded that Article 4(1) of Directive 89/105 does not require measures for controlling public expenditure on medicinal products to be based solely on expenditure that has already been ascertained. Expenditure estimated on the basis of a forecast complies with the directive if transparency within the meaning of Directive 89/105 is ensured, that is to say, if the estimate is drawn up on the basis of objective, verifiable criteria and complies with all the directive’s procedural requirements, in particular review at least once a year and adjustment, as required by Article 4(1) of Directive 89/105. 4. The fourth question 95. By its fourth question concerning the interpretation of Article 4(1) of Directive 89/105, the national court wishes to ascertain what factors are to be taken into account in the review, at least once a year, of the macro-economic conditions. It is asking whether reference is to be made solely to expenditure on pharmaceuticals or whether other health expenditure can also to be taken into account. 96. The observations of the applicants in the main proceedings indicate further possible variations. (78) They discuss taking as a basis expenditure on medicinal products alone, on medicinal products excluding medicinal products used in hospitals, the overall data relating to the economic situation of the State in question (including figures for the gross domestic product, gross national income, rate of inflation, general price level, purchasing power, supply and demand, as well as figures for the employment situation and/or unemployment) as well as prices in neighbouring Member States. 97. Here again, Article 4(1) of Directive 89/105 offers no explicit guidance. The term ‘macro-economic conditions’ is not defined in that article or in the preamble to the Directive. 98. As part of a systematic and purposive interpretation, some indication may be found, at the most, in the fifth recital in the preamble to Directive 89/105, where it states that an overall view of national pricing arrangements should be obtained, including all the criteria on which they are based. It may be concluded from this that the criteria used by the Member States are to be documented, but are not prescribed. 99. I think it is very probable that the term ‘macro-economic conditions’ is merely an indicator in so far as it shows that the national review criteria need not necessarily be of a purely business management nature (for example, related to research and production costs), but that other criteria such as the funding of the health service may play a part. 100. Once again, it should be pointed out here that a sensitive balance is to be maintained between the transparency requirement and the rule that health policy is a matter for the Member States. (79) Against that background, and as the directive gives no specific guidance regarding the criteria, I plead for restraint. In my opinion, to attempt to define the term ‘macro-economic conditions’ for the sake of transparency without any indication whatever in the directive would upset the desired balance. 101. Consequently, as the directive contains no specific provision, it is for the Member States to lay down the criteria for the review, at least once a year, of the macro-economic conditions. However, as the Court pointed out in Merck, Sharp and Dohme, (80) it must be remembered that, in accordance with the principle of effectiveness, this must not render the rights conferred by the Community legal order impossible or difficult in practice to exercise. Finally, it must be borne in mind that the criteria must be formulated in such a way that undertakings from other Member States are not placed at a disadvantage. (81) 102. In view of the wording of the fourth question in Case C-353/07 and in view of the observations of some of the applicants in the main proceedings, I must say that I doubt whether a procedure consisting simply in setting an upper limit on expenditure and merely reviewing whether that limit has been exceeded can be transparent in a deeper sense. However, I think that such a procedure is nevertheless sufficient to meet the transparency requirements of Directive 89/105, should permit verifiability in relation to the existence of quantitative restrictions on imports or exports or measures having equivalent effect and requires objective and verifiable criteria for that purpose. Setting an upper limit on pharmaceutical expenditure in conjunction with the requirement to contain it – whether on the basis of overall health expenditure or of pharmaceutical expenditure alone – provides, as a rule, sufficiently objective and transparent criteria with regard to the question whether there are quantitative restrictions on imports or exports or measures having equivalent effect. 