Blackbay Ventures Ltd v Secretary of State for Health the Medicines and Healthcare Products Regulatory Agency

This is an appeal by Blackbay Ventures Limited, the Claimant, against a decision made by the Secretary of State for Health, the First Defendant, through the Medicines and Healthcare products Regulatory Agency, the Second Defendant, on 18 April 2012 to suspend its wholesale dealer’s licence, pursuant to powers under the Medicines Act 1968 (“the 1968 Act”).

The Claimant is a member of a group of UK pharmacies (collectively trading as “Chemistree”) and itself operates a number of pharmacies in the UK. It is registered with the Royal Pharmaceutical Society of Great Britain (formerly known at the time of the appeal as the General Pharmaceutical Council) and is authorised to hold and dispense medicines in accordance with the 1968 Act; and it holds a Wholesale Dealer’s Licence (“WDL”) pursuant to which it purchases medicines for the purpose of their onward supply through its network of pharmacies.

The First Defendant is the “licensing authority” responsible under Part II of the 1968 Act for enforcement in England and Wales of the regulatory regime governing wholesale dealers in medicines. The Second Defendant is an executive agency of the Department of Health, with no separate legal personality.

On 18 April 2012 the Second Defendant informed the Claimant that

“In accordance with section 29(2) of the Medicines Act 1968 (‘the Act’) the Licensing Authority gives notice that it has exercised its powers under section 28(1) of the Act to suspend the [Claimant’s] licence from 18 April 2012 until 18 July 2012 on the grounds stated in the Notice of Proposed Suspension.

The reason for the suspension is the provisions of the licence have to a material extent been contravened by the licence holder – see section 28(4)(c) of the Act. This is because the requirement, under regulation 9(1) of the Medicines for Human Use (Manufacturing, Wholesale, Dealing and Miscellaneous Amendments) Regulations 2005 (‘the Regulations’), for wholesale dealers to deal only with specified persons, had not been adhered to as supplies of medicinal products had been obtained otherwise than from those specified in that regulation. Regulation 9(1) forms part of the company’s licence conditions by virtue of regulation 12(2) of the Regulations.”

On 21 April 2012 Blair J ordered by consent that the Defendants’ decision to suspend the Claimant’s WDL licence was to be suspended pending the determination of the Claimant’s challenge to the decision by way of appeal under the 1968 Act, s.107. The present hearing took place after the expiration of the suspension that was imposed, however the determination of the substantive issue in this appeal is plainly more than of academic interest.

Part II of the 1968 Act is concerned with licences and certificates for medicinal products. Section 7 contains general provisions as to dealing with medicinal products. Section 8 sets out provisions for wholesale dealing in medicines. By section 8(3)

“Subject to sub-sections (3C) and (3D) of this section no person shall in the course of a business carried on by him—

(a)

sell, or offer for sale, any medicinal product by way of wholesale dealing, or

(b)

distribute, otherwise than by way of sale, any proprietary medicinal product or industrially produced medicinal product which has been imported, but was not consigned from a Member State,

except in accordance with a wholesale dealer’s licence.”

Section 8(3A) provides:

“Without prejudice to the generality of subjection (3) of this section but subject to sub-sections (3C) and (3D), no person shall, in the course of a business carried on by him, distribute by way of wholesale dealing a product to which the 2001 Directive applies except in accordance with a wholesale dealer’s licence.”

Section 8(7) defines wholesale dealing:

“In this section any reference to distribution of a product by way of wholesale dealing is a reference to—

(a)

selling or supplying it, or

(b)

procuring, holding or exporting it for the purposes of sale or supply, to a person who receives it for the purposes of—

(i)

selling or supplying it, or

(ii)

administering it or causing it to be administered to one or more human beings, in the course of a business carried on by that person.”

Section 10 is headed “Exemptions for pharmacists”. Section 10(7) provides:

“Without prejudice to the preceding sub-sections, the restrictions imposed by section 8(3) or (3A) of this Act do not apply to anything which is done in a registered pharmacy by or under the supervision of a pharmacist and amounts to wholesale dealing, where such dealing constitutes no more than an inconsiderable part of the business carried on by the pharmacist at that pharmacy.”

