MoH issues new PDP regulation and establishes a new program named “PDIL”

June 25, 2024

MoH issues new PDP regulation and establishes a new program named “PDIL”

On June 21, 2024, the Ministry of Health (MoH) finally established the new framework for two of the public policy programs for industrial development in the health sector: (i) Ordinance #4,472/20241, which sets new regulations to govern the Partnerships for Productive Development Program – PDP Program; and (ii) Ordinance #4,473/20242, which officially sets the Local Development and Innovation – PDIL Program. The publication of both regulations took place four months after the end of the Calls for Contributions, that occurred between December 11, 2023, and February 23, 2024, to receive suggestions on both drafts (Call for Contributions #54/2023 and #53/2023).

Regarding the PDP program, MoH’s Ordinance #4,472/2024 formally revoked Annex XCV of Consolidation Ordinance #5/2017 and included Annex CX, with 80 articles governing the program. The Ordinance’s publication surprised stakeholders, given that another round of discussion on the draft was expected once the Call for Contributions had finished. In any case, expectations on the new regulation were high, considering its goal to set the stage for new phase of the PDP Program (no new PDP agreements have been signed since 2018). However, the new regulations aim to solve the fragilities pointed out by the Government’s Accountability Office (named “TCU” in the Portuguese acronym) in its audit conducted over the program in 2017. In September 2023, the TCU recommended that the MoH refrain from signing new PDPs until “mechanisms are established to objectively assess the completion and effectiveness of the technology transfer, as well as to measure the achievement of objectives”, among other several determinations to change the regulation (Decision #2015/2023).

The new regulation maintains in general the current dynamic of PDPs, establishing:

  • The same “types” of parties, but with some minor changes (the government-owned pharmaceutical industry – GoPI can now also be a scientific, technological, and innovation institution – ICT, as per article 5, I of the Annex; creation of new parties, such as the Technology Transferring Entity – ETT and the Technology Receiving Entity – ERT, as per article 2, X and XI of the Annex; and the participation of non-profit organizations, such as international organizations, is now allowed as per article 5, paragraph 4 of the Annex);
  • Filing of the PDP proposal within a certain period to be defined by the MoH, based on a defined list of products (the term will now be of at least 30 days, as per article 7, paragraph 1 of the Annex, and the drugs that may be the eligible for new PDPs are listed in the Matrix of Productive and Technological Challenges in Health, established by MoH’s Ordinance #2,261/2023, as per article 4 of the Annex);
  • Proposals are analyzed by the Technical Assessment Commission – CTA and then decided by the Deliberative Committee – CD, based on criteria defined in the regulations (the proposals are evaluated firstly regarding their merit and must reach a minimum score; secondly, only those that reach the minimum score move on to the classification evaluation, as per article 15 and subsequent articles of the Annex);
  • Formalization of the PDP through multiple instruments, including the term of commitment and the agreement signed between the PDP partners (the private entity – EP becomes a party to the term of commitment, which until then was signed only by the MoH and the GoPI, as per article 2, XXIV of the Annex, and there is now the productive and technological arrangement, which will govern the division of responsibilities between PDP’s parties, as per article 2, I of the Annex);
  • Organization in stages of a PDP in IV phases (but now with clearer milestones on the events that start and end each phase, as per article 6 of the Annex, as well as maximum terms for phases II and III, respectively 3 and 10 years, as per article 7, paragraph 1 of the Annex);  
  • Payment of the EP for the tech transfer through the acquisition of the product via a bid waiver, at prices compatible with those practiced in the Brazilian Public Healthcare System – SUS, to meet a defined percentage of public demand (MoH’s concern with the benefit from a financial standpoint of acquisitions within PDP seems to have increased; there is a new a provision that, before phase III begins, projects will undergo a new analysis by the CTA and the CD to review their main elements, including updating the price and MoH’s demand, as per article 33, paragraph 5 of the Annex, and that if the percentage of SUS’ demand to be met by a PDP increases, there shall be a price reduction, as per article 36, paragraph 2 of the Annex).

