Pharmaceutical reimbursement systems : Potential VAT refund opportunity?

Situation actuelle

The interaction between pharmaceutical pricing, public health reimbursement systems, and VAT rules has raised challenges in the EU.

Central to this discussion are the Boehringer Ingelheim judgments, which explored whether payments that pharmaceutical companies make to public health insurance agencies should be treated as price reductions (rebates) thus reducing the taxable amount or whether they fall outside the scope of such adjustments.

Recent jurisprudence from the European Court of Justice (ECJ) has firmly categorised these payments as rebates, allowing pharmaceutical companies to reclaim VAT where appropriate.

This article summarises the key facts, analyses the Court’s reasoning, and outlines the practical consequences for pharmaceutical companies across the EU.

The Boehringer Ingelheim cases

Case C‑462/16 (Germany)

Boehringer Ingelheim Pharma GmbH & Ko (BI) is a pharmaceutical company that manufactures medicines and supplies them to pharmacists through wholesalers. BI charges VAT on these supplies. The pharmacists then supply the medicines to statutory health insurers, who in turn supply the medicines to the insured. The pharmacists grant the statutory health insurers a discount, and BI is obligated under German law to reimburse the pharmacists (or the wholesalers involved) for this discount.

BI was also legally required to grant mandatory discounts to private health insurance companies, even though they were not directly involved in the supply chain.

The ECJ ruled that such payments qualify as a price reduction that leads to a reduction of the taxable amount. The economic reality was that the manufacturer did not retain full consideration.

Case C‑717/19 (Hungary)

In Hungary, Boehringer Ingelheim (BI) concluded “financing contracts” with the national health insurance agency NEAK, under which it made contributions to NEAK linked to the volume of medicinal products supplied. These amounts were deducted from turnover and reflected the reduced consideration actually received from sales. When BI revised its VAT returns to account for these reductions, the Hungarian tax authority rejected the adjustment.

The ECJ held that the EU VAT Directive requires a reduction of the taxable amount where the supplier’s remuneration is reduced after the supply. Payments made to NEAK – even if not referred as commercial discounts – nonetheless reduced the consideration BI received and therefore constituted rebates, entitling the company to reduce its VAT base. The Court emphasised the principles of fiscal neutrality and proportionality, confirming a lack of invoices could not prevent a reduction if other documentation proved the payment.

Extension of the principle: ECJ confirmation in 2024

Novo Nordisk (Case C‑248/23)

In 2024, the ECJ considered payments mandated by Hungarian law requiring pharmaceutical companies to pay 10 – 20% contributions to the tax authority, which were then transferred to the public insurer. Although these contributions were compulsory, they demonstrated an intention to create a mandatory rebate system.

The ECJ confirmed that these payments were rebates because they effectively reduced the price received by the producer and were used to lower medicine prices for consumers. As such, payment reduced the VAT taxable base. This ruling aligned fully with the logic of the Boehringer cases and extended the same treatment to statutory (non‑contractual) rebate schemes.

Practical implications for pharmaceutical companies

• VAT refund opportunities: companies may reclaim VAT where they made payments to public insurers.

• Review of historical VAT returns: Businesses should reassess historical VAT filings in light of EU case law.
• Compliance and backup documents : documentation processes should ensure that evidence of contributions, rebates, or reimbursements is preserved, even where invoices are not issued.
• EU policy impact: The ruling benefits to all pharmaceutical companies operating in Hungary, enabling them to claim VAT refunds, and potentially carries implications for markets in the EU with a similar tax and rebate system. Other Member States with similar health subsidy or mandatory contribution systems may need to adapt their VAT rules.
• Financial turning point in the UK: Another Boehringer case is now before the UK Upper Tribunal further to HMRC’s appeal, and its outcome will be decisive for the VAT treatment of pharmaceutical rebates.

 Conclusion

The Boehringer Ingelheim judgments C‑717/19 in Hungary and C‑462/16 in Germany together with the 2024 Novo Nordisk ruling, create a coherent line of ECJ case law, confirming that pharmaceutical payments to state health insurers are rebates that reduce the VAT taxable amount. This interpretation aligns with the main VAT principles of fiscal neutrality and proportionality and ensures VAT is charged only on actual consideration received.

The door is now open for potential significant VAT refund claims and the harmonisation of treatment throughout the EU. In the UK, the Boehringer case could unlock billions of pounds in VAT reclaims for pharma companies, depending on the outcome of the Upper Tribunal hearing.

Should you need our support to review this, please do not hesitate to contact us.