The wholesale distribution of medicinal products is governed by Articles 76-85 of Directive 2001/83/EC (“the 2001 Directive”). The recitals to the 2001 Directive state, so far as relevant:

“(2)

The essential aim of any rules governing the production, distribution and use of medicinal products must be to safeguard public health.

(3)

However, this objective must be attained by means which will not hinder the development of the pharmaceutical industry or trade in medicinal products within the Community.

(35)

It is necessary to exercise control over the entire chain of distribution of medicinal products, from their manufacture or import into the Community through to supply to the public, so as to guarantee that such products are stored, transported and handled in suitable conditions. The requirements which must be adopted for this purpose will considerably facilitate the withdrawal of defective products from the market and allow more effective efforts against counterfeit products.

(36)

Any person involved in the wholesale distribution of medicinal products should be in possession of a special authorisation. Pharmacists and other persons authorised to supply medicinal products to the public, and who confine themselves to this activity, should be exempt from obtaining this authorisation. It is however necessary, in order to control the complete chain of distribution of medicinal products, that pharmacists and persons authorised to supply medicinal products to the public keep records showing transactions in products received.”

Title VII of the Directive is headed “Wholesale Distribution of Medicinal Products”. The material Articles are as follows:

“Article 77:

1.

Member States shall take all appropriate measures to ensure that the wholesale distribution of medicinal products is subject to the possession of an authorisation to engage in activity as a wholesaler in medicinal products, stating the place for which it is valid.

2.

Where persons authorised or entitled to supply medicinal products to the public may also, under national law, engage in wholesale business, such persons shall be subject to the authorisation provided for in paragraph 1.

3.

Possession of a manufacturing authorisation shall include authorisation to distribute by wholesale the medicinal products covered by that authorisation…

6.

The Member State which granted the authorisation referred to in paragraph 1 shall suspend or revoke that authorisation if the conditions of authorisation cease to be met. It shall forthwith inform the other Member States and the Commission thereof.

Article 79:

In order to obtain the distribution authorisation, applicants must fulfil the following minimum requirements:

(a)

they must have suitable and adequate premises, installations and equipment, so as to ensure proper conservation and distribution of the medicinal products;

(b)

they must have staff, and in particular, a qualified person designated as responsible, meeting the conditions provided for by the legislation of the Member State concerned;

(c)

they must undertake to fulfil the obligations incumbent on them under the terms of Article 80.”

Article 80:

“Holders of the distribution authorisation must fulfil the following minimum requirements:

…

(b)

they must obtain their supplies of medicinal products only from persons who are themselves in possession of the distribution authorisation or who are exempt from obtaining such authorisation under the terms of Article 77(3)…

(c)

they must supply medicinal products only to persons who are themselves in possession of the distribution authorisation or who are authorised or entitled to supply medicinal products to the public in the Member State concerned. …

(g)

they must comply with the principles and guidelines of good distribution practice for medicinal products as laid down in Article 84.”

By Article 84, the Commission is required to publish guidelines on good distribution practice.

The Medicines for Human Use (Manufacturing, Wholesale Dealing and Miscellaneous Amendments) Regulations 2005 (“the 2005 Regulations”) implement the 2001 Directive into English law. Regulation 9 is headed “Requirement that wholesale dealers deal only with specified persons”. It states, so far as relevant:

“9(1) The holder of a wholesale dealer’s licence shall obtain supplies of relevant medicinal products only from either—

(a)

a manufacturer’s licence holder or wholesale dealer’s licence holder in respect of such products; or

(b)

a person who holds an authorisation granted by another EEA State authorising the manufacture of such products or their distribution by way of wholesale dealing.

(2)

The holder of a wholesale dealer’s licence shall distribute relevant medicinal products by way of wholesale dealing only to—

(a)

a holder of a wholesale dealer’s licence relating to those products;

(b)

a holder of an authorisation granted by the competent authority of another EEA State authorising the supply of those products by way of wholesale dealing;

(c)

any person who may lawfully sell those products by retail or who may lawfully supply them in circumstances corresponding to retail sale; or

(d)

any person who may lawfully administer those products.”

