C-481/98

COMMISSION V FRANCE

OPINION OF ADVOCATE GENERAL MISCHO delivered on 6 December 2000 1

1. In the application under examination, percentage of the taxable amount and shall the Commission of the European Commu- be the same for the supply of goods and for nities asks the Court to declare that, by the supply of services. From 1 January introducing and maintaining in force Art- 1993 until 31 December 1996, this percen- icle 281g of the Code Général des Impôts tage may not be less than 15%. (the General Tax Code), which provides for a rate of 2.1% for value added tax (here- inafter 'VAT') on reimbursable medicinal products, whereas other medicinal pro- ducts are taxed at the rate of 5.5%, the French Republic has failed to fulfil its obligations under Article 12 of Sixth Coun- cil Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment 2(herein- after the 'Sixth Directive'). Member States may also apply either one or two reduced rates. These rates shall be fixed as a percentage of the taxable amount which may not be less than 5% and shall apply only to supplies of the categories of goods and services specified in Annex H.' 2. Article 12(3)(a) of the Sixth Directive, as amended by Directive 92/111/EEC, 3pro- vides that:

3. Medicinal products constitute one cate- gory of goods listed in Annex H.

'The standard rate of value added tax shall be fixed by each Member State as a

1 — Original language: French. 2 — OJ 1977 L 145, p. 1. 4. The existence of rates of VAT lower than 3 — Council Directive of 14 December 1992 amending Directive 5% is, none the less, allowed by Art- 77/388/EEC and introducing simplification measures with regard to value added tax (OJ 1992 L 384, p. 47). icle 28(2)(a) of the Sixth Directive, as

8. It submits that all medicinal products are similar products, so that the existence of two different rates of VAT is in conflict ...' with the principle of fiscal uniformity laid down in above Article 12(3) and is con- trary to the fundamental principles of the Community VAT system, fiscal neutrality and the elimination of distortions in com- petition. 5. Under the aforementioned criteria in Article 17, these reduced rates must have been fixed 'for clearly defined social rea- sons and for the benefit of the final consumer'. 9. The Commission accepts that the system provided by the Community directives involves some limited deviations from those principles, notably in Article 28 (2) (i) of the Sixth Directive, as amended by Council 6. In the view of the Commission, the Directive 96/42/EEC of 25 June 1996, 5 existence in France of two different VAT authorising Member States to apply a rates for medicinal products, depending on reduced rate of VAT to wood for use as whether or not they are reimbursable by firewood, and in Annex H to the Sixth Directive, as amended by Directive 92/77,

4 — Council Directive of 19 October 1992 supplementing the common system of value added tax and amending Directive 77/388 (approximation of VAT rates) (OJ 1992 L 316, p. 1). 5 — OJ 1996 L 170, p. 34.

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authorising the application of a reduced 13. The French Government submits that rate of not less than 5%, instead of the the application should be dismissed on the normal rate of 15%, for the supply of ground that all the conditions of Art- housing provided as part of a social policy icle 28(2)(a) are satisfied. The rate of and for the supply of services and goods by 2.1% existed before 1 January 1991, a fact organisations recognised as charities by which the Commission, moreover, does not Member States and engaged in welfare or dispute. social security work.

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17. The Commission acknowledges that ities enter a medicinal product on the list of any search in the various VAT directives those which are reimbursable. for a provision clarifying the concept of similar products would prove fruitless, and it admits, in consequence, that it is accep- table to reason by analogy with other branches of Community law. 20. The Commission is in no way disputing that this listing is carried out pursuant to objective criteria and complies with the rules laid down by Council Directive 89/105/EEC of 21 December 1988 relating to the transparency of measures regulating 18. However, while the French Govern- the prices of medicinal products for human ment seeks to draw analogies from Council use and their inclusion in the scope of Directive 65/65/EEC of 26 January 1965 national health insurance systems. 7 on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products, 6 from the Common Customs Tariff, from the case-law relating to the permissibility, for the purposes of Art- 21. For the Commission, however, the icles 30 and 36 of the EC Treaty (now, classification of medicinal products into after amendment, Articles 28 EC and 30 two categories cannot be in the slightest EC), of a national rule prohibiting phar- way relevant for the application of the macists dispensing a doctor's prescription Community VAT system, because the fact from substituting one medicinal product that some medicinal products are reimburs- for another, and from competition law, the able and others are not does not lead to the Commission argues that the only reasoning conclusion that, for the purposes of that by analogy that may legitimately be applied system, these are different products that in this case is that drawn from the case-law may be subject to different rates of tax of the Court on the concept of similar without any infringement of the principle products within the meaning of the first of fiscal neutrality or of the prohibition of paragraph of Article 95 of the EC Treaty creating distortions of competition. (now, after amendment, the first paragraph of Article 90 EC).

