The financial pressures on the NHS have resulted in some questionable strategies in the use of framework contracts to procure biosimilar medicines.
The NHS’s Commercial Medicines Unit (“CMU”) has been known to use the (usually small) differences between biosimilars and the original product to extract the lowest possible prices from pharma companies by artificially distinguishing between products, through the use of exclusive procurement frameworks.
According to the European Medicines Agency’s guidance on biosimilars, the active substance of a biosimilar and its reference medicine is essentially the same, though there will be differences, resulting from their manufacture by living organisms rather than traditional chemical synthesis.
Despite this guidance, the CMU has used the existence of differences to justify procuring new, exclusive, frameworks for different biosimilars as they receive marketing authorisation, despite having in place existing frameworks which could have been reopened. Equally, the Invitation to Offer for the new frameworks have specified that only the new biosimilar manufacturer is eligible to bid.
There is nothing unlawful about public authorities employing parallel procurement frameworks for similar products. However, there are serious legal concerns with arbitrarily limiting the companies eligible to bid on a framework by excluding certain players from the competition.
These legal concerns are compounded by the risk that in small markets, such as for biosimilar medicines, information about the prices established by the earlier frameworks are likely to be relatively easy to obtain. As a consequence, the sole bidder for the new framework will be well placed to undercut its rivals on the earlier procurement, while those rivals are precluded from bidding in the new procurement process.
If the new bidder does win with an undercutting approach, those who won the initial framework are likely to find it impossible to compete with the lower priced products for some or all of the potential demand that they had originally hoped to supply, as they are contractually locked into the price they bid on the original framework.
In effect, the existing framework will be rendered redundant, the original bidders’ access to the NHS purchasing market will be restricted, and the new biosimilar bidder will have secured a competitive advantage and privileged market position.
If a company is excluded from a procurement process for reasons that appear spurious and likely to affect its market position, it is important to challenge the CMU’s decision-making process as soon as possible during the ten day ‘standstill period’.
The ‘standstill period’ is engaged after the winning bid has been selected and prevents the public authority (in this case the CMU) from entering into the framework agreement, or contract, for ten working days in order to provide an opportunity to challenge the contract award.
Tactically it is also important that work starts on a potential claim in the High Court, as our experience is that the CMU is more likely to reconsider its approach if it is likely to have defend its procurement decision in court.
A procurement challenge can only be brought for up to thirty days from the point when the claimant knew or ought to have known that grounds for starting proceedings had arisen. Once a claim is issued the procurement process is automatically stayed, although public authorities are usually successful in requesting that the stay is lifted.
Finally, it is noteworthy that it is not only in the procurement field that biosimilar cost savings are being pursued. The UK Competition and Markets Authority has recently announced an investigation into Merck, in relation to its Remicade brand of infliximab, for foreclosing biosimilar competitors by entering into rebate arrangements with purchasers. A report on this development is available here.