103. I therefore propose that the replies to the first four questions referred should be that Article 4(1) of Directive 89/105 is, provided that the other requirements of that provision are fulfilled, to be interpreted as meaning that: – the scope of the term ‘price freeze’ is to be construed broadly so as to include national price reduction measures for controlling public expenditure on medicinal products, where such measures have not been preceded by a price freeze; – measures for controlling public expenditure on medicinal products may be adopted or repeated more than once a year and/or for more than one year; – such measures need not be based solely on expenditure that has already been ascertained and an approach based on expenditure estimated on the basis of a forecast complies with the directive if transparency within the meaning of Directive 89/105 is ensured, that is to say, if the estimate is drawn up on the basis of objective, verifiable criteria and complies with all the directive’s procedural requirements, in particular review at least once a year and adjustment, as required by Article 4(1) of Directive 89/105; – it is for the Member States to lay down the criteria for the review at least once a year of the macro-economic conditions. It must be borne in mind that the selected criteria must not lead to undertakings from other Member States being placed at a disadvantage and that must not render the rights conferred by the Community legal order impossible or difficult in practice to exercise. E – The fifth question referred (interpretation of Article 4(2) of Directive 89/105) 104. The fifth question from the national court relates to the interpretation of Article 4(2) of Directive 89/105. The court wishes to ascertain whether that provision requires that there must always be a right to apply for derogation from the price imposed and whether it follows therefrom that there must be genuine participation by the applicant undertaking and that the authority concerned must state reasons for any refusal. 105. Under Article 4(2) of Directive 89/105, the holder of a marketing authorisation for a medicinal product may apply for a derogation from a price freeze if that is justified by particular reasons. 106. The wording of that provision is unambiguous and leaves no doubt at all that it requires that there always be the right to apply for a derogation and that approval of such derogation depends on whether it is justified by particular reasons. Furthermore, such an interpretation accords with that of the EFTA Court. (82) 107. The referring court is also asking whether the genuine participation of the applicant undertaking is required. 108. It is clear from the wording of Article 4(2) that, if the information supporting the application is inadequate, the competent authorities must forthwith notify the applicant of what detailed additional information is required. To that extent Directive 89/105 requires the applicant’s genuine participation, which has to be actively initiated by the competent authority concerned by giving notice. 109. The reply to the national court must add that it is also clear from the wording of Article 4(2) of Directive 89/105 that a reasoned decision on any such application must be adopted and communicated to the applicant within 90 days of receipt of the application or additional information. 110. However, in so far as the applicants in the main proceedings submit, as regards the ‘participation’ (83) of the applicant undertaking referred to in the question from the national court, that Article 4(2) does not allow unilateral measures by the competent national authorities, but contains a ‘dialogue principle’ – rather similar to pricing negotiations – I cannot agree. (84) It is understandable that a national procedure which, as a first step, provides for complex negotiations which, at a later stage, can be thwarted by unilateral official measures may lead to frustration. However, Directive 89/105 cannot be invoked against that because the participation referred to in Article 4(2) does not go beyond the extent indicated in paragraphs 108 and 109 above. 111. I therefore propose that the Court reply to the fifth question that Article 4(2) of Directive 89/105 is to be interpreted as meaning that, in the event of measures freezing or reducing the prices of all, or of particular categories of, medicinal products, there must always be a right to apply for a derogation from the price imposed and the authority concerned must state reasons for any refusal. The competent authority must allow genuine participation by the applicant in the sense that, if the information supporting the application is inadequate, the competent authority must forthwith notify the applicant of what detailed additional information is required. VII – Conclusion 112. For those reasons, I propose that the Court’s reply to the questions referred for a preliminary ruling by the Tribunale amministrativo regionale del Lazio should be as follows: (1) Article 4(1) of Directive 89/105 is, provided that the other requirements of that provision are fulfilled, to be interpreted as meaning