Insights

Francesco Setti, Esq., Milano, Italy

Dr. Med., Dr. iur. Alexander P.F. Ehlers and Dr. iur. Dieter Barth, Munich Germany

Héctor Jausàs, Esq., and Margot Subirats, Esq., Barcelona, Spain

Yannis Chryssospathis, Esq., Athens, Greece

Poul Heidmann, Esq., Copenhagen, Denmark

Poul Heidmann, Esq., Copenhagen, Denmark

Maria Isabel F. Utgès Manley, Esq., Brussels, Belgium

Austria: Schönherr Barfuss Torggler & Partner, Rechtsanwälte, Tuchlauben 13, POB 41, A-1014 Vienna;

Belgium: White & Case LLP, 62, rue de la Loi, B-1040 Brussels;

Denmark: Jonas Bruun, Bredgade 38, DK-1260 Copenhagen K;

Finland: Castrén & Snellman, Attorneys at Law, P.O. Box 233, Erottajankatu 5 A, FIN-00131 Helsinki;

France: Alain Bensoussan, Avocats, 194 bis, rue Garibaldi, F-69428 Lyon Cedex 03;

Germany: Ehlers, Ehlers & Partner, Rechtsanwaltssocietät, Widenmayerstrasse 29, D-80538 Munich;

Greece: M. & P. Bernitsas Law Offices, 5, Lykavittou Street, GR-106 72 Athens;

Italy: Avvocati Associati Nello Studio Franzosi Dal Negro, Via Brera 5, I-20121 Milan;

Netherlands: Stibbe Simont Monahan Duhot, Strawinskylaan 2001, NL-1077 ZZ Amsterdam;

Norway: Lowzow & Co, Advokatfirma DA, Raadhusgaten 27, P.O.B. 359 Sentrum, N-0101 Oslo;

Portugal: Carlos de Sousa e Brito & Associados Advogados, Rua Castilho, 71, r/c, P-1250 Lisbon;

Spain: Jausàs, Nadal & Vidal de Llobatera, Advocats, Avda. Diagonal, 407 bis, E-08008 Barcelona;

Sweden: Rydin & Carlsten, Advokatbyra AB, Norrmalmstorg 1, P.O. Box 1766, S-111 87 Stockholm;

Switzerland: Bratschi Emch & Partner, Advokaturbureau, Bollwerk 15, Postfach 5576, CH-3001 Bern;

Portugal previously had no specific legislation which expressly governed genetic testing of samples collected from humans, which was a source of controversy and uncertainty. The Convention’s entry into force in Portugal is therefore a significant step. It is also a response to article 26-3 of the Portuguese Constitution, which requires the legislator to establish legislation ensuring respect for the personal dignity and genetic identity of the human being, notably in the creation, development and use of technologies and in scientific experiments.

Although the Convention alone may not be considered sufficient to resolve the major controversies relating to this sensitive issue, it does answer some relevant questions, for example regarding informed consent and predictive genetic tests.

Article 12, which deals with the admissibility of predictive genetic tests for medical purposes, is particularly important as it prohibits employers or insurance companies from using such tests for the purposes of discrimination. Under this provision, tests which can predict the risk of genetic diseases, identify the subject as the carrier of a gene responsible for a disease, or detect a genetic predisposition or susceptibility to a disease, may be performed only for medical or related scientific research purposes, and subject to appropriate genetic counseling.

Simultaneously, Portugal has ratified the Additional Protocol on the Prohibition against Cloning Human Beings. In fact, human cloning and genetic engineering were already considered as forbidden by the Portuguese Constitution, since they were deemed to be a threat to the fundamental values of the Portuguese community, in particular human dignity and identity, as well as by article 55-2 of the Medical Ethics Code.

Italy’s Inter-ministerial Committee for Economic Programmes ("CIPE") has recently introduced major changes to the procedures for negotiating which EU-registered drugs (centralised procedure and mutual recognition) qualify for refunds under Italy’s National Health System ("SSN"). The new procedure, which supersedes the procedure introduced in January 1997, gives major weight to sales forecasts, national research and the possibility of saving SSN costs in price negotiations. As in the past, the company holding the market registration for the product will propose a price for it, but in future it will also have to provide information to enable the SSN to evaluate the relative usefulness of the product. This information is listed in the CIPE resolution introducing the new system, and includes sales quantity, product availability for the SSN, price reductions for supplies to hospitals and public facilities and the quantities and prices of other drugs manufactured by the company in question.

