New rules on Productive Development Partnerships (PDP)
Summary
On June 21, 2024, Ministry of Health Ordinance GM/MS No. 4,472/2024 (“Ordinance“) was published, changing the previous regulations on PDPs. The rule came into force on the date of its publication.
The main changes brought about by the Ordinance are:
- Need to adapt partnerships, including technological collaborations, already established for the PDP model when there is centralized purchasing by the Ministry of Health;
- Explicit inclusion of the possibility of a Scientific, Technological and Innovation Institution (“ICT“) participating in the partnerships;
- Express provision that the “internalization of technology” includes the manufacture of the API and Critical Technological Component (CTC) in national territory;
- Definition of new eligibility criteria for technologies that could be the subject of a PDP;
- Definition of milestones for starting and ending each phase of the PDP and a time limit to conclude Phases II and III of 3 and 10 years, respectively. For medical devices, the Phase III deadline will be 5 years, extendable for a further 5 years if the Executive Project provides for incremental innovations;
- Provision of objective requirements that must be included in the project and contracts, including full access to the knowledge and production technology of the product object of the PDP;
- Need for a public tender to select the private partner;
- Establishment of objective criteria for evaluating and classifying projects; and
- Provision for sanctions for non-compliance with the Ordinance and total or partial non-execution of the Term of Commitment.
In depth
The Partnership for Productive Development (“PDP“) is defined as a partnership through which a private company transfers to a public institution or ICT the knowledge necessary for the local production of strategic technologies and products for the SUS, in exchange for a preferential acquisition, without public procurement, of products during the technology absorption period.
According to the new Ordinance, other types of partnerships that (i) involve the transfer of technology or technological development; (ii) have been entered into by public institutions and ICTs; and (iii) are aimed at local production for supply to the SUS should be adapted for the PDP model. This is a reaction to the use of other types of collaboration to avoid the strict rules of a PDP in relation to the level of technology transfer.
The Ordinance establishes a series of criteria for product eligibility, including the product/technological solution being included in the Matrix of Productive and Technological Challenges in Health, to be established by an act of the Minister of Health, the existence of a marketing authorization or the prospect of submitting the marketing authorization and the absence of a patent restriction affecting the proposed arrangement or the loss of the restriction within thirty-six months from the date of submission of the project proposal.
The previous ordinance already divided the PDPs into phases, however, the Ordinance now establishes some new time frames for starting and ending each one, as well as maximum deadlines for completing these stages:
- Phase I: Phase of submission of the project proposal by the public institution/ICT, analysis by the Ministry of Health and publication of the result, which begins after the end of the proposal submission period and ends with the publication of the result or the extract from the Term of Commitment;
- Phase II: Preparation phase for the execution of the technology transfer between the partners, which begins with the publication of the extract of the Term of Commitment in the Federal Official Gazette (DOU) and ends with the publication of the instrument formalizing the first acquisition of the product. This stage must be completed within a maximum of 3 years;
- Phase III: Phase in which there is a transfer of technology covering the process of internalizing the technology and the production and supply of the product that is the object of the PDP by the public institution/ICT, which begins with the publication of the instrument formalizing the first acquisition of the product and ends after the period approved by the collegiate bodies for internalizing the technology has elapsed. This stage must be completed within a maximum of 10 years; and
- Phase IV: Verification of the conclusion of the transfer and absorption of the technology covered by the PDP, as provided for in the Executive Project, which begins immediately after the end of Phase III and ends with the publication in the DOU of the extract from the term of deliberation for the internalization of the technology.
In addition to a clearer division of each of the phases of the PDP, the Ordinance also established (i) objective requirements that must be included in the project and will be considered for purposes of evaluating the PDP proposal; (ii) objective criteria for evaluating the proposal merit and classification (such as the adequacy of the schedule, the availability of human resources to make the project viable, the shortest period for internalizing technology and production, investments made by the private entity to carry out the PDP, the lowest overall price proposal, among others); and (iii) the express need for a public call for tenders to select the private partner, which was an affirmation of the understanding that had already been adopted by the Federal Court of Auditors (“TCU“).
The way in which the degree of national verticalization and the transfer and access to the Master Cell Bank (“MCB“) or equivalent, in the case of biotechnological products, as well as to the Master Drug Archive, in the case of chemical synthesis and mixed synthesis products, has been detailed a little more. For digital information and connectivity technologies, the proposed project must cover the field of core technology. Also, the concept of “internalization of technology” now provides for the manufacture of API and CTC in national territory, which was not expressed in the previous rule. Therefore, the existence of patent protection may have an impact on the signing of PDPs and will need to be assessed on a case-by-case basis.
Although the current ordinance is clear on the fact that the MCB must be supplied and also that the transfer of technology must be integral, there are some provisions that leave room for defining the level of integration of the technology.
Finally, sanctions were also provided for in the event of non-compliance with the rules of the Ordinance and/or partial or total non-execution of the Term of Commitment, including a warning, fine and temporary suspension of participation in new PDPs. The sanctions for non-compliance may be offset by other compensatory measures, to be accepted and defined at the sole discretion of the government.