that: – the scope of the term ‘price freeze’ is to be construed broadly so as to include national price reduction measures for controlling public expenditure on medicinal products, where such measures have not been preceded by a price freeze; – measures for controlling public expenditure on medicinal products may be adopted or repeated more than once a year and/or for more than one year; – such measures need not be based solely on expenditure that has already been ascertained and an approach based on expenditure estimated on the basis of a forecast complies with the directive if transparency within the meaning of Directive 89/105 is ensured, that is to say, if the estimate is drawn up on the basis of objective, verifiable criteria and complies with all the directive’s procedural requirements, in particular review at least once a year and adjustment, as required by Article 4(1) of Directive 89/105; – it is for the Member States to lay down the criteria for the review at least once a year of macro-economic conditions. It must be borne in mind that the selected criteria must not lead to undertakings from other Member States being placed at a disadvantage and that it must not render the rights conferred by the Community legal order impossible or difficult in practice to exercise. (2) Article 4(2) of Directive 89/105 is to be interpreted as meaning that, in the event of measures freezing or reducing the prices of all, or of particular categories of, medicinal products, there must always be a right to apply for a derogation from the price imposed and the authority concerned must state reasons for any refusal. The competent authority must allow genuine participation by the applicant in the sense that, if the information supporting the application is inadequate, the competent authority must forthwith notify the applicant of what detailed additional information is required. 1 – Original language: German. 2 – OJ 1989 L 40, p. 8 3 – General Supplement No 26 to the GURI No 36 of 13 February 1992. 4 – General Supplement to the GURI No 229 of 2 October 2003. 5 – General Supplement No 181 to the GURI No 274 of 25 November 2003. 6 – General Supplement No 244 to the GURI No 299 of 27 December 2006. 7 – In the Italian public health system, the regional governments perform important functions, such as, as is shown by the contents of the Court file, those connected to the regulation of the amount of pharmaceutical expenditure. It may, however, be noted in passing that such a reciprocal agreement must not lead to imported products being placed at a disadvantage (see Case C‑249/88 Commission v Belgium [1991] ECR I-1275, paragraph 38). 8 – Class A covers essential medicinal products and medicinal products for chronic illnesses (see point 12 above). 9 – In particular: Resolutions No 18 of 8 June 2006 and No 21 of 21 June 2006 of the AIFA Administrative Board approving the reduction in the retail price of medicinal products; AIFA Decision of 3 July 2006 concerning the list of medicinal products in Class A, the price of which may be reimbursed by the SSN under Article 48(5)(c) of Decree-Law No 269/2003 (National Pharmacopoeia 2006); Resolution No 25 of the AIFA Administrative Board of 20 September 2006 approving action to control agreement-covered and non-agreement-covered pharmaceutical expenditure for 2006; Decision of the Director General of the AIFA of 27 September 2006 on ‘action to regulate agreement-covered and non-agreement-covered pharmaceutical expenditure’; Resolution No 26 of 27 September 2006 of the AIFA Administrative Board approving the document concerning the ‘additional details and definition of action to control agreement‑covered and non-agreement-covered pharmaceutical expenditure, addressing the need to anticipate the effects of that action in order to reduce the deficit for 2006 and, at the same time, avoid the accrual of possible deficits in 2007’. 10 – On that point, it is clear from the various observations submitted to the Court that the reference to recent, virtually identical measures, is to the AIFA decision of 30 December 2005 on a general price reduction of 4.4% and the AIFA decision of 3 July 2006 mentioned in footnote 9. 11 – See Resolution No 34 of the AIFA Administrative Board of 22 December 2005 and the decisions and resolutions specified in footnote 9 of this Opinion, which have been challenged by the applicants in the main proceedings. 12 – Case 238/82 Duphar and Others [1984] ECR 523. 13 – It should be noted that the account of the relevant national legislation in this Opinion was not obtained from the orders for reference, but thanks to various observations lodged with the Court in which the national law is set out in sufficient detail. 14 – The fourth question referred is worded in different ways (see point 30 above), which partly affects the meaning. 15 – According to the applicants in the main proceedings, the selling prices of medicinal products in Italy are the lowest in Europe. 