Secretary of State for Health, R (on the Application of) v Association of Pharmaceutical Importers & Anor

Where a regulatory scheme is an integrated arrangement, the legality of one provision cannot be determined in isolation if severing it would alter the scheme’s character or substance. A claimant seeking judicial review must formulate the challenge and relief on that basis. The court may refuse relief where the pleaded case attacks only part of an indivisible scheme and the evidence is insufficient to assess the scheme as a whole. In complex questions concerning the actual or potential effect of a regulatory arrangement on imports and competition, judicial review may be unsuitable, particularly where a fuller investigation is required. Allegations not properly pleaded and supported by evidence cannot ordinarily be raised for the first time on appeal.

The Association of Pharmaceutical Importers and Dowelhurst Limited challenged Chapter 21 of the 1999 Pharmaceutical Price Regulation Scheme. They alleged that its modulation provisions unlawfully restricted parallel imports and breached Articles 28 and 81 EC, and sought relief directed only to those provisions.

Mr Justice Thomas dismissed the application on 14 March 2001, holding that the modulation provisions could not be severed from the scheme. The appellants appealed. The central questions were whether Chapter 21 could be considered separately and whether the claimed relief could properly be granted without examining the legality of the entire scheme.

1. Appeal dismissed. The court held that the modulation provisions in Chapter 21 of the 1999 Pharmaceutical Price Regulation Scheme were an essential and integrated part of the overall arrangement. The 4.5 per cent price reduction had been agreed on the basis that companies would retain flexibility to modulate prices. Removing Chapter 21 would therefore alter the character and substance of the scheme. The provisions could not be severed, whether the contractual or public-law approach to severance was applied.
2. The scheme had to be considered as a whole. Its provisions concerning profit limits, price reductions, new products and modulation were interdependent. A declaration directed only to Chapter 21 would rest on a false basis and could not properly be granted.
3. The court gave a further reason for refusing relief. The legality and practical effects of the scheme involved evidence about the operation of the pharmaceutical market and the development of parallel imports since 1983. Judicial review was not the most convenient procedure for that investigation. The European Commission was identified as the more appropriate body to investigate the legality of the scheme, if necessary.
4. The court declined to determine the substantive Article 28 and Article 81 issues because they had not been properly presented on the basis of a challenge to the scheme as a whole. It nevertheless observed that the relevant effect or potential effect had to be assessed by reference to the operation of the PPRS as a whole, including the way medicines were supplied and priced, rather than by considering the price-cut requirement in isolation.
5. A submission based on the Transparency Directive was not open to the appellants. It had not been pleaded in the Form 86A, permission to amend had not been sought under Part 54.15 of the Civil Procedure Rules 1998, and the ordinary burden of proof remained on the party making the allegation.

The appeal was dismissed. The Secretary of State and ABPI were awarded the costs of the appeal, and leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): dismissed the appeal from the order of Mr Justice Thomas dated 14 March 2001, which had dismissed the application for judicial review.