II

A — The first question relates to the first phase of the supervision carried out by the Netherlands authorities, that is to say, the licence to market a medicinal preparation in the Netherlands and the duty to make up a file. As the advocates for the accused in the main proceedings have rightly emphasized, the assumption made by the national court, on the basis of which it has referred its questions to the Court, is that a proprietary medicinal product or a pharmaceutical preparation has been manufactured in one or more Member States in accordance with a given, uniform method, having a given uniform quantitative and qualitative composition and in respect of which the manufacturer or the person responsible for putting it on the market in each of these States has obtained the requisite marketing licences (vergunningen). This product therefore circulates lawfully in each of these States and third parties have notice, through notifications given in an official publication or otherwise, that these licences have been granted in each of these States. The court asks whether, in these circumstances, the fact that the authorities of the Member States, on the territory of which this product is imported by a parallel importer, make such importation subject to a licence issued on the basis of data, which can only be obtained with the cooperation of the manufacturer of the medicinal preparation or of appointed importer and which these authorities already have in their possession following an application for authorization made by the manufacturer or by his appointed importer, amounts to a measure having equivalent effect prohibited by Article 30 which cannot be justified by the exceptions specified in Article 36. Having regard to the contents of the file it appears to me to be established that the competent Netherlands authorities have in their possession a file relating to valium manufactured by Hoffmann-La Roche in Switzerland and sold by its appointed representative in the Netherlands, a file which was produced to them by the manufacturing company or by its sole representative for the Netherlands. On the other hand it is quite clear that they do not have in their possession either the file for valium manufactured in the United Kingdom or the report showing that the pharmaceutical preparation sold by Centrafarm is exactly the same as the valium manufactured in Switzerland and sold by the sole representative for the Netherlands. Although there is no difference between the Swiss valium sold by Hoffmann-La Roche's sole representative in the Netherlands and the valium bought in England by Centrafarm and sold by this firm in the Netherlands, the view can be taken that the file relating to the Swiss valium must be deemed to apply to the English valium sold by Centrafarm. But, even if it is assumed that the Netherlands authorities have in their possession the file for British valium, it would still be necessary to be sure that there is no difference between the valium manufactured and packaged in England, which Centrafarm bought, and the Diazepam which Centrafarm sells in the Netherlands after having repacked it. The ‘records’, which the Netherlands authorities may have in their possession, only relate to the valium manufactured and packaged in Switzerland or the valium repacked by the sole representative in the Netherlands; they do not cover the product repacked by Centrafarm. This is the decisive question. (a) There appears to me to be no doubt that the requirement prescribed by Netherlands law, in such a case, is a measure having an effect equivalent to a quantitative restriction under Article 30. Even if the Netherlands rules do not appreciably affect the total volume of trade in Diazepam between Member States, a view which the Officier van Justitie believes he can prove, they are capable of affecting the pattern of this trade. Moreover, and contrary to the view put forward by the representatives of the British Government and by the Officier van Justitie, the measure in question is not applicable without distinction to national and imported products; if it were it would not be discriminatory. It amounts in fact to treating certain imported products differently because of their origin. The persons who import the product direct from the country of manufacture (Switzerland) are treated differently from those who import it after it has already been placed on the market in a Member State (United Kingdom).The obligation to produce a file and a report on manufacture is in fact imposed indiscriminately upon traders who are in a fundamentally different position vis-à-vis the manufacturer. You have already had occasion in your judgment of 30 April 1974, Sacchi ([1974] ECR 428) to deal with discrimination which benefits, within the Community, specific patterns of trade or particular traders as compared with others. You examined the problem again in your judgment of 11 July 1974, Dassonville ([1974] ECR 852), and you criticized ‘the formalities required by a Member State for the purpose of proving the origin of a product, which only direct importers are in practice in a position to satisfy without coming up against serious difficulties’. (b) But is such a measure having equivalent effect justified on grounds of public health under Article 36 of the Treaty? The right of Member States to invoke the exceptions