February 21, 2021

No competitive procedures are needed to execute research agreements with public entities: The Italian administrative court of last instance overturns the TAR decision

The Italian administrative court of last instance (“Consiglio di Stato”) closed litigation undertaken by Technogenetics S.r.l. that challenged a research agreement entered into by DiaSorin S.p.A. and the Pavia Hospital (which is classified, under Italian law, as a scientific research and healthcare facility, or IRCCS) for the evaluation of certain molecular and serological tests to diagnose COVID-19 (the Consiglio di Stato’s judgement was published on December 17, 2020).

The main topics addressed by the Consiglio di Stato concern:

  • the possibility that a research agreement executed between a private company and a public hospital could qualify as a concession of public goods; and
  • the consequent need for the public facility to launch a call for tender (or a different type of competitive procedure) to select the private company to enter into said research agreement.

Both these topics were addressed by the administrative court of first instance (“TAR”) of the Lombardy region, which upheld the claim filed by Technogenetics S.r.l., a potential competitor to DiaSorin, stating that the contract between DiaSorin and the Pavia Hospital should be qualified as a concession of public goods and, consequently, should be assigned by conducting a public tender. Therefore, according to the claimant, it was executed in breach of the national and European principles of transparency and non-discrimination among private operators, which require that appropriate selection procedures be performed.

The Consiglio di Stato overturned the TAR’s decision, stating that:

  • regardless of the name applied to the contract, it is necessary to assess whether there are grounds that make it necessary to apply rules aimed at protecting competition among private operators interested in executing research contracts with public facilities;
  • a competition issue does not arise with regard to this kind of research agreement because — unlike the case of procurement and concession contracts — the public entity is not obliged to select one contractor only, as research is open to many potentially interested companies; indeed, there is no exclusivity;
  • therefore, the conditions that would require application of the national and European principles of transparency and non-discrimination are not met in this case and, accordingly, the hospital is under no obligation to launch a public tender or any other competitive procedure;
  • this is also in line with the national practice of not conducting a competitive procedure for a research agreement proposed by private parties, as confirmed by the Consiglio di Stato via a specific report on the subject that it solicited from the Ministry of Health.

In brief, it is routine for a public healthcare and research facility to evaluate a product offered by a private company. It is also routine for the facility to use its own resources and specific professional skills in conducting that activity, and this does not trigger any breach of competition principles, nor does it grant a particular benefit to one company over its competitors.

Although this judgment makes reference to a specific legislative framework applicable to IRCCS (Legislative Decree No. 288/2003 and, specifically, Article 8 on research agreements executed by IRCCS), the principles above, stated in this case, can be considered applicable to research agreements offered by private companies to any public healthcare facilities. These principles confirm the freedom that public entities enjoy to negotiate and accept a research agreement offered by a private company without the need to open up the competition to others.

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