Foregone bargaining: FAS found collusion in the supply of vital drugs
The Federal Antimonopoly Service has found evidence of collusion in tenders for the supply of medicines for State health care institutions. This includes vitally important drugs. Details - in the material "Izvestia".
Dangerous agreement
The Federal Antimonopoly Service (FAS) of Russia initiated a case for violation of antimonopoly legislation under paragraph 2 of part 1 of Art. 11. 1, Part 1, Article 11 (prohibition of agreements of business entities restricting competition) of the Federal Law "On Protection of Competition". The defendants were LLC "IFC Arfa" and LLC "Health Spaces".
The companies are suspected of collusion in order to maintain prices at tenders for the supply of medicines. Their actions, in particular, affected medicines for citizens entitled to state social assistance, as well as medicines included in the list of vital and essential drugs (VED).
According to the regulator, thanks to collusion organizations won at tenders without reduction or with a minimum reduction from the initial (maximum) price of the contract. We are talking about an aggregate amount of 664,662,140 rubles for public procurement in 62 Russian regions. If guilt is established, the organizations will face negotiable fines in accordance with part 2 of article 14.32 of the Administrative Offences Code of the Russian Federation.
The press service of the FAS of Russia noted that the regulator pays special attention to tenders for the supply of vital drugs. The Service monitors and analyzes them.
- The negative consequence of collusive bidding, including for the supply of medicines, is an increase in budget expenditures due to a decrease in competition, which brings damage from cartels to budgets at all levels," FAS told Izvestia.
The FAS did not give details of the current investigation, referring to the ongoing consideration of the case. At the moment, the service is studying all the actual circumstances of what happened.
Demanded suppliers
According to Rusprofile, the main activity of IFC Arfa is wholesale of pharmaceutical products. The organization actively acts as a supplier in government contracts. During its existence, it has won 4385 tenders totaling more than 4.5 billion rubles. In total, the company had 1,476 customers.
The leading position among the top 5 customers of this company is occupied by the "Procurement Agency" of the Department of Health of Moscow, which concluded 30 contracts with IFC Arfa for 163 million rubles. In second place is the Ministry of Health of the Irkutsk Region - nine contracts for 73.5 million rubles. The third position in terms of procurement volumes went to the Ministry of Health of the Orenburg region, where 14 contracts for 68.6 million rubles were concluded with the company. Rounding out the top five are the Directorate of the Unified Customer of the Ministry of Health of the Moscow Region (22 contracts worth RUB 61.9 million) and the Morozovska Children's City Clinical Hospital of the Moscow DepEd (seven contracts worth RUB 59.7 million).
Prostory Zdorovya Limited Liability Company, in its turn, specializes in the production of pharmaceutical substances, Rusprofile specifies. In total, it has already acted as a supplier in 2133 government contracts worth more than 2 billion rubles. In total, the company has 827 customers.
The first place among them, as well as in the case of IFC Arfa, is occupied by the Procurement Agency of the Moscow Department of Health, which concluded 77 contracts with the company (304.7 million rubles). The second line is occupied by the Health Care Committee of St. Petersburg, which has five contracts for 125.8 million rubles. The joint-stock company "Regional Pharmacy Warehouse" is in the top three with a single contract. It gave 74 million rubles for the services of "Health Spaces". The top five suppliers also include the Ministry of Health of the Orenburg Region, which signed six contracts with the company for 39.7 million rubles, and the Health Committee of the Leningrad Region, which has five contracts for 27 million rubles.
Deception strategy
Such collusions usually work as follows: competing companies agree on the distribution of contracts, determining in advance which of them will be the winner, says David Adams, general director of the professional legal group AID, lawyer. The victory of the right company is achieved through the symbolic participation of other organizations, which submit bids with a minimum price reduction or refuse to actively compete at all.
- As a result, customers are forced to conclude contracts on initial or close to initial conditions, which leads to inefficient spending of budget funds," the expert explains.
Such behavior may be accompanied by various methods of disguise: from registration of false bids to imitation of bidding, adds Sean Betrozov, a practicing lawyer of the Moscow Chamber of Lawyers, a member of the Association of Lawyers of Russia. Often collusions include the use of affiliated companies that are only formally independent.
In some cases, bids are submitted that knowingly contain errors that exclude them from consideration. In addition, fictitious companies registered to front persons are sometimes used, which makes it more difficult to detect such fraud.
According to Alexei Rodin, financial advisor and founder of Rodin.Capital, collusion between participants in government procurement is quite common. For example, on January 14, the Federal Antimonopoly Service initiated a case against Primapharm and Profarm. According to the service, the organizations entered into an anticompetitive agreement within the framework of bidding for the implementation of the national project "Health Care". The total amount of the maximum contract prices exceeded 1 billion rubles.
And on January 16, FAS disclosed another bid rigging, this time during the implementation of the national project "Digital Economy. The contract price amounted to 71.7 million rubles.
The main reasons for such violations are related to insufficient control over procurement procedures, difficulty in confirming the facts of collusion and economic benefits for the participants, who can receive contracts worth multi-millions ofdollars, Betrozov says.
- Analysis of statistics shows that such schemes are most often implemented in areas where high competition is combined with a large amount of government funding, such as medicine, construction and equipment supply," he believes.
The practice shows that despite the active actions of the FAS, not all cases can be detected and suppressed in time, which leads to repeated violations by the same participants, the expert notes.
Proportionate responsibility
At the same time, companies involved in anticompetitive collusions face serious consequences, warns Sean Betrozov. The Law on Protection of Competition provides for fines that can reach significant amounts, depending on the size of the contract.
In case of proof of guilt, organizations face fines from 1/10 to 1/2 of the initial value of the subject of the auction, points out Alexei Rodin. The amount should not exceed 1/25 of the total amount of revenue from the sale of all goods and not less than Br100 thousand.
Fines are imposed on both legal entities and officials involved in the violation. The latter may be fined up to Br50 thousand or disqualified for up to three years, adds David Adams.
- It is also possible to include organizations in the register of unfair suppliers, which deprives them of the opportunity to participate in public procurement for several years, - says Betrozov.
In cases where intent and large-scale damage are proven, it may be a matter of instituting criminal proceedings under articles related to fraud or abuse of power, the lawyer does not rule out. This may entail imprisonment for the guilty parties, especially if their personal interest or selfish motives are proven.
- It is important to note that even a suspicion of collusion can seriously undermine a company's reputation and deprive it of trust from its partners and clients," says the Izvestia interlocutor.
Detect the connection
David Adams believes that cases of collusion related to medical drugs are particularly alarming. When it comes to medicines, the consequences of anti-competitive agreements can be catastrophic, as high prices limit citizens' access to life-saving drugs.
- Public health care institutions often find themselves hostage to the situation, as their ability to choose suppliers is limited. This can lead to a shortage of medicines, the need to use less effective analogs and increased treatment costs," the lawyer warns.
Such schemes undermine confidence in the health care system as a whole, especially if large companies with established reputations are found to be involved, he says.
The solution to this problem requires a comprehensive approach, Betrozov is convinced. In his opinion, tightening control over bidding, introducing automated systems for analyzing bids and increasing liability for violations will help reduce the number of cases of collusion.
- The development of more transparent bidding procedures, including mandatory affiliation checks, will be an important step in the fight against corruption in this area. In addition, more active cooperation between the FAS, law enforcement agencies and public organizations is required," says the expert.
It is also important to develop legal literacy of market participants and conduct active explanatory work, Betrozov believes. The organization of regular training events and the introduction of an early warning system can increase the effectiveness of control.
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