by Joaquim Augusto Melo de Queiroz
Continuing the analysis begun in part 1 of this article on the effects of Law 14,133/2021 on the pharmaceutical sector, the remaining controversial and practical issues in tenders and administrative contracts in this segment will be addressed.
- Non-requirement of tender and impossibility of competition
Non-requirement of tender is a high-octane issue for the sector and one that sparked great controversy in the pharmaceutical market in the recent past. Law 14,133/2021 did not precisely define the concept of impossibility of competition capable of making a tender non-required (art. 74). Its items set out an illustrative list of cases that would lead to impossibility of competition, but there is no legal definition of the concept.
In the supply of medicines, as a rule, impossibility of competition is based on the existence of a sole manufacturer and/or its exclusive distributor. However, some years ago, the Ministry of Health made purchases of orphan drugs (intended for the treatment of rare diseases) in which it disregarded the existence of sole manufacturers, and therefore their status as exclusive suppliers. It allowed the contracting of alleged distributors that did not meet the regulatory requirements to do so and were not distributors accredited by the manufacturers. The issue is extremely sensitive and deserves more careful examination by the Public Administration and oversight bodies.
- Waiver of tender for the purchase of medicines for the treatment of rare diseases
Art. 75, item IV, subparagraph ‘m’ of Law 14,133/2021 introduced a new case of waiver of tender for the purchase of medicines intended exclusively for the treatment of rare diseases, as defined by the Ministry of Health. The new rule is controversial, despite its laudable intention of ensuring continuity of supply of these medicines to patients.
The first criticism is based on the subversion of the law’s own rules in cases where competition is impossible. This is because impossibility of competition would trigger the mandatory nature of non-requirement, given its logical precedence over waiver. Practical experience even confirms the inconsistency of the new provision. Indeed, it has been observed that the Ministry of Health sometimes chooses to formalize the direct purchase of the medicine through non-requirement of tender, and sometimes makes the purchase through a waiver (invoking the emergency situation provided for in item IV of art. 24 of Law 8,666/1993).
The new rule therefore seems to have been designed to try to legitimize this recurring practice of the Ministry of Health: using the waiver of tender in a way that distorts the context of genuine urgency. This practice deserves criticism for failing to comply with the duty of planning inherent to the Public Administration, which should lead to the organic structuring of periodic purchases, well in advance, precisely to ensure the uninterrupted supply of these medicines and the continuity of therapeutic treatment. In cases of impossibility of competition, which is generally the case with orphan drugs, it would be up to the Public Administration to organize itself so that purchases are made systematically through non-requirement of tender.
The new rule also seems to carry an indirect objective aimed at shielding public officials. By validating purchases through waiver of tender (even in cases where they should occur through non-requirement), the hidden intention seems to be to avoid possible challenges by oversight bodies regarding whether impossibility of competition actually exists. In this way, the public official’s conduct would be safeguarded from scrutiny by oversight bodies.
- Supplier’s right to terminate the contract
An ordeal experienced by the pharmaceutical industry, especially over the last 5 years, stems from the Public Administration’s constant delays in making the payments due.
The new Public Procurement and Administrative Contracts Law sought to address this problem by reducing the maximum permitted payment delay from 3 to 2 months (art. 137, § 2, item IV). It also clearly established that the period is to be counted from the date the invoice is issued. Once this period has elapsed, the company may legitimately seek termination of the contract.
Although the innovation is positive, its implementation may still face major obstacles. If the Administration fails to make the payment due for more than two months, the supplier will not be automatically authorized to terminate the contract. In reality, it will still depend on a formal decision to be released from its contractual obligation. Law 14,133/2021 has now made explicit that this decision may be either judicial or arbitral (as a result of an arbitration clause or submission agreement), which is not exactly new, especially since the advent of Law 13,129/2015.
- Chronological order of payments and liability of public officials
Art. 141 of Law 14,133/2021 introduced original rules on the effects of failing to observe the chronological order of payments. The Public Administration must observe the chronological order of payments, except in extraordinary situations, now expressly listed in the items of § 1 of this provision. Any change to the chronological order must also be reported to the internal control body and the competent court of accounts, which may curb impulses to favor certain creditors. There is also a specific provision (§ 2 of art. 141) on determining the official’s liability in the event of unjustified failure to observe the chronological order1, which comes at a good time.
Indeed, the financial hardship of several federative entities, which took on obligations beyond their budgetary capacity, produced an acute crisis to the detriment of medicine suppliers. These companies are often forced to continue delivering their (essential) products without any financial consideration. In this context, the new rule is beneficial and timely and should be praised. Indeed, the design of mechanisms preventing maneuvers to obstruct the chronological order of payments should be welcomed.
- National public procurement portal
The creation of the PNCP (National Public Procurement Portal) is another development with repercussions for the pharmaceutical industry (art. 174). Broadly speaking, it is an electronic platform (recently launched by the Ministry of Economy) that will compile information on annual procurement plans, notices of direct contracting, tender notices and their annexes, price registration records, contracts and their amendments, electronic invoices, etc. The new law provides that the PNCP must offer a health price database, which is expected to be regulated in line with the existing Health Price Database2. The relevance of the subject stems from the inquiries usually made by managers to check medicine prices. If this standardization of data materializes, the practice of granting specific discounts in certain regional circumstances should be assessed with caution, especially in a scenario where other bodies may join price registration records3.
- Manufacturer’s letter of joint liability
The possibility of requiring a letter of joint liability issued by the manufacturer, guaranteeing performance of the contract where the bidder is a reseller or distributor, is now expressly regulated by art. 41, item IV.
The issue gave rise to heated debate given the absence of a specific provision to that effect in Law 8,666/1993 and Law 10,520/2002. The Federal Court of Accounts and the Federal Supreme Court rejected this requirement on the grounds that it undermined the competitive nature of the tender. Specifically regarding the pharmaceutical sector, the discussion became more heated due to the provisions previously contained in art. 5, § 3, of Ministry of Health Ordinance No. 2,814/19984. With the advent of Law 14,133/2021, this provision may be declared unconstitutional.
- Reduction of the minimum period for submitting proposals and bids
Finally, § 1 of art. 55 provides that the minimum periods for submitting proposals and bids may, by reasoned decision, be reduced by up to half in tenders held by the Ministry of Health within the SUS (Unified Health System).
As can be seen, the projected effects of Law 14,133/2021 on the tenders and administrative contracts of the pharmaceutical industry are significant. There are useful innovations, opportunities to be explored and sensitive points that will require extra attention from companies in the sector.
1 Which may give rise to divergent interpretations of the scope of the provision if the reasoning is merely generic and unrelated to truly legitimate grounds.
2 The Health Price Database (BPS) is a system developed by the Ministry of Health for recording and consulting information on purchases of medicines and health products made by public and private institutions. Resolution No. 18 of June 20, 2017, of the Tripartite Inter-Manager Committee, had already made it mandatory for the Federal Government, States, the Federal District and Municipalities to send the information necessary to feed the Health Price Database (BPS).
3 In this regard, note the possibility set out in § 7 of art. 86, which allows bodies and entities of the federal, state, district and municipal Public Administration to join the price registration record managed by the Ministry of Health for the emergency purchase of medicines and medical-hospital consumables, without the limit established in § 5 (double the quantity of each item registered in the price registration record).
4 The Federal Supreme Court had considered this issue in an injunction issued in ADI 4105. The provision was then revoked by Ministry of Health Ordinance 1,167/2012, which rendered the ADI moot.
Article originally published in the Licitações e Contratos column on Portal da Infra (in Portuguese), on 08.23.2021.
