European Law Report – Restrictions on Pharmacy Licences

TIMES OF MALTA Thursday, 17th June 2010 http://www.timesofmalta.com/business/view/20100617/features/restrictions-on-pharmacy-licences

Mariosa Vella Cardona

Certain demographic and geographical restrictions on the granting of new pharmacy licences are permissible, the European Court of Justice has recently ruled. This is only the case provided that the authorities ensure that a sufficient number of pharmacies which can provide adequate pharmaceutical services can be set up within any particular area.

Spanish legislation stipulates that a new pharmacy can only be opened provided that prior administrative authorisation is granted. Furthermore, it makes provision for a licensing system which limits the number of pharmacies in an area by reference to the population of that area. This means that only one pharmacy may be opened per unit of 2,800 inhabitants and a supplementary pharmacy cannot be opened until that threshold has been exceeded.

The system also prohibits the opening of a pharmacy within 250 metres of another pharmacy. Two qualified pharmacists who wanted to open a new pharmacy filed legal proceedings before the national courts alleging that such a system was illegal in terms of EU law. The national court seized the case and eventually made a preliminary reference to the European Court of Justice requesting guidance as to whether Spanish law is compatible with the principle of freedom of establishment laid down in the EC Treaty.

The European Court of Justice ruled that such conditions linked to population density and the minimum distance between pharmacies for the granting of a licence constituted in principle a restriction on the freedom of establishment. However, the court observed that such measures can be justified by a member state provided that a number of conditions are satisfied. The court noted that such measures must be applied in a non-discriminatory manner and justified by overriding reasons relating to the general interest. They must also be appropriate for the objective that the State is seeking to attain and must not go beyond what is necessary for attaining such an objective.

The objective of the restrictions laid down by Spanish law in this case was that of ensuring that the provision of medicinal products to the public is reliable and of good quality. The court considered such an objective to be an overriding reason relating to the general interest and as being capable of justifying national legislation such as that at issue in the proceedings. It remarked that, if such a sector was left wholly unregulated, it would possibly be the case that pharmacies would become concentrated in the areas considered as attractive.

Other less attractive areas would suffer from a shortfall in the number of pharmacists needed to ensure a pharmaceutical service which is reliable and of good quality. The court concluded that the restrictions imposed by Spain were not in breach of the freedom of establishment, provided that such restrictions did not prevent the establishment of a sufficient number of pharmacies to ensure adequate pharmaceutical services.

It is interesting to note that Maltese law imposes similar restrictions in so far as the licensing of pharmacies is concerned. It lays down that in every town or village the number of pharmacies must not exceed the ratio of one pharmacy for every 2,500 inhabitants and that furthermore, no pharmacy can open within 300 meters walking distance from another. This recent ruling by the European Court of Justice now confirms that such restrictions, at least in so far as the licensing of pharmacies is concerned, are indeed permissible in terms of EU law provided that the conditions highlighted by the court itself are satisfied.

Dr Vella Cardona is a practising lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is also a visiting lecturer at the University of Malta.

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