Abbvie Ltd v The NHS Commissioning Board (Operating Under the Name of NHS England)

Hearing dates: 13th, 14th, 15th, 20th and 22nd November 2018

JUDGMENT APPROVED

Introduction

The Claimant, AbbVie Ltd, is a manufacturer of pharmaceutical products. The Defendant, the NHS Commissioning Board (NHS England), is the statutory body with responsibility for, amongst other things, procuring drugs for use in the NHS. In 2018, the Defendant commenced a procurement exercise (“ the Procurement”, sometimes labelled the “strategic procurement”), pursuant to the competitive dialogue procedure, for the award of up to three public contracts for the supply of Hepatitis C (“ HCV”) treatments and related elimination initiatives. This is the largest procurement for drugs ever undertaken by the Defendant and is worth up to about £1 billion over a period of up to five years. The Procurement is still ongoing having reached stage two of three stages. The contracts are due to commence in April 2019.

The Claimant complains about two specific aspects of the rules governing the Procurement, which it says amount to a breach of the duty of equal treatment and/or are otherwise unlawful:

i) The first is the “dummy price mechanism” (“ DPM”). The DPM operates under the Revenue Capped Model (“ RCM”) of the Procurement to impute a price to a bidder in respect of a particular HCV genotype/patient group notwithstanding the fact that that bidder does not produce any drugs capable of treating that group. The Claimant contends that the DPM thereby confers an unfair advantage on a bidder unable to supply part of the market as compared to a bidder that can;

ii) The second relates to the rules under the Unmetered Access Model (“ UAM”) of the Procurement. Part of the UAM involves the payment of a fixed fee in return for the treatment of a number of patients which the supplier has committed to treat. The Claimant contends that the relevant rules operate unfairly in that the failure by one bidder to treat the number of patients that it has committed to treat means that other bidders may be required to supply treatments to patients exceeding the number they have committed to treat without additional compensation or remuneration.

The Claimant invites the Court to declare that the two main tender documents, the Invitation to Participate in Dialogue (“ ITPD”) and the Invitation to Submit Final Tenders (“ ISFT”), are unlawful in these respects and to order that they be set aside, pursuant to reg. 97 of the Public Contract Regulations 2015 (“ PCR”). This would require the Defendant to re-issue the tender documents and seek further bids.

The Defendant denies that there is any unequal treatment or that the Procurement is unlawful. It contends that a bidder that is only able to provide drugs appropriate for part of the market is in a different position from a bidder who can supply the whole market, and that, in those circumstances, the application of the DPM for the purposes of assessing bids does not involve treating like situations differently. Alternatively, the Defendant contends that if there is any unequal treatment, such treatment is justified as a means of adopting a “whole market approach”, which facilitates three-way competition and maximises the health benefits achievable from the Procurement.

As to the UAM, the Defendant says that the Claimant's complaint is concerned more with the content of the contract rather than the procedures for their procurement, and that, as such, it falls outside the scope of the PCR. Even if the complaint is within scope, it is said that this is a case where the same rules are applied to all bidders and there is therefore no unequal treatment. Finally, it is said that fixed fees are justified in any event as a means of encouraging suppliers to invest in and adopt effective initiatives for the elimination of HCV.

Confidentiality

The fact that the Procurement is ongoing means that the actual bids and the Defendant's analysis and assessment thereof must remain confidential in order to preserve the integrity of the tendering exercise. In this open judgment, I shall not refer to confidential material insofar as it is possible to do so. There is a Confidential Annex to the judgment which contains sensitive information, and which is not to be published.