23. In my opinion, some of these argu- ments plainly do not bear examination and can accordingly be disposed of quickly. 27. It does not follow that, because two proprietary medicinal products, sold under different trade marks and with different packagings, must be the subject of separate marketing authorisations, they cannot be 24. To start with, such is the case with the similar products for the purposes of VAT. argument based on Directive 65/65. According to the French Government, the existence of different categories of medic- inal products is approved by that directive, since it provides that a product may be defined as a medicinal product on the basis of various criteria, and it is true that the 28. In fact, the reason for the existence of directive does, in admitting a product to the two marketing authorisations should prob- category of medicinal products, take into ably be sought in the need to verify, each account its packaging as well as its func- time that a manufacturer proposes to tion. That, however, does not alter the fact, market a medicinal product, exactly which emphasised by the Commission, that when product is involved and to ensure that it the directive sets out the various cases in cannot be harmful to public health. which, for its purposes, a product is to be considered to be a medicinal product, its objective is solely to draw a distinction between medicinal products and other products. 29. This is totally unrelated to the demands of fiscal neutrality in the Community VAT system.

25. A product may be a medicinal product on various grounds, but once it is recog- nised as a medicinal product a single system applies to it and, in any event, nothing in the directive supports the contention that 30. This is even more obviously the case not all medicinal products are similar with the definition of a medicinal product products for VAT purposes. in the Common Customs Tariff, which the

32. Finally, the same holds true for the judgment in Joined Cases 266/87 and 267/87. 8 In that judgment, the Court accepted that: 'a national rule of a Member State requiring a pharmacist, in response to 34. It seems, accordingly, difficult to argue a prescription calling for a medicinal pro- that the Court, in so holding, made it duct by its trade mark or proprietary name, possible to treat two products with the to dispense only a product bearing that same active ingredients as different pro- trade mark or proprietary name may be ducts for the purposes of VAT. justified under Article 36 of the Treaty on grounds of the protection of public health even where the effect of such a rule is to prevent the pharmacist from dispensing a therapeutically equivalent product licensed by the competent national authorities pur- suant to rules adopted in conformity with 35. Inasmuch as its reasoning was strictly the judgment of the Court of Justice in within the context of Article 36 of the Case 104/75 and manufactured by the Treaty, it seems to me pointless to discuss same company or group of companies or whether the Court took the view that a proprietary medicinal product marketed by a laboratory should or should not be 8 — The Queen v Royal Pharmaceutical Society of Great regarded as similar to a competitor of the Britain, ex parte Association of Pharmaceutical Importers [1989] ECR 1295, at paragraph 24. same kind.

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36. The arguments which the French Gov- 40. In fact, medicinal products are not ernment draws from Article 95 of the placed on, or excluded from, the list of Treaty and from competition law are much reimbursable products because of intrinsic more relevant to the question before the differences between them. Court, and for that reason merit very thorough examination.

42. It is, however, entirely possible that another manufacturer might decide differ- 38. The Commission considers, none the ently for a product which is intrinsically less, that this line of argument offers no identical, taking the view that inclusion on assistance to the French Government inas- the list would have advantages outweighing much as that case-law has always favoured the accompanying constraints. a very broad construction of the concept of product similarity, on the ground that the concept should not be seen as depending on the criterion of strict identity, but rather on that of similarity and comparability of use. 9 43. On the other hand, even if the manu- facturers of two medicinal products which are intrinsically identical were both to seek to have them placed on the list, the rules applicable in France do not guarantee that both will be successful. 39. A fortiori, two products having the same objective characteristics should be considered to be similar products within the meaning of the first paragraph of Article 95 of the Treaty. 44. According to Article R 163-3 of the Code de la Sécurité Sociale (the Social Security Code), reimbursable medicinal 9 — See, for example. Case 243/84 John Walker v Ministeriet products are those which bring either an for Skatter og Afgifter [1986] ECR 875, at paragraph 11 of the judgment. improvement in the therapeutic effective-

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ness or, where relevant, the secondary effect sider whether or not both categories of of the medical service supplied or a saving beverages are capable of meeting the same in the cost of medicinal treatment. needs from the point of view of consumers' (paragraph 11).