16 – OJ 2001 L 311, p. 67. Article 4(3) of Directive 2001/83 reads as follows: ‘The provisions of this Directive shall not affect the powers of the Member States’ authorities either as regards the setting of prices for medicinal products or their inclusion in the scope of national health insurance schemes, on the basis of health, economic and social conditions.’ 17 – See point 12 above. 18 – Opinion of the EFTA Court of 24 November 1998 in Case E-2/98 Icelandic Trade Association v Iceland and the Committee for setting prices of medicinal products, EFTA Court Reports, p. 172, paragraph 21. 19 – The applicants point out that the directive emphasises the principle of participation by those who are affected by a price freeze. Regarding the situation in Italy in particular, it is relevant that pharmaceutical prices were set at the first stage in a complex process of negotiation and agreement between the State and the companies concerned. This was recorded in an agreement binding the parties for two years. However, in the second stage, the State could circumvent the agreement by setting prices unilaterally. The applicants contend that this is incompatible with Directive 89/105. 20 – See point 42 above. 21 – The Italian Government refers in this connection to Article 7 of the abovementioned CIPE Decision No 3 of 1 February 2001 (see point 15 above). 22 – For the abovementioned conditions of admissibility, see the Court’s settled case-law, including Case C‑105/03 Pupino [2005] ECR I-5285, paragraph 30; Case C‑344/04 IATA and ELFAA [2006] ECR I-403; paragraph 24, and Case C-303/06 Coleman [2008] ECR I-5603, paragraph 31. See also Lenaerts, Arts and Maselis, Procedural Law of the European Union, 2nd ed., 2006, p. 52 et seq., n. 2-023 et seq. 23 – For the situation in 2007 in 25 Member States, see Habl, Vogler, Leopold, Schminck and Fröschl, Referenzpreissysteme in Europa, February 2008, p. 7 et seq. (in 2007, 14 of the 25 Member States studied had a social insurance system, 11 had a national health service. Cyprus was planning to change from a national health service to a social insurance system). 24 – Benefits in kind are supplied by the health insurance institutions without patienta having to make provisional payment. 25 – See Rosian, ‘Rezepte zur Kostendämpfung bei Arzneimitteln’, GGW 2/2002, p. 22; Espín and Rovira, Analysis of differences and commonalities in pricing and reimbursement systems in Europe, A study funded by DG Enterprise and Industry of the European Commission, Final Report, June 2007, Granada/Brussels, p. 173. Both sources give a general view of the measures taken in certain Member States. 26 – See Rosian, cited in footnote 25, p. 24; see also Espín and Rovira, cited in footnote 25, p. 27 et seq.; Roth,‘Möglichkeiten und Grenzen eines einheitlichen Binnenmarktes für Arzneimittel’, in Schwarze (publ.), Arzneimittel im Europäischen Binnenmarkt, 2007, p. 31, and Mossialos, Walley and Mrazek, ‘Regulating pharmaceuticals in Europe, an overview’, in Mossialos, Mrazek and Walley (publ.), Regulating pharmaceuticals in Europe: striving for efficiency, equity and quality, 2004, p. 1 et seq., p. 10 et seq. 27 – See Espín and Rovira, cited in footnote 25, p. 38 with examples of countries. 28 – See paragraph 55 et seq. of this Opinion. 29 – State pricing has implications for economic policy (Hart and Reich, Integration und Recht des Arzneimittelmarktes in der EG, 1990, p. 283), and therefore extends into the area of Article 99 EC. 30 – See Roth, cited in footnote 26, in particular p. 32; Schwarze, ‘Die Bedeutung des Territorialitätsprinzips bei mitgliedstaatlichen Preiskontrollen auf dem europäischen Arzneimittelmarkt’, in: Schwarze (publ.), Unverfälschter Wettbewerb für Arzneimittel im europäischen Binnenmarkt – Pharmazeutische Produkte im Widerstreit von freiem Warenverkehr und nationalen Preiskontrollen, 1998, p. 59 (p. 63) refers to a conflict of principle between the free movement of goods and State price controls. 31 – Case 181/82 [1983] ECR 3849, paragraph 17, citing the earlier case-law. 32 – Case 56/87 Commission v Italy [1988] ECR 2919 provides an example of a price reduction measure framed in discriminatory terms. In issue was a pricing procedure which expressly made provision for medicinal products to be priced so as to promote the development of the domestic industry and domestic research work. 33 – See also Commission v Belgium, cited in footnote 7, paragraph 16. In previous cases, however, there were not only situations where it was conceivable that low prices could make the sale of imported products more difficult than that of domestic products, but also situations where the importation of products from Member States with strict price control at a low financial level could potentially lead to the distortion of competition between the Member States, particularly in the case of parallel imports of non-patentable pharmaceutical products (Joined Cases C‑427/93, C-429/93 and C-436/93 Bristol-Myers Squibb and Others [1996] ECR I‑3457, paragraph 46, and Joined Cases C-267/95 and C-268/95 Merck and Beecham [1996] ECR I‑6285, in particular paragraph 45 et seq.), which ultimately may also lead to rigid measures for pricing pharmaceuticals in one Member State having in practice effects on the health policy of another Member State (see Schwarze, cited in footnote 30, pp. 63 and 65 et seq.). 