Witnesses

Perhaps unusually in a case where the challenge is to the tender design rather than to the actual assessment decisions made by the contracting authority, I have heard from a number of witnesses. The Claimant called one witness, Mr Neil Pumford, the Claimant's Business Unit Director for Hepatitis C. He gave evidence as to the Claimant's understanding of the Procurement and the perceived unfair impact that it had. Save in one respect, Mr Pumford gave evidence in a largely straightforward manner and fairly made concessions in cross-examination where appropriate. The one aspect of his evidence which was less satisfactory was in relation to a series of questions about the manufacturing cost of the Claimant's drugs. Mr Pumford claimed to have “ no idea” what those manufacturing costs were. This was a surprising claim to make since, as Business Director, Mr Pumford might be expected to know the margins available to the Claimant when setting a price for its drugs. Upon closer questioning, Mr Pumford accepted that the manufacturing costs would certainly be comfortably below the bid prices submitted by the Claimant and was sure that these would be “ fairly low”. However, he maintained that the actual costs were not known to him. Although this aspect of Mr Pumford's evidence was a little unsatisfactory, it did not undermine the general impression that Mr Pumford was a witness of truth doing his best to assist the Court.

The Defendant called three witnesses. The first of these was Mr Peter Huskinson, the National Commercial Director for Specialised Commissioning for the Defendant. Mr Huskinson was the senior responsible officer for the Defendant in relation to the procurement of the new generation of treatments for HCV. Mr Huskinson was clearly very knowledgeable about HCV, the treatments available for the disease and the aims and objectives of the Procurement. However, he had an unfortunate tendency to provide long, rambling answers to questions during cross-examination, and often strayed off the point. The Claimant attacks his evidence as being “ extremely evasive”. Whilst the manner of giving evidence was less than satisfactory, in my judgment Mr Huskinson was not being deliberately evasive or attempting to hide or avoid revealing the truth. Mr Huskinson was evidently very keen to defend the whole market approach and the DPM to which he had become closely wedded in the past year or so, and this keenness did, on occasion, make it difficult for him to step back from the detail and to refrain from being defensive in his evidence. I shall address some of the Claimant's specific criticisms of Mr Huskinson's evidence below, but I should say at this stage that, notwithstanding those criticisms, I regarded him also to be a witness of truth.

The Defendant's second witness was Mr Mark Perkins, who is the Procurement Lead engaged by the Defendant to run the Procurement. Mr Perkins' evidence was considerably less prolix than that of Mr Huskinson. However, he too is criticised for allegedly not providing a full or proper answer to questions about an internal email in which he proposed looking for a means of excluding one of the Claimant's products from the Procurement. I shall deal with Mr Perkins' evidence in this regard below. However, as with Mr Huskinson, and notwithstanding the Claimant's criticisms, I found Mr Perkins also to be a witness of truth.

The Defendant's final witness was Dr Sebastian Moritz. Dr Moritz is the Managing Director at TWS Partners Limited (“ TWS”). He is an economist specialising in Game Theory and Auction Theory and the application of those theories in the context of procurement and supply chain management. TWS advised the Defendant as to the design of the Procurement and, relevantly for present purposes, as to the inclusion of the DPM. His witness statement was supplemented by a series of calculations which sought to demonstrate that the DPM did not ‘systematically disadvantage’ the Claimant in the Procurement. The Claimant subjected those calculations to a detailed attack in cross-examination in an attempt to show that, amongst other things, Dr Moritz had attempted to “fiddle” the figures in order to assist his client. I shall deal with the particular criticisms and challenges to Dr Moritz's evidence below, but I should make clear at this stage that I reject the suggestion that Dr Moritz was seeking to “fiddle” the figures or that he was attempting to do anything other than assist the Court in its understanding of the operation of the DPM.

Factual Background

HCV

HCV is a cancer-causing infectious virus. It is spread through infected blood which may be as a result of sharing needles, transfusion of unscreened blood, or unprotected sex. Those at risk of becoming infected by HCV include some of the most disadvantaged in society, such as those who inject drugs, who are homeless or who are in prison. HCV is a serious disease which presents a major public health threat. According to the World Health Organisation (“ WHO”), there are an estimated 71 million people chronically infected by HCV worldwide...