The High Court has upheld a Tax Appeals Commission determination that Novartis Ireland was entitled to a VAT refund on rebates it paid to private health insurers for Lucentis supplied to private hospitals.
In a judgment delivered on 23 November 2022, Ms Justice Emily Egan answered in the affirmative the sole question referred in a case stated: whether the Commission was correct in law to find that the insurer rebates reduced the consideration Novartis received for its supply of the medicine. The court held that Revenue could not charge VAT on the pre-rebate amount when Novartis was contractually bound to pay rebates and did not have the full price freely at its disposal.
The dispute concerned a claim for repayment of €1,000,048.662 in VAT. Novartis supplied Lucentis through wholesaler Allphar to hospitals, where clinicians administered it to patients. Under volume-based agreements, Novartis paid rebates to insurers according to the amount of Lucentis reimbursed. The insurers, in turn, agreed to provide full reimbursement cover for up to nine vials per eye per year. The court noted that the rebates were calculated retrospectively and that hospitals separately itemised the medicine and medical services on invoices to insurers.
Revenue argued that the insurer agreements were separate from the supply of goods, and that the supply chain ended at the hospitals. It also contended that the rebates could be payment for services by insurers, including reimbursement cover or usage data. The judge rejected those arguments. She found the agreements integral to the supply chain because insurer reimbursement was essential to hospitals’ use of Lucentis and to securing a market for the product. The itemised invoices also allowed the medicine, its price and related discount to remain identifiable despite its administration as part of hospital care.
The court found no evidence that the insurers’ data provided value to Novartis beyond checking rebate calculations and confirming the medicine had entered Ireland through Allphar. It also agreed that providing health cover was not a service to the manufacturer in exchange for the rebate. Applying European Court of Justice case law, including the Boehringer decisions, the judge said the relevant consideration was the amount actually received by Novartis.
The judgment leaves in place the Commission’s determination that the insurer rebates reduced the taxable amount and that Novartis qualified for repayment under section 39(2) of the Value Added Tax Consolidation Act 2010. The court did not calculate or order payment of the refund in this judgment. It also declined Revenue’s request to refer a question to the Court of Justice of the European Union, finding a reference unnecessary.