specified in this Article is not an absolute right and does not confer any discretion upon them. Council Directive No 64/221/EEC of 25 February 1964 on the coordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health (OJ, English Special Edition 1963-1964, p. 117) has already listed the only diseases or disabilities which might justify a refusal to allow Community nationals to enter into the territory of Member States. Moreover, the exception provided by Article 36 in the interest of public health, just as in the case of public policy and public security, is subject to the condition that ‘such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States’. This is another way of saying that Member States have no discretion at all in this field. Their powers are limited by the fact that the measures adopted for the purpose of the objective which it is sought to attain must be adequate and also that these measures must be proportionate to the aim it is sought to achieve. The Court has given its decision on this point in connexion with the protection of articles having an artistic, historic or archaeological value, the protection of industrial and commercial property, and in connexion with public policy and public security (Judgment of 10 December 1968, Commission v Italian Republic [1968] ECR 423; Judgment of 30 April 1974, Dassonville [1974] ECR 428; Judgment of 20 February 1975, Commission v R.F.A. [1975] ECR 181). It has confirmed its decision in connexion with the protection of plants (Judgment of 8 July 1975, Rewe [1975] ECR 843). The Officier van Justitie in the Netherlands himself admits that the only restrictions which are admissible are those which are ‘reasonable and proportionate to the aim it is sought to achieve’. Consequently I have to consider, within the terms of reference laid down by the first question of the national court, whether the production of the reports required under the Netherlands rules certifying that the batches sold by Centrafarm correspond to and are the same as the batches purchased in the United Kingdom, which comply with a file deemed to be in the possession of the Netherlands authorities, is not a superfluous formality. Although the qualitative and quantitative composition and the method of preparation are the determining factors for the purpose of authorizing a medicinal preparation, there is no doubt that the same cannot normally be said to the same extent of the packaging or presentation. If all that a parallel importer does is to repack a medicinal preparation, it would be going too far to conclude that these operations caused the constituents to deteriorate and have some therapeutic effect on this medicinal preparation, provided that these particular operations were carried out under the supervision of a qualified pharmacist and that the origin of each batch of, this medicinal preparation sold by the importer can be identified, which would make it possible if need be to bring the ‘production line’ and the marketing to a halt, or to identify and confiscate the whole of the suspect batch. In fact this requirement does appear to meet organizational exigencies and administrative convenience. The Netherlands legislature has delegated to the sole importer alone the task of checking whether a batch of imported products conforms to the medicinal preparation officially authorized. But if the parallel importation is only possible with the consent, granted at the discretion of a manufacturer, who moreover has every interest in refusing his authorization, then this requirement does not appear to me justified by the exception of public health. The application of a system based upon presumptions — and this is what the Netherlands system proves to be in the final analysis — under which a challenge on a question of fact or a point of law cannot be made to the same extent and in the same conditions in the case of domestic and imported products, has already been criticized in your judgment of 30 September 1975 in Joined Cases 89/74, 18 and 19/75, Arnaud [1975] ECR 1023. Unlike the fraudulent practices in the case of wine it must be borne in mind that marketing the product of the parallel importer has not given rise to any ground for the belief that there is any such risk (cf. Judgment of 8 July 1975, Rewe [1975] ECR 860). It is reasonable to suppose that if the slightest difficulty had occurred it would have been reported without fail. The Member States have as a general principle a considerable degree of freedom to make rules for the distribution of medicinal preparations and it is understandable that some of them have recourse to methods which make the task of the supervisory authorities as simple as possible. But this freedom stops at the point where the methods selected are no longer strictly essential for achieving the aim sought or where the same objective could be attained by adopting rules which do not restrict free trade so much (see the opinion of Mr Advocate-General Alain Dutheillet de Lamothe in Case 11/70, Internationale Handelsgesellschaft [1970] ECR 1148). The question then arises how Netherlands law should be adjusted in order to encourage free trade between Member States to the greatest possible extent whilst complying with the well-known requirements of public health. My Lords, you do not have to answer such a question when exercising