The negotiations may also involve establishing a relation between prices and sales volumes and the introduction of an obligation to monitor sales and revenues annually. The price eventually agreed will be in force for two years. The Single Pharmaceutical Commission 5"CUF") will supervise the negotiations, and will have the right to request a review of the price agreement before the end of the two-year period if an increase in sales volumes is forecast. If the negotiations do not lead to a price agreement, the SSN will not refund the cost of the product in question. cb

Following the recent ruling by the European Court of Justice which strengthens the position of parallel traders against trademark holders, the German legislator is trying to promote demand for parallel imports in the Social Health Insurance System. According to the revised Sec. 129 Subsec. 1 No. 2 of the German Social Code (SGB V), pharmacists are required to provide patients insured by the Social Health insurance system with cheap imported prescription drugs. The criteria for defining what constitutes a cheap drug are given in a framework agreement between the leading associations of health insurers and pharmacists’ leading associations.

The mandatory requirement to deliver imported drugs was abolished in 1996. However, the new Government felt that an increased market share for imported drugs would significantly reduce the pharmaceutical budget, and has therefore reintroduced the former regulation in the Health Care Reform Act 2000. Compliance with the terms of the agreements is accompanied by major possibilities for recourse. A pharmacist who fails to observe the requirement to deliver an inexpensive parallel import might be obliged to refund the difference between the price of the cheaper parallel import and the original price of the drug. Prescription of an original drug by physician might be considered as an infringement of the fundamental efficiency principle and lead to intensive utilisation reviews. Though the borderline for the choice between original drugs and parallel imports is not clearly defined yet, the pressure on physicians and pharmacists for prescription and delivery of imported drugs is continuously increasing. cb

In the past, the price of all prescription-only medicines, whether refundable or not, was subject to administrative authorisation by the Spanish Health Authorities. Thus only the price of OTC medicines could be established freely.

A budgetary measure published on December 31, 1997 envisaged the gradual liberalisation of the pricing of non-refundable prescription-only drugs. The first stage of this measure provided that new (i.e. not yet on the market) non-refunded drugs would be exempt from price intervention, while the price of old (i.e. already on the market) non-refundable drugs would be liberalised after a three-year transition period. Full liberalisation of the pricing of non-refundable drugs was therefore achieved as of January 1, 2001 and only the prices of refunded medicines are now subject to approval. Naturally, laboratories have taken advantage of the expiry of the transition period by modifying the prices of "old" non-refunded drugs.

One outstanding question which has now been addressed by the new General Budgetary Act of December 30, 2000 concerns the pricing of medicines whose price may only be refunded with respect to certain of their authorised indications. The new law provides that these medicines are to be considered as refundable for pricing purposes; for all practical purposes, therefore, the price of partly refunded drugs will still be fixed by the health authorities, and companies can only modify the prices of these products with the approval of the General Directorate of Pharmacy and Health Products of the Ministry of Health and Consumption. cb

The main legislation of the European Union concerning medical devices, namely Council Directives 90/385/EEC and 93/42/EEC on the approximation of the laws of the Member States relating to active implanted medical devices and for general adjustments to medical devices, including clinical trails are included, have been implemented in Greece by two Ministerial Decisions of the Ministry of Health, following the opinion of the competent authority, the National Drug Organisation (EOF). Each Ministerial Decision is a literal translation of the Directive concerned.

However, Ministerial Decision A6/10983/1 of December 1994 provides that clinical trials for medical devices may only be conducted following the granting of an appropriate permit by the National Drug Organisation which monitors and controls such trials. This procedure is in contradiction with both Directives 90/385/EC and 93/42/EEC and the Ministerial Decisions transposing the Directives into Greek law. With regard to the conducting of clinical trials, the Directives simply require the manufacturer or his agent established in the EU to inform the competent authority that such trials will take place on Greek territory, and impose no requirement regarding the granting of a relevant permit. This leads to the paradox that while the EU legislation on medical devices simply requires the competent authority to be informed that clinical trials are being conducted, the competent authority in Greece (i.e. the EOF) has decided to ignore the EU provisions and continue to apply the bureaucratic and time consuming national one instead. The Greek industry has repeatedly raised this matter, calling for the proper implementation of the procedure laid down in the Directives. The national authority will propose an amendment on this issue on the occasion of the general revision of the legislation concerning medical devices. This revision will soon be introduced in the Parliament. However, until then, clinical trials for medical devices will have to be approved by the National Drug Organisation. cb

In the autumn of 2000 new reimbursement rules entered into force in Denmark. As a result, the price of prescription drugs was only refunded on the basis of the average price at which the product in question was sold in other European countries. If the price exceeded a special Northern European average, the product did not qualify for any refund at all. The object of this measure was to encourage the pharmaceutical industry to reduce the prices of their products to the European average. However, it turned out that the industry did not wish to lower prices to those levels. Consequently, patients had to pay more than before.

