High Court rejects equal treatment challenge to a £1bn medicines procurement exercise

The Technology and Construction Court (TCC) of the High Court has firmly rejected a legal challenge from a potential bidder that the contract award methodology for a series of 3 contracts for the purchase of drugs worth up to £1bn over 5 years breached a contracting authority’s obligation to treat all bidders equally.

Whilst the case was adjudicated upon the unique facts surrounding the procurement exercise, the case reinforces that contracting authorities enjoy a wide margin of discretion when setting the award criteria and methodology for a public procurement.

Of particular importance is the Court’s finding that a scoring methodology will not be found to infringe the principle of equal treatment simply because it will de facto be more favourable to certain bidders than others

The case, AbbVie Ltd v NHS Commissioning Board (operating under the name of NHS England) [2019] EWHC 61 (TCC), concerned a competitive dialogue procedure run by NHS England under the Public Contracts Regulations 2015 in order to select suppliers to provide drugs and related initiatives for countering the infectious liver disease, Hepatitis C,the largest ever procurement of drugs ever undertaken by the contracting authority, NHS England.

AbbVie Ltd challenged two specific aspects of the rules governing the Procurement, which it says amount to a breach of the duty of equal treatment and/or were otherwise unlawful:

  • Firstly, a “dummy price mechanism”, involving a revenue capped model, which had been established by NHS England to impute a price to a bidder in respect of a particular patient group, even if the bidder did not produce drugs capable of treating that group. AbbVie claimed that this mechanism conferred an unfair advantage on bidders that were unable to supply part of the market, as compared to those that could do so; and,
  • Secondly, NHS England applied an “unmetered access model“, which entailed payment of a fixed fee in return for the treatment of a number of patients which the supplier had committed to treat. AbbVie argued that this model was unfair because a failure by one bidder to treat the number of patients that it had committed to treat might lead to other bidders being required to supply additional treatments to patients exceeding the number they had committed to treat, without receiving additional remuneration.

In the Court’s judgement published on 18th January 2019, Mr Justice Choudhury dismissed both claims, stressing that contracting authorities are afforded a wide margin of discretion when designing their award criteria and methodology.

Moreover, an authority would not necessarily breach the equal treatment principle just because it chose to apply a scoring system which could favour one bidder as compared with an alternative scoring system.

As regards the dummy price mechanism, the Court considered that the fact that a bidder might score better than a rival under a particular model did not necessarily mean that the model violated the equal treatment principle.

The choice of model fell within the wide margin of discretion afforded to a contracting authority when setting the award criteria and scoring methodology which best met its objectives.

Furthermore, evidence presented to the Court showed that, despite the dummy price mechanism, the claimant would still be able to win the most valuable contract under the procurement, depending on the prices which it chose to submit. In addition, the Court found that, even if the dummy price mechanism had infringed the principle of equal treatment, its use was objectively justified.

In adopting that mechanism, NHS England was pursuing the legitimate aims of increasing competition, achieving greater value, reducing costs and enabling a like-for-like comparison between different tenders. The mechanism’s combination of dummy prices and capped revenues was held to be a proportionate means of achieving those aims.

In relation to the unmetered access model, the Court found that all bidders were in a comparable position and subject to the same rules. It rejected AbbVie’s claim that it was not in a comparable position because of the greater popularity of the treatments which it was able to supply, compared to those of its competitors.

The alleged advantage enjoyed by AbbVie due to its more popular product reflected “a difference in its competitive position” which did not need to be catered for in the contracting authority’s evaluation methodology.

In any event, even if the unmetered access model had infringed the principle of equal treatment, there was an objective justification. According to the Court, the fixed fees inherent in this model were a proportionate means of achieving the legitimate aim of encouraging investment in public health solutions for eliminating Hepatitis C.

An unusual feature of this particular case is that the legal challenge was to to the tender’s design and methodology, rather than to the actual assessment decisions made by the contracting authority. However, the strict time limits for starting proceedings under the Public Contract Regulations 2015 (to all intents and purposes, 30 days from the date when the claimant first knew of the alleged breach) meant that it would be too late to challenge that methodology once the outcome of the NHS England’s competitive dialogue procurement procedure was known.

Nevertheless, this complex case illustrates the increasing willingness of suppliers to go to court to contest the fairness of public procurement procedures. Nonetheless, the overriding message that emerges from the ruling is that contracting authorities have a wide margin of discretion when designing the ground-rules and scoring methodology for a procurement.

Absent a truly egregious infringement, the courts will generally be reluctant to interfere with the exercise of that discretion. Moreover, some divergence from the unequal treatment principle may be permissible if the authority can point to an objective justification.