Boehringer Ingelheim Pharma: AG opinion on manufacturer rebates paid to third parties
The CJEU AG delivered his opinion in the Boehringer Ingelheim Pharma case concerning rebates paid to insurers or health bodies.
20 juli 2017
On July 11, 2017 Advocate General Evgeni Tanchev (the “AG”) of the European Court of Justice (“CJEU”) delivered his opinion in the Boehringer Ingelheim Pharma case (C-462/16) concerning rebates paid to insurers or health bodies. The outcome in this case may be of great importance to the suppliers of pharmaceutical products that grant rebates to third parties outside the supply chain in EU Member States where they are obliged by law to pay rebates.
Boehringer Ingelheim Pharma GmbH & Co. KG (‘Boehringer’) is a Germany-based manufacturer of pharmaceutical products at the head of a supply chain that is obliged by a statutory provision of German law to pay price rebates to public health insurance funds and private health insurers after supply takes place which is indexed to the price of its products. Unlike the public health insurance fund, private health insurers do not buy and sell the drugs – they just pay for them. In its VAT return Boehringer included the price rebates to the private health insurers.
The German Tax Authorities decided that Boehringer is allowed to reduce the taxable amount for rebates to public health insurance funds. However, she was not allowed to adjust its output tax position in relation to rebates paid to private health insurers, as they were insufficiently linked to the supply chain.
The AG disagrees with the German Tax Authorities. According to the AG, there is no apparent objective justification for a different VAT treatment of pharmaceutical supplies to publicly and privately insured persons. In both cases, Boehringer understands that, by law, it would have to rebate 7% of its total sales.
Applying the CJEU judgment in Elida Gibbs, the AG concludes that having regard to the principle of equal treatment under EU law a pharmaceutical company such as Boehringer is allowed to reduce the taxable amount if:
- it supplies those medicinal products to pharmacies via wholesalers,
- the pharmacies supply those products, subject to tax, to persons with private health insurance,
- the insurer of the medical expense insurance (the private health insurance company) reimburses the persons insured by it for the costs of purchasing the medicinal products, and
- the pharmaceutical company is required to pay a ‘discount’ to the private health insurance company pursuant to a statutory provision.
If the CJEU endorses the AG’s Opinion, the current treatment of rebates paid to third parties, particularly where they are required by law, will have to be reconsidered in the EU Member States where this obligation exists. Potentially, the outcome of the case will have a impact on agreements on the prices of medicinal products and the VAT position of all parties involved.