Following press coverage, the Danish Minister of Health introduced in great haste a bill whereby prices were both frozen and forced down to the average European level (i.e. an act introducing maximum prices). The average European price is calculated solely as the simple average of the prices in the other European countries where the pharmaceutical is marketed. This means that the price in Denmark is not included in the calculation. Consequently, the price of pharmaceuticals which are only marketed in Denmark can be fixed freely; in other words, there are no restrictions on the pricing of new pharmaceuticals introduced and marketed in Denmark only. This mechanism also results in differentials according to whether the production takes place in Denmark or elsewhere. The industry considers that these effects conflict with Article 28 of the EC Treaty, as they constitute price discrimination on grounds of nationality. The industry has therefore brought the matter before the European Commission. cb

For a long time the Danish authorities have been preparing a proposal, based on a report by a working group, for a reform of the principles of the granting refunds for pharmaceuticals. This reform should be viewed as part of the efforts to reduce public expenditure on pharmaceuticals. No bill has been introduced yet, but according to information available the intention is to set up a tender procedure for equivalent pharmaceuticals within individual product markets. The idea is that during a certain period refunds may only be obtained for one pharmaceutical, namely the least expensive one. The purpose of the tender procedure is to find the cheapest product. During the tender period it will not be possible to obtain a refund for a product, even when its price is lower than that of the product which won the tender.

The proposed system is totally different from any previous systems used in Denmark, and probably also in other European countries. The industry has pointed out a number of possible infringements of EU law, for example Article 28 of the Treaty as interpreted by the European Court of Justice in the Duphar case, in which the Court recognised the principle that refunds can be obtained for low-priced pharmaceuticals, but also ruled that it should be possible to revise such a system at any time. This requirement may conflict with the duration of the tender period. The system may also lead to infringement of the competition rules, as it would create very strong power on the part of the buyers, which might infringe the principle of proportionality. Finally, the system may infringe the transparency directive, which lays down certain requirements on how refunds should be granted for pharmaceuticals. A tender procedure does not fall within these rules. cb

The Danish Kidney Case (Case C-203/99 (footnote 1), pending before the European Court of Justice (ECJ) raises interesting questions on the extent of the application to pharmaceutical products of the Product Liability Directive (footnote 2) (hereafter the "Directive"), as well as the interpretation of Article 7 (setting the defences available to the producer) and Article 9 (definition of damage). The ECJ has not yet issued its ruling, but the Opinion of Advocate General Ruiz-Jarabo Colomer, is already available and his interpretation of the Directive merits attention.

It appears from the facts that a kidney transplant was to be carried out at a Danish hospital, the intended recipient being Mr. Veedfald. After the kidney was removed from the donor (a brother of the patient), its blood vessels were irrigated by means of a perfusion solution in order to drain the kidney of its blood and to lower its temperature and stabilise it for transplantation. However, the perfusion solution prepared by the Aarhus Hospital laboratory crystallised, so that the kidney could no longer be used for transplantation. The resulting legal action reached the Danish Supreme Court (Hojesteret), which decided to suspend the proceedings in order to refer five questions to the ECJ regarding the interpretation of Directive 85/374/EEC.

Before examining the questions submitted to the Court of Justice, the Advocate General considered whether the Directive was applicable to the case in question. He concluded that it was not, for three main reasons:

• Firstly, the Advocate General considered that the directive only applies to "industrially produced movable goods".(footnote 3) He deduced from the facts presented that the solution used for the kidney was a "unique preparation, prepared each time it is to be used for a transplant" and thus was not an "industrially produced product".
• Secondly, a key element in the application of the Directive is the moment at which the product is "put into circulation".(footnote 4) The producer of a defective product will be exonerated of liability if he proves that he did not put the product into circulation, that it was not manufactured or distributed for an economic purpose or within his professional activity, and that at the time when it was put into circulation the state of scientific and technical knowledge did not allow him to detect the existence of the defect. The Advocate General concluded that although the solution was "used within the frame of activities carried out by a hospital" it was "not put into circulation on the market, was not prepared to be sold or distributed, was at no time available to the customer no more than it was destined to his use, and even though it may be sustained that it was manufactured within a professional activity, the preparation of such a solution is in reality an ancillary activity to the hospital’s specific mission which is to cure patients, which includes the undertaking of surgical operations".
• The third reason advanced by the Advocate General was that in November 1990 the Commission proposed a Directive aimed at reconciling the national legislation governing the liability of service providers. The Advocate General deduced from this that the Commission must have considered that Directive 85/374/EEC was not intended to apply to services.