There has also been an improvement in MoH’s monitoring on the tech transfer. The new regulation issues stricter monitoring of the tech transfer process by creating two new reports and some rules. Article 49 of Annex created the “Tech Transfer and Internalization Report”, which must be sent by the GoPI to the MoH within 90 days of the end of Phase III, providing documentary evidence of the absorption of the technology, as well as the production of the API in the country. Article 50 of Annex also provides that a “Technology Transfer and Internalization Verification Report” will be drawn up by the MoH after an on-site verification at the ETTs. There is also a provision in article 32 establishing that PDPs will be automatically stayed at the end of the period approved for Phase II, so that the MoH can reassess the feasibility of maintaining the partnership.

The question that remains is whether the publication of the new regulation will be enough for the MoH to continue with the program by signing new PDPs or whether it will wait for a position from the TCU, especially if the new rule resolves the fragilities already identified. Formally, there is no prohibition on the MoH signing new PDPs. The TCU made only one recommendation and the MoH's position, already presented to the TCU on April 15, 2024, is that the fragilities have been resolved in the new regulation. In fact, the MoH has already announced that it won't be long before new proposals can be presented. If the MoH decides not to follow the recommendation, it will need to adequately justify its decision. In any case, on October 20, 2023, the Federal Attorney General's Office (named “AGU” in the Portuguese acronym) filed a motion for reconsideration against TCU’s staying recommendation. The request is still pending decision and, according to public information, TCU has not yet analyzed the new regulation.  

Finally, MoH’s Ordinance #4,472/2024 requires that all technological development and tech transfer agreements and partnerships that aim to supply products to SUS must comply with the new regulation. This adaptation is mandatory for the agreements and partnerships that have been established by December 31, 2022, or that, at the time of publication of the new regulation, have a supply agreement with the MoH in place, as per article 5, paragraph 1. To be considered legally valid, the adaptation must refer to procedural aspects like complying with the new deadlines, preparing the new reports, but cannot be used to validate unacceptable irregularities in the formation of such partnerships.

As for the new program named PDIL, it was created by the National Strategy for the Development of the Economic-Industrial Health Complex released in September 2023, and now formally issued by MoH’s Ordinance #4,473/2024. The program's rules are now set out in the 27 articles of Annex CIX of Consolidation Ordinance #5/2017.

PDIL comprises projects aimed at developing new technologies and/or products that are covered by the Matrix of Productive and Technological Challenges in Health (MoH’s Ordinance #2,261/2023) for manufacture in national territory, as per article 1 of the Annex. These projects will be proposed by IPs, ICTs, or private non-profit organizations, which may establish strategic alliances in cooperation with other IPs, ICTs, private non-profit organizations, public or private companies, and startups, as per article 7 of the Annex.

Unlike the PDPs, a PDIL project does not necessarily include the supply of the technology/product to the MoH, but the MoH will have the option of hiring the supply within a period of up to 10 years after the successful conclusion of the PDIL, based on article 5, paragraph 3 of the Annex.

In addition, there are no pre-defined legal instruments for the implementation of PDIL, which will be defined by the Science, Technology, and Innovation and the Economic-Industrial Health Complex Department on a case-by-case basis when analyzing filed proposals, as per article 9, III and IV of the Annex. Among the possibilities, there are technological orders, technological compensation agreements, among others, as per article 5 of the Annex.

The dynamic of filing proposals will be similar to PDPs’, with a period of at least 30 days for submission to the MoH, based on the Matrix of Productive and Technological Challenges in Health, as per article 6, paragraphs 2 and 3 of the Annex.

Both Ordinances have already entered into force. However, for the programs to start working in accordance with them, the MoH must issue internal regulations for the CTA and the CD, as they need to set important provisions, such as the scoring of proposals for approval purposes, as per article 15, I of the Annex (MoH’s Ordinance #4,472/2024) and article 12, I of the Annex (MoH’s Ordinance #4,473/2024), and guidelines for ruling appeals and criteria for dividing up the MoH’s demand (specifically for PDPs, as per article 23 of the Annex of MoH’s Ordinance #4,472/2024).

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1Portuguese version available at link.

2Portuguese version available at link.