your jurisdiction under Article 177. This is exactly what the procedure prescribed by Article 169 has been designed for. Nevertheless I would like to say a few words on the method of ensuring that a medicinal preparation, which is in fact the subject of a parallel importation, conforms to or is identical with the medicinal preparation imported direct from the original manufacturer, other than the method of requiring the importer to have in his possession a report signed by the pharmacist employed by the manufacturer, which he obviously cannot obtain from the latter, if only because it contains manufacturing secrets. Although the Netherlands authorities believe that they can rely only on such a report, it does not appear to me that it would call for undue effort on the part of the Public Health Inspector, to have recourse, as the Commission suggests, to Article 17 (1) of the decree relating to pharmaceutical preparations under which the manufacturer, the importer and the wholesaler must produce, on request, for examination by the public health authorities full particulars of the checks made to ensure that the requirements prescribed by the Netherlands rules have been complied with and to ask the manufacturer to produce the report relating to the manufacture and packaging and presentation of medicinal preparations which later become the subject of a parallel import, if need be by drawing his attention to the fact that, if the request is refused, the authorization to trade in the Netherlands, which he was granted, may be withdrawn. The inspectorate could in this way, with the help of this report, confirm in its laboratories whether the composition, method of preparation and packaging of the medicinal preparation conforms to the information on the original file. It is this manufacturer who is best placed to show whether there are any differences between the product which be manufactures in different countries and whether these differences are caused by specific provisions of national laws or by any other reason. In this way respect for the secrecy of manufacturing processes would be protected. If this procedure was to entail further examinations which might be expensive, the inspectorate could under Article 14 (1) of the decree relating to pharmaceutical preparations instruct an independent institute to check, on its behalf, whether the product sold by the parallel importer is from the therapeutic point of view different from the product imported by the original manufacturer. This would certainly mean heavier burdens for the health inspectorate and for the parallel importer additional expenses and some delay. But such consequences are unavoidable if it is borne in mind that only this method of establishing the position meets the requirements of the protection of public health. But in my opinion this protection of public health, including the essential factor of public health policy constituted by the cost of medicinal preparations, is well worth such an effort. An example of a rather similar situation is found in the supervision of the safety of imported moter vehicles. It would also be possible to consider requiring a manufacturer or his appointed importer in the Netherlands to declare, when he lodges his file, or at a later date by way of correction, whether he produces under the same name for different Member States a medicinal preparation which is nevertheless different and to describe the nature and purpose of these differences. B — The second situation envisaged by the Netherlands judge is concerned with a pharmaceutical preparation or a proprietary medicinal product which has been authorized and properly marketed in a country from which it is exported to another country on the territory of which a preparation is authorized and marketed, the qualitative and quantitative composition of which contains, as compared with the first, differences of such minor importance that there are grounds for thinking that the manufacturer only introduced them in order to prevent parallel imports. The judge asks you whether in such a case the requirement referred to in the first question is a measure having equivalent effect which is not justified by the exception of public health. This question is explained by the fact that during the proceedings before the Netherlands judge the expert who was summoned to appear by the Officier van Justitie and who was none other than the Chief Public Health Inspector, stated that there was a difference between English and Netherlands valium and that this difference was that the English tablets contain a little more maize starch and lactose than the Netherlands tablets. But he had stated that he could not say whether this difference had any pharmaceutical effect. Moreover the colouring matters used differed according to the nationality of the tablets and, in his view this could be a matter of importance. Whereupon the advocate appearing for Mr de Peijper, without being contradicted, remarked that the colouring matters used for the English tablets were also allowed in the Netherlands. My Lords, it may be asked, and more and more people are asking this question, what interest a manufacturer of pharmaceutical products can have in manufacturing in different forms a medicinal preparation intended to be marketed under the same name in different countries and which, looked