Mr Palmer, for the Claimant, submits that the Claimant operates both a wholesale business pursuant to its WDL and a retail pharmacy business as a registered pharmacy. It engages in both activities and therefore operates in two different capacities, as it is entitled to do. Mr Palmer’s primary submission is that the Claimant’s activities as a pharmacy are not regulated by Regulation 9 of the 2005 Regulations or Article 80 of the 2001 Directive and that the Claimant may purchase from pharmacies without WDLs under s.10(7) of the 1968 Act.

Alternatively Mr Palmer submits the Claimant is entitled to purchase medicines from other pharmacies without WDLs subject to a condition that the integrity of the supply chain is maintained. This would be so, he submits, if the dealing complies with the EU’s guidelines on good distribution practice.

As to the Claimant’s primary submission, Mr Milford, for the Defendants, submits Regulation 9 of the 2005 Regulations and Article 80 of the 2001 Directive apply to all persons holding a WDL, irrespective of the purported capacity in which they act. Pharmacies holding WDLs must at all times comply with the requirements imposed on wholesale dealers by the 2001 Directive (see Criminal Proceedings Against Fabio Caronna C-7/77 (Judgment of the CJEU (Second Chamber), 28 June 2012). Section 10(7) of the 1968 Act must, on usual EC law principles, be read so as to conform with Article 80 of the 2001 Directive.

Further Mr Milford submits that the Claimant’s secondary submission is based on an impermissible approach which requires the court to ignore the words of Regulation 9 of the 2005 Regulations and Article 80 of the 2001 Directive in favour of their supposed “aim”, as defined by the Claimant. The 2001 Directive is not intended, he submits, to permit pharmacists with WDLs to circumvent an obligation imposed on all other holders of WDLs, whether or not they comply with good distribution practice when doing so.

It is the Claimant’s contention that the 2001 Directive draws a distinction between two forms of activity: first, the supply of medicinal products to the public; and second, the undertaking of wholesale business. Mr Palmer submits it is clear from Articles 76-85 that the 2001 Directive only imposes obligations in relation to the supply from manufacturers or wholesalers to wholesalers and/or pharmacists. Where pharmacists are engaged in the supply of medicines to the public, authorisation is left solely as a matter for the national authorities.

Article 77, Mr Palmer submits, distinguishes between the activity of supplying medicines to the public and the activity of wholesale supply. That being so the only sensible reading of Article 80 is that it imposes various obligations on those holding a distribution authorisation where those undertakings are engaged in the activity of wholesale supply. If that were not so Article 80(c) would cut across the freedom of a pharmacist to supply medicines to the public in a manner inconsistent with Article 77(2).

It follows, the Claimants submit, that the obligations in Article 80 do not apply in the course of a pharmacist’s business as a supplier of medicinal products to the public. Regulation 9 of the 2005 Regulations must be read in the light of what Mr Palmer submits is the proper interpretation of Articles 76-85 of the 2001 Directive. The obligation is not imposed on a person who simply holds a wholesale dealer’s licence in respect of its wholesale activity which it conducts alongside its retail supply of medicinal products to the public. The obligation is imposed where that person is in fact engaged in the activity of wholesale supply.

Mr Palmer submits that paragraph 2 of Article 77, read together with the Recitals, in particular Recital (36), support the Claimant’s submission that authorisation is required “to engage in wholesale business”, but if the activity in which persons are only engaged is the supply of medicinal products to the public, that is not an activity subject to the authorisation regime.

Mr Palmer submits that s.10(7) of the 1968 Act does not contradict Regulation 9 of the 2005 Regulations, or the provisions of the 2001 Directive. The exception in s.10(7) falls within the exempted category of activity, namely direct supply to the public, within the 2001 Directive and is not subject to the obligations in Article 80. As such the limited activities permitted by s.10(7) fall outside the scope of regulation 9 of the 2005 Regulations. S.10(7) relates to the circumstances where a pharmacist is engaged principally in the supply of medicines to the public, and whose business does not amount to wholesale business. The exception which s.10(7) provides is designed to meet circumstances where, for example, pharmacist A seeks to meet patient needs but may not have sufficient stock to do so. That pharmacist is therefore entitled to procure supplies from pharmacist B in order to be able to supply his patients, without falling subject to wholesalers’ obligations. Whilst in formal terms this activity may amount to wholesale activity it is not to be regarded as such because the focus of the activity remains facilitating supply to the public.

