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23 October 2019
Since the European Court of Justice's ruling in C-300/07 of 11 June 2007, hospitals and other health institutions must abide by public procurement laws to the extent that they are at least 50% financed directly by public authorities or indirectly by public insurance schemes.
The Federal Agency for Medicines and Health Products (FAMHP) – which regulates the Belgian healthcare sector – has observed that in the context of such public procurement procedures, health institutions ask economic operators (eg, pharmaceutical companies) to submit not only their best prices or the shortest delivery period, but also all types of free-of-charge incentives (eg, support for outreach activities, educational materials and patient monitoring software).
With Circular Letter 646 of 21 June 2019, the FAMHP issued a reminder to the different actors in the healthcare sector that such incentives should be considered carefully. The circular letter underlined the risk of contravening the ban on receiving gifts, monetary advantages or benefits and public procurement rules. This article discusses to which extent incentives are allowed in the framework of these prohibitions as well as the additional boundary of non-bribery.
Article 10 of the Medicines Act of 25 March 1964 prohibits requesting, offering, accepting or providing "gifts, monetary advantages or benefits in kind" to wholesalers, persons qualified to prescribe, deliver or administer medicines or medical devices and institutions where prescribing, delivering or administering medicines or medical devices takes place (eg, hospitals).
The circular letter clarifies that incentives such as a training to use certain medicines medicines, educational materials, software for patient follow-ups or support for outreach activities fall under this prohibition if they are provided free of charge (or at an extremely low price), even if this is part of an award criterion of a public procurement process. The circular letter also sets out that violations of the prohibition are punishable by one year imprisonment and penalties of up to €240,000 – or double in case of recidivism.
This prohibition does not apply to:
In the context of public procurement, the circular letter stipulates that economic operators should price complementary services offered also if they are part of an award criterion. This could be done by offering the service at a price that is separate from that provided for the supply of medicines or medical devices as the main subject matter of the procurement. Another solution is to state clearly that the price of the complimentary service is included in the price offered for the supply of medicines or medical devices.
Public procurement law requires contracting authorities (eg, hospitals) to award the tender to the applicant that offers the best value for money, which is assessed on the basis of pre-established criteria in the tender specifications (eg, the price or cost) and criteria including qualitative, environmental and/or social aspects relating to the subject of the public contract concerned. However, contracting authorities must take certain factors into account when deciding the award of a tender.
First, the award criteria should relate to the subject matter of the public contract. In other words, award criteria which ask for incentives such as support for outreach activities, educational materials and patient monitoring software are not allowed in principle if they are not directly or indirectly linked to the subject matter of the procurement.
Second, requiring certain (technical) specifications or asking for certain incentives cannot be used in an illegitimate way to prevent equal access or distort competition; otherwise, contracting authorities would have unlimited freedom of choice for the winning tender, which would make the award process legally challengeable.
Finally, although not addressed in the circular letter, the costs of incentives in a submitted tender cannot be abnormally low. If the costs of incentives are, or appear to be, abnormally low, the contracting authority will need to exclude that tender from the competition process following the necessary investigations and verifications. Similarly, if the cost of incentives are included in the price for the main subject matter, this should still be realistic and an abnormally low offer should be avoided.
Although bribery is not addressed in the circular letter, the Criminal Code's anti-bribery provisions apply. The active public bribery of public health institutions is broadly understood to mean an offer, promise or benefit of any kind made directly or through intermediaries to a person that performs a public function, in particular for performing certain actions. The same applies to private bribery (for private health institutions), but the key element is that the bribery was committed without the knowledge and authorisation of the board of directors, general assembly, principal or employer, as the case may be.
As the concept of bribery is extremely broad, parties should be cautious when offering gifts or hospitality in the course of a public procurement process, even if they fall under the exceptions provided by the Medicines Act. This applies even more when gifts or hospitality have not been requested by the contracting authority in the tender documents, which could be seen as an undue attempt to influence the outcome.
Penalties for acts of bribery include up to three years' imprisonment, penalties of up to €1.6 million (public bribery) and up to €800,000 (private bribery) and the confiscation of any profits resulting from the infringement. The contracting authority may also consider a company's attempt to make a bribe to be grave professional misconduct and refuse the company access to future tenders.
For further information on this topic please contact Julien Gaul or Kirian Claeyé at ALTIUS by telephone (+32 2 426 1414) or email (firstname.lastname@example.org or email@example.com). The ALTIUS website can be accessed at www.altius.com.
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