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51. There are also reimbursable medicinal prescription from his doctor and has found products which may be bought in a phar- it to be effective. In this case, if the product macy without a prescription, but which is on open sale, the pharmacist will have no will only be reimbursed if prescribed by a reason to refuse to supply it to him. doctor.

52. Finally, there are medicinal products 56. In practice, it may also happen that a which require no prescription and the cost reimbursable medicinal product, even when of which can never be reimbursed because its reimbursement cannot be requested they are not on the list of those which are because there has been no prescription, reimbursable. turns out to be cheaper than a non-reim- bursable medicinal product with the same curative powers and that the VAT rate of 2.1% is not unconnected with that differ- ence. 53. In spite of these differences, is it none the less possible to take the view, as the French Government does, that reimburs- able medicinal products, as a group, cater for a need which is different from that met by non-reimbursable medicinal products? 57. However, the non-reimbursable medic- inal product may also prove to be cheaper than the reimbursable one, in spite of the higher VAT rate which it bears. Moreover, it does not seem possible to me to base all 54. The Commission replies in the neg- our reasoning on these specific instances ative, pointing out that a person who briefly because, as a general rule, reimbursable suffers slight headaches will probably go medicinal products will still be bought on directly to a pharmacy and request the prescription and will attract full or partial pharmacist to sell him a medicinal product reimbursement. to relieve his pain, little caring whether the medicinal product is reimbursable or not, since he has no prescription.

59. One would, indeed, reach the conclu- in reimbursable medicinal products can be sion that this group has a specific need, distinguished from the market in those namely that of having available a full which are non-reimbursable. According to selection of medicinal products capable of paragraph 8 of that decision, '[a] distinc- satisfying the demands of quality medicine tion may also be made between medicines to deal cost-effectively with the full range which are wholly or partially reimbursed of illnesses, a need to be addressed by under the health insurance system and recourse to a strictly defined pharmaco- medicines which are not reimbursed'. poeia, as expressed by the list of reimbur- sable medicinal products. The suitability of these medicinal products to the needs, thus defined, of social-security beneficiaries as a group means that they would be medicinal products corresponding to a specific con- sumer need, and would require to be 62. Once the markets for these two cat- distinguished from other medicinal pro- egories of medicinal products can be re- ducts whose reimbursement would not be garded as distinct, it becomes difficult to justified in terms of satisfying that need. see how different rates of VAT could lead to distortions of competition.

60. Considered from this point of view, the question whether there is a distinction 63. Although the Commission invokes the capable of being taken into account within penultimate recital in the preamble to the the framework of the Community VAT First VAT Directive,11which states that the system could be answered in a manner Community VAT system must 'result in which recognises the validity of the French neutrality in competition, in that within Government's contentions. each country similar goods bear the same tax burden', I am not persuaded that the system of two rates applied by the French Republic does indeed adversely affect neu- trality in competition.

66. One of those categories possesses an intrinsic advantage, that of giving the right to reimbursement. The consumer, via his 70. On that issue, the Commission, as I prescribing doctor, seeks in preference have already noted, has hardly been expan- medicinal products within that category, sive, in my view rightly so. It seems indeed not because they attract a reduced rate of difficult to deny that there are social VAT, but because they will ultimately cost reasons here, since the cost of medical him little or nothing. The higher rate of treatment prescribed by a doctor is reduced VAT applied to non-reimbursable medicinal for the patient. Moreover, the final con- products is thus not, in itself, capable of sumer certainly benefits from the low rate leading to an increase in the consumption of VAT since, in general, he will not obtain of reimbursable medicinal products at the full reimbursement of the amount which he expense of non-reimbursable medicinal has spent. products.

71. While it cannot be denied that the 67. To sum up, as the two categories of general body of those entitled to social medicinal products are not in a competitive security benefits, and likewise all of those relationship in which taxation could play a liable to pay contributions, also benefit determinant role, and because they are not from this measure, that cannot be a suffi- substitutable at the consumer's free choice, cient ground on which to conclude that the I conclude that they are not similar goods. third condition is not also satisfied.

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