Warsaw, May 17th, 2018
Dispute about 1% of pharmacies in a voivodeship ends. The SAC on the side of patients and entrepreneurs
A written justification of the key and precedent judgment of the Supreme Administrative Court regarding the provisions on 1% of pharmacies in a voivodship has been published. The SAC confirmed that the principle of universal succession apply to licences for running pharmacies, and pharmacy licenses acquired through capital acquisitions by law are transferred to the purchaser. Thus, the Court confirmed the rights of entrepreneurs who in the last dozen or so years had been buying pharmacies, also from the State Treasury. The verdict undermines the interpretation pushed by the pharmaceutical inspection and the pharmaceutical corporation, which in recent years took action against entrepreneurs, trying to change the meaning of the provisions on 1%, after more than a decade of their validity, without changing their wording by the parliament.
The judgment of the Supreme Administrative Court of February 27th, 2018 in the case of II GSK 2510/17 is a breakthrough, as it ends the interpretive chaos around the principle of universal succession concerning licences to operate a pharmacy.
In 2004, the legislator introduced to Art. 99 sec. 3 of the Pharmaceutical Law, the provision according to which the licence to operate a pharmacy “is not issued if the entity applying for the licence runs in a given voivodeship more than 1% of generally accessible pharmacies”. For more than a decade, it was consistently assumed that the ‘one percent rule’ applies, as is clear from the quoted provision, only in cases where the entrepreneur requests a new licence to run a pharmacy. It does not mean, however, a general ban on having more than 1% of pharmacies, for example, through capital acquisitions.
For ten years, many state institutions in official documents stated that there is no ban on having more than 1% pharmacies in a voivodeship. These included, among others, the Ministry of Health, the President of the Office of Competition and Consumer Protection, and the Ministry of Treasury, which on the basis of the aforementioned provisions sold state-owned Cefarm pharmacies and their pharmacy chains to entrepreneurs for over PLN 0.5 billion.
Furthermore, there were two draft bills discussed with the intent to introduce such a ban (the ban eventually did not come into force). In the justifications of those amendments, it was clearly indicated that the then (and current) provision applies only to the stage of licence issuing.
Suddenly, at the end of 2014, the pharmaceutical inspection, under the pressure of the authorities of the pharmacy self-government, concluded that the phrasing “is not issued if” translates into an absolute ban on anyone having more than 1% of pharmacies in a voivodeship. As a result, an administrative procedure was commenced to challenge and withdraw existing licences, including the procedure to refuse licence changes in the case of capital mergers.
In the case covered by the decision of the Supreme Administrative Court, the entrepreneur, after the acquisition of another company, applied to the Chief Pharmaceutical Inspectorate for a change in the licence to run a pharmacy. The entrepreneur referred to the principle of universal succession, provided for in Art. 494 par. 2 of the Commercial Companies Code, according to which the acquiring company enters into the entire rights and obligations of the acquired company on the merger date. The CPI refused to change the licence to operate a pharmacy, claiming that the entrepreneur exceeded the permissible threshold of 1% of pharmacies owned in a voivodeship. The CPI further stated that in such a situation Art. 99 sec. 3 of Pharmaceutical Law applies. In its opinion, this article is an exception to the principle of universal succession specified in the Commercial Companies Code, and thus the licence was not transferred to the entrepreneur.
The Voivodeship Administrative Court did not agree with the arguments put forward by the Chief Pharmaceutical Inspectorate that were supported by the Chamber of Pharmacists, indicating that the succession took in fact place and Art. 99 sec. 3 of Pharmaceutical Law had no impact upon it. In the judgment under review, the Supreme Administrative Court unanimously confirmed the VAC’s argumentation. The judgement states as follows: “The Supreme Administrative Court rules that the interpretation of the provisions of Art. 494 § 2 of the Commercial Companies Code and Art. 99 sec. 3 of Pharmaceutical Law do not allow to accept that the second of the referred provisions is a provision referred to in Art. 494 § 2 C.C.C., i.e. a provision stating that the acquiring company is not allowed to operate a pharmacy. The provision of Art. 99 sec. 3 P.L. determines situations in which no licence to operate a pharmacy is granted, but in no way refers to the situation of a licence transfer in the event of a takeover of a company”.
The justification in ink is the more important, as the court battle for the defence of pharmacies abounded in much manipulation on the part of the supporters of closing down pharmacies. Hopes arise that such an unambiguous ruling of the case by the Supreme Administrative Court will prevent further attempts to misinterpret the ‘one percent rule’. The more so, because the court clearly ruled that the licence to operate a pharmacy passes to the acquirer of the pharmacy by law (ex lege) without the need to issue any administrative decision, and the provisions concerning 1% of pharmacies in a voivodeship by virtue of Art. 99 sec. 3 of Pharmaceutical Law do not apply. In the ruling, it was stated: “The aforementioned provision does not provide any basis for examining these premises in a situation when the transfer of a licence is based on Art. 494 § 2 of the Commercial Companies Code, when the acquiring company acquires the permit by law without the need and the possibility to issue a decision in this matter”. The court suggested that the formal confirmation of the transfer of a license take place through material and technical activities, which the body is obliged to perform, without examining the substance of the case.
The ruling of the Supreme Administrative Court introduces an understandable interpretation of pharmaceutical law provisions referring to the classic rules for the interpretation of the law and the actual wording of the provisions. The attempts by the Chief Pharmaceutical Inspectorate to create artificial rules regarding the succession of licences were thus suppressed.