at purely from the point of view of rationalizing production and costs, should be composed, prepared and checked in exactly the same way. There is no doubt that some of these different forms may be obligatory under specific national public health rules. But even allowing for these rules the question often remains unanswered, unless the view is taken that the differences in question were introduced for purely commercial reasons with a view to dividing up the market and taking advantage of a profitable situation. Moreover the fact that the price of the product imported in parallel is much lower than the price of the medicinal preparation sold by the importer appointed by the manufacturer is by no means irrelevant. In fact the cost of public health and therefore of the sickness benefits of social security schemes is a factor forming an integral part of public health policy. The Officier van Justitie takes a somewhat ingenuous view of the matter when he says that the demand for pharmaceutical products depends far less on price and the advertising of these products than does the demand for other products and that this demand is solely determined by the prescriptions of doctors who are not themselves in any way influenced by prices and advertising. If the sickness insurance funds show such little interest in the cost of health, we have to ask ourselves why there are doctors under contract to social security organizations and pharmacies belonging to mutual benefit societies. We also have to consider why the price system for medicinal preparations is governed by regulations in most Member States and why the manufacturers of medicinal preparations allocate such large sums for advertising with which they bombard the members of the medical profession. These questions raise the whole problem of the cost of medicinal preparations in the social security budget of our Member States. Consequently I am inclined to the view that a price difference as great as the one between the official price at which Diazepam is sold in the United Kingdom and at which it is sold in the Netherlands raises a presumption of interference with the free movement of goods, if not with the rules of competition under the Treaty. But in my opinion it is necessary to be quite certain that these differences do not have any therapeutic effect since this will mean that they are only accounted for by the manufacturer's intention to partition the market. It is impossible to be too careful when considering this point. The essential requirements of public health have to be weighed against the principle of the free movement of goods. I readily admit that it is a little dangerous to give preference to the free movement of goods, even in the second case. This risk seems to me, however, to be negligible. In the second place the cheapness of a product cannot be weighed against the fact that it may be harmful. But, on the one hand, is not what is good for the English also good for the Dutch? And on the other hand no incident has been reported as yet in the Netherlands concerning the Diazepam put into free circulation by Centrafarm: moreover the product in question is not new. In any case since manufacturers of pharmaceutical products are tempted to make use of differences in the law for the purpose of making profits and partitioning the markets it is impossible to rely on their discretion in this field. Lastly, further substantial evidence of the absence of differences or of the minor nature of the differences between the Valium distributed by the manufacturer and Centrafarm's Diazepam might, if I have correctly understood the question raised by the Judge-Rapporteur and the reply thereto, be the fact that the sole Netherlands distributor imports, if necessary, not only the Valium produced in accordance with the Swiss formula but also the Valium produced in accordance with the English formula. In other words I share the Commission's view that the prohibition on the marketing of a specific form of medicinal preparation at a time when another form of this preparation is authorized could only be justified under Article 36 if it is shown, on the basis of criteria which are clearly objective, that the use of this form has a therapeutic effect. In order to avoid the discrimination or distortions prohibited by Article 36 it is primarily the Commission, acting in concert with the competent authorities of the Member States and the Pharmaceutical Committee set up by Council Decision of 20 May 1975 (OJ L 147 of 9. 6. 1975, p. 23) and not the national court to determine these criteria. You are aware that the task of this body is to examine any question in the field of proprietary medicinal products brought up by its Chairman, either on his initiative or at the request of the representative of a Member State. The Commission may also take the opinion of the Committee for Proprietary Medicinal Products mentioned in Article 8 of Council Directive No 75/319/EEC of 20 May 1975 (OJ L 147 of 9. 6. 1975, p. 15), which has been set up in order to facilitate the adoption of a common policy by Member States in relation to authorizations to place these proprietary medicinal products on the market. The Commission cannot, by sheltering behind national laws, leave the national authorities, the manufacturers and parallel importers in contention with each other.