These three arguments invoked by the Advocate General for the non-application of the Directive are debatable. Although we do not have all the facts of the Danish case in our possession, we believe the affirmation that the solution is a "unique preparation" and thus could not qualify as "industrially produced product" could be contested. The aim of the Directive is to provide uniform protection for consumers within the EU against defective products. That protection would be undermined if a person injured by the use of a defective product could not seek damages because the cause of the injury was a "unique preparation". The same could be said about the argument that the solution was not "put into the market". The argument that the hospital at issue did not charge for the solution does not in itself justify the non-application of the Directive. In another Member State a patient in the same situation might well be charged for the perfusion liquid. Consequently, protection could be granted in one Member State and not in another. This is clearly contrary to the spirit of the Directive which aims at a high uniform degree of protection for EU consumers.

We would be more inclined to agree with the Commission’s definition, whereby a product is in circulation when it is available to a person distinct from the producer or is used by another person on behalf of a third party. In the present case, the perfusion liquid was put into circulation since it was to be used for the transplantation of the kidney. Article 7 of the Directive does not seem to include an exemption for products used "in-house". It would be unfair to hold a producer liable for a defective product but allow a hospital using its own products to escape liability.

Furthermore, it seems to us that the Advocate General’s argument that the Directive should not apply in this case because it does not cover the provision of services is irrelevant, since the defect was in the product, the perfusion liquid, not in the service (the transplantation of the organ).

However, the Advocate General apparently anticipated that the ECJ might disagree with his conclusion that the Directive is not applicable, since he nevertheless addressed the questions referred by the Danish court to the ECJ. The first two of these questions relate to the interpretation of Article 7 of the Directive in this specific case, while the other three more general questions relate to the interpretation of Article 9.

The first question concerned whether, if the product which caused the damage was prepared and used solely in the course of medical services (i.e. not in order to be marketed commercially), there was no putting into circulation, so that the producer would escape liability under Article 7a. The Advocate General replied that the "simple use of the product should be assimilated to its being put into circulation". Article 7a should be interpreted so that professional who prepares a product for use within the scope of his activity (e.g. shampoo by a hairdresser or cream used by a masseur) cannot claim exemption from liability by alleging that he did not put it into circulation.

In its second question the national court asked whether a public hospital is exempted from liability under Article 7c of the Directive regarding products manufactured and used for a medical service financed with public funds and for which the patient has not paid any consideration. Article 7c allows a producer to escape liability if he proves that he neither manufactured the product for sale or any form of distribution for economic purposes, nor manufactured or distributed it in the scope of his professional activity. The Advocate General responded that a public hospital is not exempted from liability for products which it has manufactured and uses in the context of providing services financed by public funds, even if the victim has been treated free of charge and has therefore paid no form of consideration, since the second condition of Article 7c is not fulfilled: the solution was distributed in the context of the hospital’s professional activity.

Thirdly, the court asked whether Member States are free to decide what meaning is to be attached to the notions of "damage caused by … personal injuries" and "damage to, or destruction of, any item of property" in Article 9 of the Directive. The Advocate General responded that the Member States are bound by the definition of "damage" as provided in the Directive and have no margin to alter its meaning.

Questions four and five concerned the issue of whether, for the purposes of Article 9 of the Directive, damage to a human organ intended for immediate transplant which had already been removed could be considered as "damage caused by personal injuries" or an "item of property" in relation to the intended recipient of the organ. The Advocate General stated that he shared the view of the Commission, which proposed to consider that damage caused to a human organ which had been removed from a donor’s body for immediate transplantation into a recipient’s body constituted "damage caused by corporeal lesions" which is the first type of damage provided by Article 9a, i.e. "damage caused by death or by personal injuries". More importantly, the Advocate General added that the Directive does not specify who is to be identified as the victim of the damage. It is for national legislation to determine whether the donor, the recipient or both suffered the damage and is entitled to compensation, and in what proportion.

The ECJ’s judgment is expected before the end of the year. It will be interesting to see whether the ECJ shares the Advocate General’s view that the Product Liability Directive does not apply, and thereby sets important limits to its scope of application in the medical sector. It will also be interesting to see if the ECJ confirms the Advocate General’s interpretation of "damage" and, in particular, if it rules on who constitutes the victim in the case of a failed transplant. If the ECJ does confirm that the Directive does not apply, thereby leaving it to national authorities to regulate such matters, it is likely that national courts would establish quite different determinations of the victim.

Meanwhile, other cases are pending in various jurisdictions on the questions of whether transfused blood or transplanted organs can be regarded as "defective products" if they give rise to infection.