Visser Pharmacy on A.Th. Illidge Road.
PHILIPSBURG–Oduber Agencies NV and Visser Trading St. Maarten have lost an injunction filed against Social and Health Insurances SZV over its Pharmaceutical Cost Containment Programme (PCCP) and a cooperation agreement closed between the insurer and wholesaler in pharmaceuticals Orange Pharma in May 2020, which is to be implemented between December 1, 2020 and January 1, 2021.
Oduber Agencies N.V.
The PCCP is a collaborative effort between SZV and the Ministry of Public Health, Social Development and Labour VSA to significantly save cost as it pertains to pharmaceuticals, which is a main cost driver in the healthcare system.
The aim of the programme is to source a preferred supplier, who can deliver pharmaceuticals for a cost-effective price to pharmacies in St. Maarten. Appointing such a supplier would save SZV some NAf. 10 million per year.
Under the PCCP, Orange Pharma was selected as the preferred wholesaler for the delivery of pharmaceuticals at the so-called Z-index price plus a mark-up percentage to cover all additional cost associated with the delivery of medication in St. Maarten.
SZV updated the pharmaceuticals reimbursement fees accordingly and stated in a letter dated September 11, 2020, that it was aiming to implement the contract with Orange Pharma and start delivering pharmaceuticals through this preferred supplier in the final quarter of 2020.
The sourcing of certain pharmaceuticals via other – regional – wholesalers would still be possible if their price is below the Z-index plus a 9.2 per cent mark-up, and for pharmaceuticals that are delivered at pharmacies at a lower price, and for those that are not in the Z-index and are currently being reimbursed by SZV, and especially pharmaceuticals that are lower priced in the region due to the price policy of manufacturers.
In the injunction, which was filed November 17, 2020, Oduber and Visser objected to the “preferred suppliership” of Orange Pharma. They claimed that the principals of transparency, equality, proportionality and care were violated, as well as the “general principles” of good governance.
They also believe that SZV will radically change the pharmaceutical market in St. Maarten by appointing a preferred supplier and that SZV will create a monopoly for the supplier. This is disadvantageous for Visser and Oduber because it will significantly reduce their market share, causing them to suffer loss of turnover.
The introduction of a preferred supplier is a “game changer,” the consequences of which for Visser and Oduber are only now becoming clear, without the legal regime having been changed. Implementation of the collaboration is, therefore, unlawful towards Visser and Oduber and null and void due to conflict with the law, according to Visser’s and Oduber’s legal representatives Camiel Koster and Rogier Wouters of BZSE Law.
On behalf of SZV, lawyers Jeroen Veen and Femke Jansen of Lexwell attorneys at law contested the claims, whereas Country St. Maarten and the minister of VSA were not represented in court.
Where the minister was concerned, the judge ruled that a minister or any civil servant cannot be involved in proceedings in a civil court. Therefore, the claims against the minister were declared inadmissible.
As SZV had formed a tender committee and had invited wholesalers to make a bid “for a cost-effective price” of medication, the court held the insurer for the contracting party in the bidding process and not Country St. Maarten. Therefore, the claims against the government in these proceeding were also rejected.
In the preliminary opinion of the Court of First Instance, SZV did not make it clear in the context of the “tender” what exactly the preferred suppliership entails and which rights and obligations would follow from this cooperation. Only with “hindsight” and with the ultimate cooperation agreement in hand can a definite answer be given. That is why SZV must provide a copy of this agreement to the plaintiffs, the judge said.
In the court’s view, Visser and Oduber should, however, have understood that the tender was aimed at a price reduction for medication in St. Maarten, so that SZV must pay less to pharmacies. This is also the message in a letter of August 20, 2019, from SZV to the wholesalers in which the insurer informs them that the prices of medicines in St. Maarten are too high and that measures will follow to lower these prices if the wholesalers do not take their responsibility.
According to the court, Visser was too late in filing a complaint on October 23, 2020, whereas SZV had informed on February 10, 2020, that the contract was awarded to another party. The court also established that Visser had the same opportunities as other wholesalers. Oduber had not made a proposal.
Visser claimed that its offer was more favourable than the offer from Orange Pharma, but this statement was rejected by SZV as Visser’s mark-up was at a minimum of 18 per cent.
In Visser’s and Oduber’s opinion, the implementation of the cooperation agreement will lead to a restriction of competition on the pharmaceutical market in St. Maarten and to a monopoly position of Orange Pharma, as a result of which they will lose a considerable share of their markets, leading to loss of turnover.
In a recent letter to the Pharmacy Association St. Maarten SZV informed that the prescription fee for pharmacists will be increased from NAf. 7 to NAf. 16.95 on condition that 80 per cent of pharmaceuticals are purchased from the preferred wholesaler.
The court agrees with Visser and Oduber that implementation of the cooperation agreement will lead to Orange Pharma obtaining a dominant position in St. Maarten’s medicine market. It appears that SZV deliberately strives for this, because a financial incentive is promised to pharmacists if they purchase 80 per cent of the medicines from Orange Pharma.
The Court considered it reasonable to assume that this will come at the expense of the market share of the other parties, which will most likely suffer loss of turnover as a result. This does not have to be the case when the other wholesalers are able to offer pharmaceuticals at a lower price than Orange Pharma, but such a downward adaption of the prices for medication is not to be expected in the short term, as pharmacists will most likely purchase their products at Orange Pharma considering SZV’s incentives, the court stated. However, it is up to the judge in the proceedings on the merits to decide whether SZV’s actions in this are unlawful.
In its preliminary judgement, the court ruled that the implementation of the cooperation with Orange Pharma on the planned date is justified, even though this comes at Visser’s and Oduber’s expense. However, this does not mean that SZV may not be obliged to pay damages, but it was left up to the judge in the main case to assess whether the change on the medicine market is part of the risk of doing business, or not.
As the largely unsuccessful parties, Visser and Oduber were ordered to pay the costs of these proceedings.
Source: The Daily Herald https://www.thedailyherald.sx/islands/two-medicine-wholesalers-lose-injunction-against-szv