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Brazilian Government formally reinstates Product Development Partnerships (PDPs), but the General Accounting Office (TCU) may pose a hindrance

October 2, 2023

On September 27 and 28, in order to formally reinstate the PDPs Program to celebrate new partnerships, the Brazilian Government published three regulations: Decree #11,715/2023, GM/MS’s Ordinance #1,354/2023, and Decree #11,714/ 2023.

Decree #11,715/2023, published on September 27, established the National Strategy for the Development of the Health Economic-Industrial Complex – CEIS. This strategy aims to provide guidance for both public and private investments in the productive sectors of healthcare and innovation, seeking productive and technological solutions to mitigate vulnerabilities within the Brazilian Public Healthcare System (SUS) and expand access to healthcare (article 1). The Government anticipates an investment of 42.1 billion Brazilian Reais by 2026 from both public and private sectors to the instruments of the new Strategy, one of them, if not the main one, being the PDPs Program.

As Decree #11,715 does not address the implementation of the Strategy, GM/MS's Ordinance #1,354/2023 was published on September 28 precisely to officially address what the Government had previously announced through news releases1. The Ordinance lists the six structuring programs through which the Strategy for the Development of the CEIS will be implemented (article 4). Among these, as mentioned, is the PDPs program, which involves partnerships forged between public and private laboratories, with support from the Ministry of Health, to facilitate the transfer of particular medicine technology and ensure supply to SUS.

The objectives of the National Strategy are very similar to those of the PDPs. They include, for example, (i) mitigating vulnerabilities within SUS and expanding access to healthcare by advancing the development and integration of healthcare technologies; (ii) strengthening local production of goods and services; (iii) coordinating public policy instruments, including leveraging State procurement power, financing, regulation, scientific and technological infrastructure, and other incentives, in order to foster the development of CEIS (article 3).

Additionally, Decree #11,715 repeals Decree #9,245/2017, which outlined the National Policy for Technological Innovation in Health – PNITS which also included PDPs as one of its strategic instruments. Decree #9,245, in articles 7 to 12, contained some rules aimed at formalizing PDPs, such as the object of the partnerships, the minimum content for a contract, and that the selection of partners should be objective, transparent, and simplified. With the amendment, partnerships are now ruled exclusively by Consolidation Ordinance #5/2017 of the Ministry of Health, Annex XCV, which already provided more specific and detailed regulations for PDPs.  

Decree #11,714/2023, published on September 27, provides for the Consultative Committee – CD and the Technical Assessment Committee – CTA within the scope of CEIS. Both interministerial bodies have competencies related to the analysis and evaluation of PDPs both in the initial stage of their formalization and during their execution. So far, these bodies have retained their existing powers as outlined in Decree #10,001/2019, which has been repealed.

Regarding PDPs, Decree #11,714 did not bring significant changes to the powers of the CD and CTA. The publication of the Decree suggests an effort to make the composition of the CD and CTA compatible with the current government structure (e.g., changes in Ministries), as well as to delegate some new responsibilities, related to the Local Development and Innovation Program, which will also be part of the National Strategy for the Development of the CEIS.

However, the Government's effort to reinstate PDPs could be hindered by the Brazilian General Accounting Office (TCU)'s recent deliberation. Also on September 27, the Full Court recommended that the Ministry of Health ceases entering into new partnerships until weaknesses identified in the PDP Program are properly addressed (Ruling #2015/2023, case #TC 034.653/2018-0). Such weaknesses were identified by the TCU in an audit conducted by itself, which led the Court, in 2017, to issue determinations to the Ministry of Health in order to remedy them (Ruling #1,730/2017, case #TC 011,547/2014-6).

Among the shortcomings highlighted and which required action from the Ministry of Health, the TCU identified (i) lack of objective criteria and evaluation parameters for defining the list of strategic products for SUS; (ii) lack of mechanisms to ensure that the selection of private laboratories observes the principles of transparency, legality, and ethical conduct; (iii) lack of objective parameters for analyzing PDP proposals.

In the recent appellate decision of September 27, the Full Court of the TCU concluded that the Ministry of Health has not solved the highlighted issues. As a result, the Court has decided to recommend the suspension of the signing of new partnerships, and has also determined: (i) establishment of objective criteria for defining the list of strategic products for SUS, and parameters for evaluating compliance with such criteria; (ii) establishment of objective parameters for carrying out analysis of project proposals and pre-defined criteria for the process of assigning grades to proposals; (iii) definition of deadlines for analyzing monitoring reports and carrying out technical visits.

To understand the future of PDPs, it will be necessary to follow the Brazilian Government's next measures in this effort to reinstate the Program, as well as what will be done in relation to the TCU's determinations and recommendations.  

For more information on this subject, feel free to contact us via info@lickslegal.com.

1 During the inauguration of the National Strategy for the Development of the CEIS, the Government provided a presentation (link) outlining its main aspects, including the six structuring programs.

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