The court judged that public bodies may offer financial incentives for doctors to prescribe medicines. But they must ensure incentives are based on non-discriminatory objective criteria and publish therapeutic evaluations, the court said.
In February, the European Court suggested that prescribing incentive schemes could be illegal. It argued they may breach EU directive 2001/83, which prohibits promotion of medicinal products by gift.
A ruling had been sought after a High Court case brought by the Association of the British Pharmaceutical Industry (ABPI) against the MHRA.
The MHRA welcomed the judgment, but the ABPI said it was 'disappointed'. It said the ruling meant patients could not have total confidence in the motives for doctors' prescribing decisions.