Pharmacies only for pharmacists? The Supreme Administrative Court takes a stance | In Principle

“Pharmacies for Pharmacists”: this slogan stands for a landmark amendment to the Pharmaceutical Law which has stirred heated debate. Will recent Supreme Administrative Court rulings cut through the controversy surrounding application of the amendment?

First we should review the changes introduced by the Pharmacies for Pharmacists amendment. By the Act of 7 April 2017 Amending the Pharmaceutical Law, the Polish parliament introduced significant restrictions on entities (these will be the subject of this article) and subject matter (a limit of four pharmacies or a demographic and geographical restriction) on the possibility of running a pharmacy open to the public. Also, as a result, the amendment introduced a ban on ownership conversions by permit holders and the transfer of permits to operate pharmacies open to the public. The new regulations entered into force on 25 June 2017.

The earlier, much more liberal regulations allowed for operation of a pharmacy open to the public regardless of the form in which the business was conducted. Obtaining a permit to operate a pharmacy open to the public was not dependent on the applicant having the status of a pharmacist. Thus, authorisation could be granted to natural persons as well as legal persons (both partnerships and corporations).

But the amendment has linked operating a pharmacy with being a pharmacist. The persons who can obtain permits has been limited to pharmacists, and partnerships (general or professional partnerships) whose subject of activity is solely limited to operating pharmacies and whose partners are exclusively licensed pharmacists. 

As a result of legal changes, the possibility of transferring a permit to operate a pharmacy has appeared, assuming that the acquirer meets the conditions specified by the law.

The changes limited the ability to acquire a pharmacy by entities not holding the status of a pharmacist, as the amendment was aimed at professionalising pharmaceutical services and, in a way, was a step towards pharmaceutical care.

Although the assumptions of the amendment, i.e. inclusion of pharmacies in the healthcare system and a move away from commercialisation of pharmaceutical services, may be valid, the legal chaos that ensued caused divergence in the decisional practice of public administrative bodies and the administrative courts. Moreover, for businesses with permits issued prior to the amendment, this divergence resulted in legal uncertainty. The pharmacy community itself has also become polarised (local pharmacists versus pharmacy chains).

Permits to operate a pharmacy open to the public granted before 25 June 2017, i.e. to some entities that now would be ineligible to obtain them, are still in legal circulation. The parliament did not mandate that these entities comply with the new requirements for operating a pharmacy, and under Art. 2(2) of the amending act, permits to operate pharmacies issued before the date of entry into force of the amending act remain valid. Entities operating pharmacies open to the public may continue to operate them on the basis of an existing permit, without having to amend the terms of the permit.

So what if these businesses make subjective changes? This is where the divergence in determining the appropriate legal regime arose, not only within the pharmacy community itself, but also in the inconsistent approach of the State Pharmaceutical Inspectorate.

To clarify the legal situation at least to some extent, it should be pointed out that under Art. 6 of the Administrative Procedure Code, the provisions in force on the date a decision is issued by a public administrative body must be applied to the facts in force on the date the decision is issued. Exceptions to this rule may be introduced by transitional provisions. However, in the absence of any regulation to the contrary, the relations that are newly created and those already existing at the time of entry into force of the act are directly governed by the new act from the time of its entry into force. 

However, the parliament may modify this rule by introducing intertemporal provisions. Such a provision was included in the amending act (Art. 2), but it was limited to applications for granting a permit to operate a pharmacy. From its wording, it may be inferred that the earlier provisions are applied only to proceedings initiated and not concluded before the date of entry into force of the amending act regarding applications for issuance of a permit to operate a pharmacy.

Bodies of the State Pharmaceutical Inspectorate (mostly) took the position that the parliament’s aim was that, apart from situations specified in the transitional provision, as of 25 June 2017, the wording of the Pharmaceutical Law given by the amending act, which modified Art. 99(4) of the Pharmaceutical Law of 11 September 2001, were to be applied when determining subjective conditions. In practice, for businesses that obtained a permit prior to 25 June 2017, this meant that changes affecting the permit will be evaluated from the perspective of the provisions currently in force. Thus, any subjective changes must be consistent with the current, new legal regime. Therefore, according to the State Pharmaceutical Inspectorate, to amend a permit, and not only to obtain one, the applicant must meet the requirements currently set forth in Art. 99(4) of the Pharmaceutical Law.

