This blog is part 6 of a series on the MEAT value-based procurement project, an initiative that advocates towards a shift from price-based procurement towards value-based procurement. It does so by defining a Most Economically Advantageous Tendering (MEAT) framework that includes the value of medical technologies, services and solutions in procurement processes across Europe. Read part 1, part 2, part 3, part 4 and part 5.
When the new EU Directive on public procurement was finalised in 2014, replacing the previous framework, it was hailed by the European Parliament as a tool for ensuring better quality of supplies and services and value for money. The European Parliament was also keen to emphasise how the Directive was designed to encourage innovation, improve SMEs’ access to public sector markets and to integrate environmental and social considerations into procurement policy.
One of the tools within the Directive to achieve these aims was the requirement for contracting authorities to base the award of contracts on the most economically advantageous tender (MEAT). Contracting authorities were also permitted to use lifecycle costing in their award criteria in order to assess total costs. Previously, tenders could be awarded either on the basis of lowest price, or on MEAT criteria which typically included a balance of price and quality criteria.
All of this seemed to be good news for those of us with an interest in value-based healthcare.
Defining what MEAT really means
However, whilst the terminology was promising, it was misleading. Indeed the Directive provided that MEAT could be based either on price only, cost only, or best price quality ratio. Although Member States have been given a choice when implementing the Directive into national law whether they wanted to exclude or restrict the use of price or cost only as the sole MEAT criterion, not all are choosing to restrict it. The UK, for example, has chosen to retain the flexibility granted to contracting authorities.
Now, two years later, and with the deadline for transposition into national legislation having just passed, it is time to ask whether the European Parliament’s objectives will be achieved and whether emphasis on value for money and innovation will really be used to promote a major shift in procurement procedures.
As a lawyer, this is a question I am asked on a regular basis. Clients in the healthcare sector frequently express concern about how tenders are run, with authorities tending to choose the lowest priced products rather than considering a combination of outcomes and overall costs.
The Directive contains little in the way of rules or guidance on how to construct appropriate award criteria and national authorities are equally reluctant to provide guidelines for fear of tying the hands of procurers. Whilst it should be acknowledged that the Directive has tried to introduce more flexible procurement procedures with shorter deadlines, ultimately these procedures remain unwieldy and restrictive.
In practice, many authorities resort to poorly managed processes based on a lack of understanding of options available in the market.
Challenges and opportunities
With significant pressure on budgets, this procurement approach may achieve short term financial savings, but in the long term will not encourage progress. Ultimately, there is a risk that the long-awaited procurement reforms will not radically change how procurement is undertaken in the medical device and technology sector.
However, there are positives to take from this new legal framework. The rules now explicitly encourage pre-tender market engagement – authorities are advised, subject to certain safeguards, to go out and talk to suppliers before drafting tenders.
This provides a key opportunity to change attitudes. By engaging early, companies and industry representatives can encourage authorities to consider more innovative approaches including the available offerings of SMEs and to consider broader health outcomes.
However, in order to change the mindset that prevails among procurement authorities, the industry will need to work hard to engage in and foster debate. Small tweaks in the legal framework will not be sufficient. The work MedTech Europe is doing in partnership with the Boston Consulting Group and procurement experts in this area can play a valuable role in educating decision-makers and unleashing the full potential of the procurement reforms to drive value-based healthcare.
We are still in the early days of implementation but we are now entering a crucial phase which will determine whether the Directive is a catalyst for fundamental change.
Value in MEAT procurement
Healthcare procurement often focuses only on the purchase price. This fails to address the needs of other stakeholders such as patients, providers, health systems and society as a whole. It also clouds the true cost of care and does not account for the economic value of health and care.
The MEAT Value-Based Procurement initiative places at its core the outcomes that matter to patients, quality and further benefits for providers, health systems and society.
By choosing MEAT value based procurement instead of selecting the product with the lowest up-front cost, procurement authorities can factor the real value of a product into their decision-making and obtain the most economically advantageous solution.
‘Value’ in European law
The new EU directive on public procurement encourages this smarter, more holistic approach to procurement and innovation.
The MEAT value-based procurement approach can help to break down organisational silos within healthcare institutions, reduce inefficiencies and spur innovation-driven investments. For more information about the MEAT Value-Based Procurement initiative, click here.