EU targets alleged state aid for German medical firms | Business| Economy and finance news from a German perspective | DW | 24.07.2013
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EU targets alleged state aid for German medical firms

The EU executive has started investigations into a German scheme which allows some drug companies to not offer otherwise obligatory rebates for selected medication. It spoke of possible unjustified state aid.

The European Commission announced Wednesday it had opened an in-depth investigation, to verify whether German legislation granting pharmaceutical companies in financial difficulties exemptions from rebates for sickness funds, was in line with EU state aid rules.

It said interested third parties were now encouraged to comment on the scheme under assessment and pointed out Brussels did not prejudge the outcome of the probe.

With EU member states being allowed to impose a price freeze on some medical products between August 2010 and December 2013, Germany introduced an obligatory manufacturer's rebate of 16 percent to be granted by producers of some prescription medicines to both public sickness funds and private health insurers.

No strings attached?

A corresponding EU directive says drug companies can apply for derogations from such prize freezes, if this is justified by "particular reasons." But the European Commission said derogations from an otherwise mandatory rebate would be doubtful, if it they only served the protection of a drug company's financial standing.

The EU executive said that at this stage, it considered such derogations involved state aid, as exemptions from the rebate had a direct impact on federal resources, as they increased the costs of the public sickness funds which received their means mainly through tax subsidies.

Brussels made it clear that state aid granted to companies in financial difficulties needed to comply with strict criteria for rescuing and streamlining firms in trouble. it added that that those criteria were aimed at avoiding being companies kept alive with pubic subsidies, to the detriment of more efficient competitors in the health sector.

The European Commission noted it had doubts whether the German scheme was in line with Brussels' guidelines, pointing out that the aid provided had not been limited in time nor granted on the basis of any restructuring plans.

hg/jr (dpa, Reuters)