Mr Palmer observes that it has never been the First Defendant’s case that pharmacists who do not hold a WDL cannot benefit from the exemption in s.10(7) despite the terms of paragraphs 1 and 2 of Article 77. The reverse is the case; those who have the authorisation cannot take the benefit of the exemption. There is nothing, Mr Palmer suggests, to justify that interpretation. There would not, he submits, be a threat to the supply chain if the Claimant’s interpretation was accepted. The legitimate aim of public safety could be secured by requiring pharmacies, from whom a pharmacy relying on section 10(7) seeks to purchase, to comply with the material guidelines as to storage, transportation and handling of medicines. The Claimant presently complies with these guidelines in relation to its dealings with all suppliers and the Defendants have not led any evidence to the contrary. Mr Palmer asks rhetorically if there is no threat to the supply chain by a pharmacist operating within the s.10(7) exemption, why should there be a threat from a person with an authorisation doing the same? If the concern is that if a pharmacy such as the Claimant were able to purchase products from pharmacies without WDLs, it could transfer those stocks to its wholesale side, and sell them on to other businesses, that is a criticism of Regulation 9 as at present drafted. The answer, Mr Palmer suggests, is to amend Regulation 9, not to read Article 80(b) as covering the situation, as the Defendants are attempting to do. If, contrary to the Claimant’s primary submission, s.10(7) has to be read down, that should be done, Mr Palmer submits, by reference to Article 80(g), not by reference to Regulation 9.

However in my judgment Article 80(b) and Regulation 9 do not make the distinction drawn by the Claimant between the purchase of stock as part of supply to the public, and the purchase of stock as part of wholesale business. They state simply that the holder of a WDL can purchase only from another licensed holder. Further the Claimant’s submission is premised on a distinction between supply to the public and wholesale business, which does not exist in s.10(7) of the 1968 Act. I do not accept that s.10(7) is concerned with supply to the public, rather than wholesale business. On the contrary, s.10(7) is concerned with acts that are “wholesale dealing” as defined by s.8(7) of the Act. The effect of s.10(7) is not to alter the nature of those acts, so that they are no longer wholesale dealing; it is to provide a limited authorisation for specific acts of wholesale dealing.

I consider the words of Article 80(b) and Regulation 9 to be clear. They apply to all persons holding a WDL, irrespective of the purported capacity in which they act. Regulation 9(1)(a) states that “the holder of a wholesale dealer’s licence” shall obtain supplies of relevant medicinal products only from either a manufacturer’s licence holder, or a person who themselves holds a WDL for such products. Those words must be given their ordinary meaning. It follows that the Claimant’s purchase of medicines from pharmacies without a WDL is in breach of the terms of Regulation 9.

Mr Palmer places emphasis on the words “by way of wholesale dealing” in Regulation 9(2) which implements Article 80(c). Read literally Article 80(c) would mean that a person who is a pharmacist whose very business is the supply of medicinal products to the public, and who also holds an authorisation, would be prevented from supplying such products to the public when carrying on the business of a pharmacist. The reason why Regulation 9(2) does not have that effect is because of the inclusion of the words “by way of wholesale dealing” in the regulation. Article 80 needs, Mr Palmer submits, to be read together with Article 77. Neither Article 80 nor Regulation 9 limit the activity of pharmacists. Article 80(b) and (c) are directed at wholesale dealing.

Mr Palmer submits that Article 80(b) and (c) should be read in the same way, both referring to wholesale activities. As drafted Regulation 9(1) does not prevent stock passing from the retail to the wholesale side of a business as that does not amount to a “supply” as the regulation is presently drafted. Mr Palmer suggests that if the regulation were to be amended, then the vice on which the Defendants focus could be avoided.