34 – See, to that effect, Thier, Das Recht des EG-Arzneimittelmarktes und des freien Warenverkehrs – Freier Warenverkehr in der EG, europäisches Arzneimittelsicherheitsrecht und das Verhältnis zu nationalem Arzneimittelpreis und –versorgungsrecht unter besonderer Berücksichtigung des Rechts der BRD, 1990, p. 306. 35 – Cited in footnote 12, paragraph 16. 36 – See, for example, Case C-70/95 Sodemare and Others [1997] ECR I-3395, paragraph 27; Case C-158/96 Kohll [1998] ECR I-1931, paragraph 17, and Case C‑245/03 Merck, Sharp & Dohme [2005] ECR I-637, paragraph 28. As there is no harmonisation at Community level, the law of each Member State determines the conditions under which social security benefits are granted (Case 266/78 Brunori [1979] ECR 2705, paragraph 6, and Case 110/79 Coonan [1980] ECR 1445, paragraph 12, against the background of Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community (OJ, English Special Edition 1971 (II), p. 416, together with the reference to Article 51 EEC [subsequently Article 51 EC and now, after amendment, Article 42 EC], on this point, for example, Case C-349/87 Paraschi [1991] ECR I‑4501, paragraph 15; see also, for the current position, Case C-372/04 Watts [2006] ECR I‑4325, paragraph 92, and Case C-444/05 Stamatelaki [2007] ECR I-3185, paragraph 23. However, as a result of the developments in case-law, particularly concerning the freedom to provide services under Article 59 EC (now Article 49 EC), Community law has clearly produced a gradual de facto effect in some respects on the conditions for benefits, for example, in the area of cross-border claims for health benefits (Kohll, cited above in this footnote; Case C-385/99 Müller-Fauré and van Riet [2003] ECR I-4509, and Watts, cited above in this footnote), which demands significant adjustment benefits from some of the Member States’ health services. For example, the fact that persons concerned, in settlement of health services received in a different Member State, make an advance payment and subsequently wish to claim reimbursement of the amounts advanced, is hardly part of the system in the health services of Member States which are organised according to the benefits in kind principle. 37 – Commission v Belgium, cited in footnote 7, paragraph 31. 38 – See Duphar and Others, paragraphs 20 and 21. 39 – These list medicinal products which cannot be prescribed and charged to the institution responsible for the national health service. 40 – See the Opinion of Advocate General Tizzano in Case C-424/99 Commission v Austria [2001] ECR I-9285, paragraph 27, referring to the Commission report which was presented together with the proposal for the Directive (COM(86) 765 final of 23 December 1986, section II.1). Thier, cited in footnote 34, p. 311, takes the same view. 41 – Cited in footnote 12, paragraph 21. 42 – See Joined Cases C-264/01, C-306/01, C-354/01 and C-355/01 [2004] ECR I-2493. 43 – There are considerable differences in the pharmaceuticals pricing policy of the Member States. In some countries, such as Italy, prices are approximately one half of those in others (Hart and Reich, cited in footnote 29, p. 263). This is attributable to various factors relating to the market in question, the pricing policy of pharmaceutical companies and differing national concepts, varying within the EU from rigid State pricing to broad avoidance of State intervention in the pricing of pharmaceuticals (see Stegemann, ‘International price discrimination and markets segmentation for patented pharmaceuticals in the EU – a social welfare analysis’, in: Govaere and Ullrich (publ.), Intellectual property, public policy, and international trade, College of Europe Studies, No 6, 2007, p. 145 et seq., S.; Hart and Reich, cited in footnote 29, p. 263). 