New EU directives on public procurement – how will procurement of Swedish health care be affected?

On 11 February 2014, the Council of the European Union adopted a package of new public procurement directives (the “Directives”) made up of two directives replacing the Public Sector Directive (Directive 2004/18/EC) and the Utilities Directive (Directive 2004/17/EC) and a new directive on concessions. The Directives mark the most significant reform of public procurement law since 2004, when the current directives were adopted.

The new Directives support economic growth and deficit reduction by making the public procurement process faster, less costly and more effective for businesses and procurers alike. The general EU procurement principles will not be changed and the new rules have a similar overall structure as the existing rules. However, the rules are promoted to have a greater degree of flexibility which will enable better commercial outcomes.

The Directives must be incorporated into the Swedish legislation within two years. Mr. Eskil Nord has been appointed as a special investigator; delegated to provide suggestions on how the Directives should be implemented in Sweden and his report shall be submitted later this year. The question is, thus, how the new Directives will affect the Swedish health care.

Procurement of Swedish health care

Health care services are currently classified as B-services and are not subject to the directive controlled area within the Swedish Public Procurement Act. Nevertheless, health care services are covered by the general EU procurement principles (the principles of equality of treatment, on-discrimination, proportionality, transparency and mutual recognition). In Sweden, procurement of B-services is regulated in Chapter 15 of the Public Procurement Act. The rules in this chapter are in many respects similar to those stipulated in the existing directives.

Since 2009, Sweden’s county councils and municipalities also have the opportunity to introduce systems of choice (Sw. valfrihetssystem) for health care services and social services. It is optional for municipalities to introduce systems of choice, but mandatory for county councils within the primary health care.

Regarding procurements of pharmaceutical products, medical devices and other health-related services and products, these are often (depending on the value) subject to the directive controlled area within the Public Procurement Act.

The Directives impact on Swedish health care

Will the Swedish public procurement legislation within health care be affected by the new Directives? The answer is yes. As a general starting point, we can assume that the framework of the Swedish system of choice will remain in one way or another. Conversely, healt h care services, classified as Bservices, will be affected as the division of A and B-services will be abolished according to the Directives.

Furthermore it should be noted that, according to the Directives, health care services are deemed inappropriate for the application of the regular procedures for the award of public service contracts. Since the rules of the procurement procedures available in Chapter 15 of the Public Procurement Act are similar to those stipulated in the directives, the procurement rules for these services have to be changed. However, the Directives clearly state that procurement of health services with a value of, or exceeding, EUR 500,000 must be in accordance with the fundamental principles of transparency and equal treatment.

The procurement of pharmaceutical products, medical devices and other health-related services and products will also be affected by the general changes when the Directives are implemented. As mentioned earlier, the changes will lead to more flexible and simple procurement procedures and better market access for small and medium sized enterprises. Moreover, the allocation criteria will be changed, implementing possibilities for the purchasers to consider the mandatory regulations in social, labor and environmental law as well as life cycle costs of products or services, i.e. purchasers’ costs such as acquisition of raw material, environmental costs and cost for removal.

As a final point, innovative products and services are vital to research and development within health care. Through the Directives, a new procurement procedure will be implemented: innovation partnership. This procedure will allow public authorities to call for tenders to solve a specific problem without pre-empting the solution, thus leaving room for negotiations between the authority and the bidding companies to find the most appropriate answer. Contracting authorities will have access to this procedure when a need for the development of an innovative product, service or works and the subsequent purchase of the resulting output cannot be met by solutions already available on the market. Innovation partnership is deemed to simplify the already existing procedure competitive dialogue procedure (Sw. konkurrenspräglad dialog). According to the Swedish Competition Authority, only 25 out of almost 20,000 Swedish procurements in 2012 were carried out as competitive dialogue procedure. Hopefully innovation partnership will be used in a further extent as it is vital with innovation within health care. However, the prosperity of innovation partnership will, in the end, depend on the purchasers’ organization, capacity and resources to structure the procurements and to draft the agreements.