I reject this submission. In my view Mr Milford correctly submits that Article 80(c) must be read together with Article 77(2). It is then clear that Article 80(c) is not intended to prevent persons who are authorised to supply medicinal products to the public under domestic law from continuing to do so. Article 77(2) necessarily implies that persons can supply to the public and be engaged in wholesale business. To that extent Article 80(c) requires qualification. Persons who engage in wholesale dealing need an authorisation (Article 77(1)) and holders of the distribution authorisation must comply with certain minimum requirements (Article 80). Thus, because of Article 77(2) it is necessary to interpret Article 80(c) as not preventing pharmacists from supplying to members of the public. By contrast there is no other provision in the 2001 Directive that requires Article 80(b) to be read down as the Claimant suggests.

This conclusion is supported by the recent decision of the European Court of Justice in Caronna that pharmacies holding WDLs must at all times comply with the requirements imposed on wholesale dealers by the 2001 Directive.

By its second question the Court was asked, in essence, “whether pharmacists who are also authorised under domestic law to operate as wholesalers in medicinal products must satisfy all the requirements imposed on applicants for and holders of authorisation for the wholesale distribution of medicinal products in Articles 76-84 of the Directive or whether it is sufficient for them to fulfil the conditions laid down by domestic law for the retail of medicinal products” (para 42).

The Court noted as a preliminary point that the conditions applicable to the supply of medicinal products to the public are not harmonised under EU law as it currently stands. Consequently, the regime applicable to persons entrusted with the retail supply of medicinal products varies from one Member State to another. On the other hand, the minimum requirements to be satisfied by applicants for and holders of authorisation for the wholesale distribution of medicinal products are harmonised by the 2001 Directive, in particular in Articles 79-82 of the Directive.

In the light of those provisions the Court continued as follows:

“47.

Given that the retail of medicinal products has different characteristics from the wholesale distribution of such products, it cannot be presumed from the simple fact that pharmacists satisfy the conditions governing retail supply in their respective Member States that they also satisfy the conditions laid down by harmonised rules at European Union level for wholesale distribution.

48.

Accordingly, in order to ensure that the Directive’s objectives are achieved, in particular those relating to the protection of public health, the removal of barriers to trade in medicinal products within the European Union and the need to exercise control over the entire chain of distribution of medicinal products, referred to in recitals 2 to 5 and 35 in the preamble to the Directive, the minimum requirements for the wholesale distribution of medicinal products must be fulfilled in a uniform and effective manner by all persons who engage in that activity in all Member States.”

That conclusion led the Court to answer Question 2 as follows: “a pharmacist who is also authorised under domestic law to operate as a wholesaler in medicinal products must satisfy all the requirements imposed on applicants for and holders of authorisation for the wholesale distribution of medicinal products in Articles 79 to 82 of the Directive” (para 50).

Section 8(3) of the 1968 Act contains a prohibition on sale of medicines by way of wholesale dealing, save in accordance with a WDL. Section 8(3A) contains a specific prohibition on the distribution by way of wholesale dealing of medicines covered by the 2001 Directive. Section 10(7) provides a limited exception from the provisions of section 8. It disapplies the prohibitions in ss.8(3) and 8(3A) where the relevant act is done in a pharmacy, under the supervision of the pharmacist, amounts to “wholesale dealing”, but is no more than an “inconsiderable part” of the business carried on by the pharmacist. In the ordinary case, where pharmacists do not hold WDLs, the effect of s.10(7) is to allow a pharmacy (Pharmacy A) to sell medicines to another pharmacy (Pharmacy B). This would otherwise be impermissible wholesale dealing, because it would be a sale by Pharmacy A to another business, rather than an end user: see ss.8(3) and 8(7) of the 1968 Act. The obvious intention behind s.10(7) is to allow for small exchanges of stock to meet unplanned shortages. However, if in the above example Pharmacy B held a WDL, its own purchase of medicines from Pharmacy A would be in contravention of Regulation 9 and Article 80. To that extent there is a tension between s.10(7) of the 1968 Act and Regulation 9 and Article 80(b).

