Within the second quarter of 2012, the Czech healthcare market saw some legislative changes affecting producers and distributors of medical devices as the Ministry of Health regulated the price system of medical devices in the country. Also the recently published regulation of the European Commission seems to end confusion on the food and dietary products market in the country. Yet, still confusing may be public procurement process in the healthcare sector, regulated by the Public Procurement Act.

New price regulation on medical devices in the Czech Republic

The Ministry of Health has regulated the price system of medical devices in the Czech Republic. Depending on the category of medical devices, different rules of price regulation applied.

There are three categories of medical devices on the Czech market – implantable medical devices; medical devices that can ‘be bought in a pharmacy’ and then there is a remaining group of medical devices whose price is not regulated by the Ministry of Health.

The price of a medical device is basically established from the three parts – the manufacturer’s price, the wholesale margin, and VAT.

As of 1 May 2012 some principles of price regulation of medical devices have changed.

While the previous price regulation set down different rules for medical devices manufactured by local producers and medical devices imported from abroad to the Czech Republic, the actual price regulation considers both groups of medical devices equal.

The new price system regulates the price of the manufacturer and the price for the final consumer. Contrary to the previous price regulation, the prices of persons standing in chain between a manufacturer and a final consumer are not regulated and are subject of mutual agreement of distributors.

The new price regulation has introduced also the equal rule on the highest possible amount of the wholesale margin. From now on, the maximum wholesale margin for most of the medical devices must not exceed 25% of the price of the manufacturer. In other words, the final consumer price for most of medical devices must not exceed in any way (125% of the price of the manufacturer maximally).

However, there are some exceptions to which different rules of wholesale margin apply (such as contact lenses prescribed by a doctor, so called ‘separately billed material’ – e.g. cardio stimulator, hip joints; or medical devices manufactured individually according to a medical prescription).

End of confusion on the food and dietary products market?

The recent development in the food and supplementary product market has been introduced in May 2012. After more than two years of delay, the European Commission issued a new Commission Regulation No. 432/2012 establishing a list of permitted health claims made on foods, other than those referring to the reduction of disease risk and to children’s development and health (EU Regulation). The EU Regulation shall apply from 14 December 2012.

The approval procedure supposes that the European Food Safety Authority (EFSA) will review all submitted claims before they are ‘finally’ approved by the European Commission. The EFSA reviewed more than 2,700 health claims that have been submitted by member states. The final list of approved claims covers 222 authorised ‘general function’ health claims.

The latest development contributes to the end of the confusion on the food and dietary products market which prevails so far. The European Commission provides food producers with the binding legal clue what labels of the food and dietary products might contain. However, the whole procedure relates ‘only’ to the ‘general function’ health claims (such as ‘vitamin A contributes to the normal function of the immunity system’) and not to the health claims referring to the reduction of disease risk.

The previous delay of the European Commission caused that national producers of food and dietary products were fined for ‘wrong labelling’ of their products despite the fact that there were no binding legal clue what is correct or incorrect claim. Hopefully, there will be established a new practice and more clear approach on the food and dietary products market now.

Public Procurement and Health Care in the Czech Republic

The health care sector is an area which requires highly specialised and sophisticated technologies and materials, a considerable amount of public funds is awarded through these public contracts.

In Czech law, the public procurement process is governed by the Public Procurement Act. The health care sector is further regulated by the Minister of Health’s Order ‘Anticorruption Strategy’. This document, however, binds only the organisations directly governed by the Ministry of Health. Regional hospitals, for instance, do not have to comply with its provisions.

The general problems that exist in the procurement process are magnified in the field of health care. It is due to the high specificity of the sector. The most problematic issues and thus the most common mistakes in the procurement process are: division of a tender, definition of subject matter of a tender and selection of evaluation criteria.

When determining the subject matter of a tender, the contracting authority should not reduce the value of the tender so that it is under a specified amount simply by dividing it into several tenders. That would be a circumvention of the law.

On the other hand, it is desirable to prevent discrimination against small suppliers and decrease the prices. Since complex tenders favor manufacturers with a broad portfolio and assemblers, a reduction in discrimination and prices can be achieved by reasonable division of the tender. As the determination of the subject matter is quite a delicate issue, it shall be considered for each tender on a case-by-case basis.

The subject matter of a tender can be defined in many ways. The general rule says that the names of pharmaceuticals shall not be used for such a definition. Using the technical specification, active substance or method of administration instead, eliminates an exclusion of generics. On the other hand, when there is a special reason for it, using the name of the pharmaceutical is perfectly appropriate. That may be when a specific pharmaceutical has characteristics different from the other generics and these characteristics are desirable for specific purposes.

An issue often discussed in relation to public procurement, especially in health care, is that of evaluation criteria. Should the bids be evaluated solely on the basis of price or should there be multiple criteria? The sole criterion option is generally preferred because it reduces potential corruption. On the other hand, it places extremely high demands on the quality of tender documentation. The specifications must be set up precisely; otherwise the cheapest winning product may happen to be an inappropriate one. Especially in case of highly specialised and sophisticated technologies and material, it is reasonable to evaluate the bids based on a price to quality ratio rather than solely the price.

The aforementioned summary of difficulties is certainly not exhaustive. Contracting authorities should exercise special care and caution at every stage of the public procurement process; especially in the health care sector where the process is extremely difficult and public health is at stake.

First published in Central Europe Pharma News bi-weekly newsletter published by research and consulting company PMR.