44 – As stated in the Directive itself at the end of the recitals. See also Thier, cited in footnote 34 above, p. 311; Thompson, The single market for pharmaceuticals, 1994, p. 9; Cranz, ‘Preisbildung bei Arzneimitteln und Erstattungssysteme’, in: Blasius and Cranz, Arzneimittel und Recht in Europa, 1998, p. 149, and Hancher, ‘Creating the internal market for pharmaceutical medicines – an Echternach jumping procession’, Common Market Law Review, Nr. 28/1991, p. 821 et seq., p. 851. Conflicting interests were obviously involved before the Directive came into existence. According to Greenwood (‘Pharmaceuticals and Biotechnology; virtues and trends in EU Lobbying’, in: Pedler and van Schendelen [publ.], Issues and Cases In European Public Affairs, 1994, p. 183 et seq., p. 188), the question of drawing up a European pharmaceuticals pricing directive was under discussion until 1984/1985. On the other hand, the European Federation of Pharmaceutical Industries and Associations (EFPIA), a European umbrella association for the pharmaceutical research industry, proposed that a directive should not be drawn up for pricing, but only for transparency in the case of national pricing, which was accepted. Kotzian (‘Stuck in the middle: welfare effects of the European pharmaceutical markets’ incomplete integration and a possible remedy’, Arbeitspapiere – Mannheimer Zentrum für Europäische Sozialforschung, No 59, 2002, p. 3) considers that, for the Commission, the main function of Directive 89/105 regarding national pricing systems was to have ‘a foot in the door’. 45 – It should however be noted that a long time has passed since the first step and no more have been taken. In the meantime, the Commission has expressly refrained from further steps towards harmonisation in the near future (Thompson, cited in footnote 44, p. 10; Hancher, ‘The European Community dimension: coordinating divergence’, in: Mossialos, Mrazek and Walley (publ., cited in footnote. 26, p. 55 et seq., p. 60). Recently, however, the Commission appears to have remembered the introduction of uniform pharmaceutical prices ex-works throughout Europe in order to unify the fragmented pharmaceuticals market and to limit trade in re-imports (at least provisionally), see Schmidt am Busch, Die Gesundheitssicherung im Mehrebenensystem, 2007, p. 280, footnote 109. In spite of such considerations, there appears to be no prospect of further ‘europeanisation’ (as found in many other areas of European pharmaceutical policy by Dorbeck-Jung and Oude Vrielink-van Heffen, ‘EU ways of governing the marketing of pharmaceuticals: a shift towards more integration, better consumer protection and better regulation?’, in: Gessner and Nelken (publ.), European ways of law – Towards a European sociology of law, 2007, S. 279) of pricing in the medicinal products sector. 46 – This can be seen as one of the applications of the principle of subsidiarity, see Wichard, in: Callies and Ruffert (publ.), EUV/EGV‑Kommentar, Art. 152 EGV, n. 10. Berg, in: Schwarze (publ.), EU-Kommentar, Art. 152 EGV, n. 8, considers that the Member States remain ‘the masters of health policy’. 47 – For the industrial policy implications, see Thier, cited in footnote 34, p. 308 et seq., who points out that, in its attempts to complete the internal market, the Commission was concerned, among other things, to promote the development of a research-intensive pharmaceutical industry in Europe. 48 – See the Opinion of Advocate General Ruiz-Jarabo Colomer in Joined Cases C‑468/06 to C‑478/06 Sot. Lélos kai Sia and Others [2008] ECR I-7139, paragraph 90. 49 – Espín and Rovira, cited in footnote 25, pp. 36 and 53. 50 – Case C-317/05 Pohl-Boskamp [2006] ECR I-10611, paragraph 29. 51 – See Case C-229/00 Commission v Finland [2003] ECR I-5727, paragraph 39; Merck, Sharp & Dohme, cited in footnote 36, paragraph 23; Case C-296/03 GlaxoSmithKline [2005] ECR I‑669, paragraph 29; and Pohl-Boskamp, cited in footnote 50, paragraph 26. 52 – For that approach, see Roth (cited in footnote 30), p. 32, and Hancher ([2004], cited in footnote 45), p. 60. A contrary position was taken, at least for a time, by Hancher ([1991], cited in footnote 44), p. 851, who considered that an interpretation based on ‘enhanced transparency’ was necessary for the purpose of the internal market. However, he correctly pointed out that there was no indication of this in the Court’s case-law. 53 – See the Opinion of Advocate General Tizzano in Commission v Austria, cited in footnote 40, paragraphs 25 to 27. 54 – Merck, Sharp & Dohme, cited in footnote 36, paragraph 27. 55 – According to Thier, cited in footnote 34, p. 309, in principle the Commission at least recognised that the relevant industrial policy and health policy aims (particularly the promotion of the European pharmaceutical industry and adequate supplies of medicinal products for the citizens of the Member States at a reasonable cost) are of equal importance 56 – Bernard, ‘Fixation des prix des médicaments’, in: Europe. March 2005, commentary No 82, p. 18, sees a ‘case-law of compromise’ in the judgments in Merck, Sharp & Dohme (cited in footnote 36) and Glaxosmithkline (cited in footnote 51). 57 – Likewise see Kröck, Der Einfluss der europäischen Grundfreiheiten am Beispiel der Ärzte und Arzneimittel, 1998, p. 242. 58 – See Case C-424/99 Commission v Austria [2001] ECR I-9285, paragraph 30; Commission v Finland, cited in footnote 51, paragraph 37; Pohl-Boskamp, cited in footnote 50, paragraph 25; and judgment of 17 July 2008 in Case C-311/07 Commission v Austria, paragraph 29. 59 – See point 63 above. 60 – Thier, cited in footnote 34, p. 319. 