Mr Milford recognises there is such a tension. The question is how to resolve it. In so doing Mr Milford refers to the obligation on the court to read its domestic legislation in the light of the wording and purpose of an applicable Directive, so far as possible (Marleasing SA v La Comercial International de Alimentation SA [1990] ECR 1-4135 at para 8 of the judgment). This may require the court to read words into a statute or to give a statute a meaning which is contrary to the natural and normal meaning of the words used, provided that it does not go against the grain of the legislation (see e.g. Ghaidan v Godin-Mendoza [2004] 2 AC 557 at paras 37-52 per Lord Steyn).

I agree with Mr Milford that the way to resolve the tension in favour of the UK’s obligations under the 2001 Directive is by reading the words “excluding acts prohibited by Regulation 9” of the 2005 Regulations into s.10(7) of the 1968 Act, so that s.10(7) would read:

“Without prejudice to the preceding sub-sections, the restrictions imposed by section 8(3) or (3A) of this Act do not apply to anything, excluding acts prohibited by Regulation 9 of the Medicines for Human Use (Manufacturing, Wholesale Dealing and Miscellaneous Amendments) Regulations 2005, which is done in a registered pharmacy by or under the supervision of a pharmacist and amounts to wholesale dealing, where such dealing constitutes no more than an inconsiderable part of the business carried on by the pharmacist at that pharmacy.”

In my view such a reading ensures that s.10(7) of the 1968 Act is read in conformity with Article 80(b) of the 2001 Directive and Regulation 9 of the 2005 Regulations; and goes no further than necessary to attain that end. It leaves the main purpose of s.10(7) intact, that is to allow pharmacies to exchange small amounts of stock to deal with unplanned shortages. The only action which it prohibits is the purchase of medicines from pharmacies without WDLs by pharmacies with WDLs. All other pharmacies, which are the vast majority, are unaffected, and can continue to engage in limited exchange of stock in the usual way.

Mr Palmer submits such an interpretation of the sub-section would result in the perverse situation that a pharmacist who does not hold a WDL licence but who requires limited extra stock to service his retail customers would be able to obtain that stock from another pharmacist, but an authorised retail pharmacist who does also hold a WDL would be unable to do so in order to service its own retail customers in precisely the same way. I reject this submission. The purpose of s.10(7) is manifestly not to allow pharmacies to circumvent restrictions imposed on all other holders of WDLs, and to buy stock from pharmacies with the intention of selling it on in the wholesale market.

Mr Palmer refers to the Claimant’s evidence (see witness statement of Ms Coosna at para 32) that the handling, storage and transportation guidelines issued under the 2001 Directive for wholesale dealers are in practice also met by the Claimant when the Claimant purchases medicines on an intra-pharmacy basis. However as Mr Milford points out a person cannot “obtain” supplies from themselves within the meaning of Regulation 9. Accordingly, Regulation 9 does not prevent a business transferring stock between its pharmacy and wholesale sides. So if a pharmacy such as the Claimant were able to purchase products from pharmacies without WDLs, it could transfer those stocks to its wholesale side, and sell them on to other businesses, without engaging the prohibition in Regulation 9. If this were permissible entities in the licensed supply chain subsequently purchasing from WDL holders who operate pharmacies engaging in this practice could no longer be assured that medicines have been subject at all times to the same stringent conditions on handling, storage and transportation as required by guidelines issued under the 2001 Directive. The integrity of the supply chain would have been lost. In my view it is for good reason that wholesale dealers have been made subject to a strict EU-wide regime, the purpose of which is to ensure that the entire chain of distribution of medicinal products can be controlled, and public health can be protected across the EU. I accept Mr Milford’s submission that it cannot be assumed that the requirements imposed on pharmacies by each individual Member State are sufficient to ensure public safety, if medicines pass from pharmacies back to wholesalers and are then re-sold. If pharmacies holding WDLs were able to purchase from pharmacies not holding WDLs the primary purpose of the Directive provisions relating to safeguarding public health would potentially be undermined.