In the opinion of these administrative bodies, a different interpretation would effectively circumvent the ban in force since 25 June 2017 on obtaining a permit by entities that do not hold the status of a pharmacist.

However, businesses holding a valid permit to operate a pharmacy as of 25 June 2017 took a dissenting view. While running a business such as a pharmacy, businesses make various changes, including subjective changes to their ownership, assuming that Art. 99(4) of the Pharmaceutical Law refers only to cases of applying to initiate administrative proceedings for issuance of a new permit to operate a pharmacy and does not apply to amendment of a permit. In other words, they assumed that the amendment is not retroactive. Therefore, they rejected the validity of the administrative agencies’ position according to which any such changes should be consistent with the current law.

Muddying the waters, in explanations issued on 12 April 2019, the Minister of Health stated that Art. 99(4) of the Pharmaceutical Law, as amended, does not apply to permits to operate a pharmacy open to the public issued prior to the effective date of the amendment. Therefore, the amendment applies only to the conditions for applying for new permits, and entities that were granted permits before 25 June 2017 are not required to adapt their activities to the new requirements. This interpretation was consistent with the position of part of the pharmacy community (mostly representing pharmacy chains).

Finally, this divergence of opinions led the Supreme Administrative Court to issue precedent-setting judgments (of 24 February 2022, case no. II GSK 477/20, and 24 February 2022, case no. II GSK 384/20). These cases were of the same type and involved changes in ownership. In these cases, permits for operating pharmacies were issued to general partnerships before the amendment entered into force. Then, after 25 June 2017, partners who were not pharmacists joined those partnerships. The entities applied to amend the final administrative decisions (permits to operate pharmacies), but both the province pharmaceutical inspector and the Main Pharmaceutical Inspector refused to make the changes, on the grounds that under the current law, to obtain a permit to operate a pharmacy open to the public, it is necessary for the applicant to meet the requirements now specified in Art. 99(4) of the Pharmaceutical Law.

In the judgments below (of 28 November 2019, case no. VI SA/Wa 1531/19, and 29 November 2019, case no. VI SA/Wa 1577/19), the province administrative court upheld the position of the State Pharmaceutical Inspectorate. The court reasoned that the personal nature of a general partnership and the rules for establishing its business name are decisive factors in determining whether the change of the partnership’s name was done in accordance with the applicable provisions. Therefore, the requested change to the permit had to be considered taking into account Art. 99(4)(2) of the Pharmaceutical Law. Accepting a different view would circumvent the ban in force since 25 June 2017 on obtaining a permit by a general partnership whose partners include persons other than licensed pharmacists.

But on appeal, the Supreme Administrative Court took a different view. It agreed with the position of the appellants, finding that Art. 99(4) of the Pharmaceutical Law, in the wording given by the amending act, does not prevent the change of a permit issued before the amendment came into force, when persons not holding the status of a pharmacist joined the partnership after 25 June 2017.

This position should be considered precedent-setting, as it is the first time the Supreme Administrative Court has substantively ruled on application of the Pharmacies for Pharmacists amendment to permits issued prior to 25 June 2017. The ruling expressly holds that entities holding permits on the effective date of the amendment may be joined by persons who are not pharmacists, and thus they do not have to meet the conditions specified in Art. 99(4) of the Pharmaceutical Law.

Will this new line of cases from the Supreme Administrative Court affect the decisional practice of the State Pharmaceutical Inspectorate, while minimising the risks of legal uncertainty for businesses operating under permits issued prior to the amendment? Now the ball is in the court of the public administration.

As mentioned earlier, as a result of the Pharmacies for Pharmacists amendment, restrictions on entities were introduced, but also subject-matter restrictions (e.g. a limit of four pharmacies). Although the judgments under discussion were issued pursuant to the amendment concerning entities, it is reasonable to assume that the same interpretation, including of the transitional provisions, should be adopted with respect to other requirements introduced by the amending act. This means that the requirements introduced by it should not apply to permits granted before 25 June 2017.

Natalia Falęcka-Tyszka, attorney-at-law, Life Science & Healthcare practice, Wardyński & Partners