Incentives and public procurement in the healthcare sector: be careful what you wish for!

Since the European Court of Justice’s ruling C-300/07 of 11 June 2009, hospitals and other health institutions must abide by public procurement law 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 Belgium’s healthcare sector – has observed that, in the context of such public procurement procedures, health institutions ask economic operators (e.g. pharmaceutical companies) to submit not only their best prices or the shortest delivery period but also all types of free-of-charge “incentives” (such as support for outreach activities, educational materials, patient monitoring software, etc.).

By circular letter no. 646 of 21 June 2019, the FAMHP has issued a reminder to the different actors in the health sector that these “incentives” should be considered carefully, and risk to contravene (i) the prohibition of gifts, monetary advantages or benefits, and (ii) public procurement rules.  Below, we will briefly discuss these two boundaries for such “incentives” as well as briefly discuss a third boundary, i.e.of non-bribery.

Prohibition of gifts, monetary advantages or benefits

Article 10 of the Medicines Act of 25 March 1964 prohibits the requesting, offering, accepting, or providing of “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 take place.

The circular letter clarifies that incentives such as a training in the use of medicines, educational material, software for patient follow-up, support for outreach activities, etc., fall under that prohibition if they are provided free of charge (or at a ridiculously low price), even if this is part of an award criterion of a public procurement.  The circular letter reminds that the violation of this prohibition is punishable with criminal penalties (a prison sentence of up to one year and penalties of up to EUR 240,000 – or double in case of recidivism).

The above prohibition does not apply to (i) gifts or benefits of limited value that concern medical, dental or veterinarian practices (such as EUR 50 per gift and up to a maximum of EUR 125 per year) (ii) invitations and payment of costs for participation in scientific events, including the hospitality of healthcare professionals if certain conditions are met (see the common ethical platform, MDEON) and (iii) the reasonable compensation of legitimate services of a scientific nature (compensation for clinical trials, research papers, symposiums, etc.).

In the context of public procurement, the circular letter stipulates that the economic operator should price its complementary service, also if this is part of an award criterion. This could be done by offering the service at a price in the offer separate from the one provided for the supply of medicines or medical devices as the main subject matter of the procurement. Another solution is to provide explicitly that the price of the complementary service is included in the price offered for the supply of medicines or medical devices.

Public procurement aspects

Public procurement law requires contracting authorities, such as hospitals, to award the tender to the offer presenting the best value for money. The best value for money is assessed on the basis of pre-established criteria in the tender specifications such as the price or cost, as well as criteria including qualitative, environmental and/or social aspects related to the subject of the public contract concerned. But the hospital is not entirely free and should take into account certain boundaries.

Firstly, the award criteria should relate to the subject matter of the public contract. In other words, award criteria asking for incentives such as support for outreach activities, educational materials and patient monitoring software are therefore in principle not allowed when they are not directly or indirectly linked to the subject matter of the procurement.

Secondly, requiring certain (technical) specifications, or asking for certain incentives, cannot be used in an illegitimate way to prevent equal access or distort competition. If not, contracting authorities would have an unlimited freedom of choice for the winning tenderer, which would make the award process legally challengeable.

Finally, although this has not been addressed by the circular letter, a submitted tender cannot be abnormally low. Therefore, if the costs of the incentives are, or appear to be, abnormally low, then the contracting authority will, after the necessary investigations and verifications, need to exclude that tender from the competition process. Similarly, if including the cost of the incentives in the price for the main subject matter, this should still be realistic and an abnormally low offer should be avoided.

Prohibition of any acts of bribery

Finally, although this has also not been addressed in the circular letter, anti-bribery regulations of the Belgian Criminal Code apply.

Active public bribery (for public health institutions) is broadly understood as an offer, a promise or a benefit of any kind made directly or through intermediaries to a person who performs a public function for him/herself or for a third party to perform certain actions. The same applies for private bribery (for private health institutions), except that the key element is that the “bribery” was committed without the knowledge and authorisation of, as the case may be, the board of directors, the general assembly, the principal or the employer.

As the concept of bribery is extremely broad, one should be cautious when offering gifts or hospitality in the course of a public procurement procedure, even if these could fall under the exceptions provided by the Medicines Act. This applies even more when these have not been requested by the contracting authority in the tender documents, which might indeed be seen as an undue attempt to influence the outcome.

Penalties for acts of bribery include prison sentences of up to 3 years, penalties of up to EUR 1,600,000 (under public law) and up to EUR 800,000 (under private law) and the confiscation of the profits of the infringement. The contracting authority could also consider a company’s attempt to bribe as a grave professional misconduct allowing it to refuse the company access to future tenders.

Written by

• Kirian Claeyé

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