61 – For the primary importance of transparency and public access, see Pohl-Boskamp, cited in footnote 50, paragraph 29. 62 – The requirement for transparency of pricing includes, according to the case-law, the way in which prices are established in individual cases and the criteria on which they are based, see Pohl-Boskamp, cited in footnote 50, paragraph 29. 63 – Under the Directive, in some cases, for example under Article 2(1) of Directive 89/105, the application will be granted automatically if the authority fails to adhere to the prescribed time limit. See also Merck, Sharp and Dohme, cited in footnote 36, paragraphs 31 and 32. 64 – See GlaxoSmithKline, cited in footnote 51, paragraphs 35 and 37. 65 – These include the fourth question in Case C-353/07, referred to in point 30 above. 66 – See Hart and Reich, cited in footnote 29, p. 290. 67 – See also the case-law cited in footnote 58. 68 – See also Thier, cited in footnote 34, p. 312, who points out that more recent types of system which are not specifically mentioned in Directive 89/105 because of the date of its adoption are also covered and therefore the provisions of the directive should no doubt apply by analogy. 69 – See point 65 et seq. above, particularly point 73. 70 – See the Opinion of the EFTA Court, 24 November 1998, cited in footnote 18, paragraphs 21 and 22: ‘[21] The Court finds support for this interpretation of the scope of Article 4 in Article 4(1), which provides that the authorities, after a period of price freeze and on the basis of macro‑economic considerations, may decide to increase or decrease the frozen prices. The authorities must be able to decide upon a general increase or decrease of individually fixed prices without a preceding period of price freeze. [22] On these grounds, and based on a contextual interpretation of the Directive, the Court finds that the words “price freeze” within the meaning of Article 4 cannot be interpreted so narrowly that they only cover a status quo of the prevailing price level. A decision on the general decrease in wholesale prices must be regarded as amounting to a “price freeze” within the meaning of Article 4 of the Directive. This interpretation is supported by the fact that otherwise the Contracting Parties might easily circumvent their obligations to provide minimum procedural guarantees under Article 4 simply by adopting general pricing decisions containing modest or minor price cuts instead of freezing prices at the prevailing level.’ 71 – See points 65 to 74 above, particularly point 73. 72 – See points 62 to 64 above. 73 – Also noted by Schmidt am Busch, cited in footnote 45, p. 281. This is supported by the historical development of the directive which, contrary to the original intention, does not regulate pricing in itself, but only provides for transparency of pricing. See Greenwood (cited in footnote 44) and Kotzian (also cited in footnote 44). 74 – Duphar and Others, cited in footnote 12, paragraph 16. 75 – See point 78 above. 76 – See paragraphs 7 and 71. 77 – Cited in footnote 12 to point 28 above. 78 – See point 41 above. 79 – Of course, the Member States are still required to comply with Community law in other matters within their competence, for example, in the fields of direct taxation and education. See my Opinion in Case C-265/07 Caffaro [2008] ECR I-7085, paragraph 43. 80 – See Merck, Sharp and Dohme, cited in footnote 36, paragraph 28. 81 – For example, it would be discriminatory, for the purposes of Article 28 EC, to give priority to such criteria concerning home undertakings only. See Commission v Belgium, cited in footnote 7, paragraph 10. 82 – See the Opinion of the EFTA Court of 24 November 1998, cited in footnote 18, paragraph 28: ‘The Court notes that Article 4(2) of the Directive provides for the possibility of submitting individual applications for price increases for particular products and that the provision applies to applications for a derogation from a price freeze within the meaning of the Directive. … In the case of a general measure to lower the maximum wholesale price of certain categories of medicinal products, the requirements under Article 4(2) of the Directive must be fulfilled, inter alia that a reasoned decision must be given on all applications. On the other hand, an exception may only be applied for in exceptional circumstances and only where particular reasons may justify a derogation from the general price decision. With regard to the latter conditions, the Court notes that Article 4 establishes minimum requirements. Thus, national law may set out less restrictive requirements with respect to the conditions under which individual derogations may be granted.” 83 – The referring court also refers to ‘co-determination’ of decisions, see point 28 above. 84 – Mossialos, Walley and Mrazek (cited in footnote 26, p. 10) point out that a negotiation process with mutual give and take may lead to a result which is precisely not transparent, within the meaning of Directive 89/105.