Mr Milford makes the point as to the need to impose the requirements of Articles 79-82 of the Directive on all wholesalers in medicinal products even if they are pharmacists by reference to the evidence of Mr Olszowka, a Senior Regulatory Adviser in the Inspection, Enforcement and Standards Division of the Second Defendant. Mr Olszowka states that

“… storage, handling and transportation requirements imposed upon pharmacies who supply end-users may adequately ensure patient safety, where medicines go straight from the pharmacy to the end-user; but may not be adequate to ensure patient safety, if medicines are transferred from the pharmacy to a wholesaler and back to pharmacies again. For example pharmacies may not have the resources or logistic capability to handle medicines outside the environment of their registered premises to transport medicine at the appropriate temperature.” (Witness statement dated 18 June 2012, para 28).

If, contrary to the Claimant’s primary submission, there is found to be a tension between ss.8 and 10(7) of the 1968 Act on the one hand and Regulation 9 of the 2005 Regulations on the other, Mr Palmer suggests that the objectives of both pieces of legislation would be met by reading in the following to section 10(7):

“(7)

Without prejudice to the preceding subsections, the restrictions imposed by section 8(3) or (3A) of this Act do not apply to anything, which is done in a registered pharmacy by or under the supervision of a pharmacist and amounts to wholesale dealing, where such dealing constitutes no more than an inconsiderable part of the business carried on by the pharmacist at that pharmacy, and where such dealing complies with the guidelines on good distribution practice published from time to time by the commission.”

In circumstances where the need to which s.10(7) responds arises, namely the exchange of small amounts of stock to deal with unplanned shortages, the aims of both that section and the 2001 Directive would, Mr Palmer suggests, be wholly served by permitting pharmacists to purchase from any pharmacist subject to a condition that the integrity of the supply chain is maintained. The benefit of such an approach is that a retail pharmacist who held a WDL, in circumstances of a shortage, would not be precluded from purchasing from another pharmacist who did not hold a WDL but otherwise adhered to all of the storage, transportation and handling obligations imposed by the guidelines under the 2001 Directive in any event.

Mr Milford’s response to this submission that s.10(7) should be read in the light of Article 80(g) is that the Defendants would have to rely on the word of the Claimant that it was complying with the guidelines. Mr Palmer accepts that is a legitimate concern, but he observes it is a reflection of the fact that there are different regulators in the EU and domestic contexts; it does not justify the reading down of s.10(7) that the Defendants propose.

In my view the language of Article 80(b) requires holders of WDLs only to purchase from other licence holders. Those words cannot be ignored by recourse to statements of general principle to be found in the preamble to the 2001 Directive. As the Court said in Caronna at para 40:

“In any event, the preamble to a European Union Act has no binding legal force and cannot be relied on either as a ground for derogating from the actual provisions of the act in question or for interpreting them in a manner clearly contrary to their wording…”

Further I do not accept, as the Claimant contends, that its preferred wording would protect the integrity of the supply chain and therefore meet the objectives of the 2001 Directive (see paras 39 and 40 above). The regulatory regime contained in the 2001 Directive, and enforced by the Second Defendant, concerns only wholesalers, not pharmacists without WDLs. That means that the Second Defendant can only inspect and monitor premises covered by WDLs. Accordingly the Second Defendant would have no way of knowing whether the Claimant is correct, when it asserts that it ensures pharmacies without WDLs, from whom it purchases medicines, comply with good distribution practice. The same difficulty would arise with regard to every purchase by a pharmacy with a WDL from a pharmacy without a WDL. In each case the Second Defendant, and any prospective purchaser, would be reliant upon mere assertion of compliance with the wholesale regime.

Finally, I reject Mr Palmer’s criticism of the Defendants’ approach on the basis that it is an impermissible restriction on freedom of movement of goods. All the Defendants are seeking to do is to ensure that pharmacists with licences act in the same way as all other licence holders. That is done by interpreting s.10(7) of the 1968 Act by reference to Regulation 9 which mirrors the precise words of Article 80(b). The Claimant’s case must therefore entail an assertion that Article 80(b) is also a restriction on the free movement of goods. However Mr Palmer has not indicated how trade between Members States is affected by Article 80(b). In any event in my view any such restriction is likely to be justified on grounds of protection of public health. (See R (Alliance for Natural Health) v Secretary of State for Health [2005] ECR 1-6451 at paras 50-52 of the Judgment of the Court).

For the reasons I have given, this appeal is dismissed.