The Value of Confidentiality
A recent court ruling raises the question of confidentiality in Norway’s public procurement processes.
The Norwegian State procures goods and services in excess of NOK 600B per year. Most procurements are organized through competitive bids. The value of bid confidentiality thus becomes evident. Competition amongst bidders, for example on net price for a product or service, is meant to secure better value for taxpayer money in the short term. In the long run, competition drives innovation, access, and quality improvements.
The laws and regulations governing competition, trade secrets and confidentiality are somewhat similar throughout the European Economic Area. Therefore, a December 2022 Norwegian District Court ruling has gained attention well beyond Norway’s borders – where two US pharma companies lost a preliminary injunction plea to stop a tender bid issued by the hospital procurement agency LIS after several confidential net pricing leak incidents. While the Public Procurement Complaints Board (KOFA) stated that leaking of confidential net prices ruined the competition to the extent that the tender had to be cancelled, the District Court ruled otherwise. The ruling is one of very few, if not the only, examples in Europe where leaks of confidential net prices have had no consequences. Further, the ruling may have left industry with no legal recourse by establishing precedent on allowing de facto net price transparency despite legislation explicitly protecting such confidentiality.
"The ruling is one of very few, if not the only, examples in Europe where leaks of confidential net prices had no consequences."
The real question is to what extent this ruling has consequences across industries supplying the Norwegian State? One legal assessment argues that net prices may now be made public at the discretion of the State procurement body. It is also argued that, in the way the ruling is framed, suppliers who have been subjected to breach of net price confidentiality may hereafter have no legal recourse. If this holds true, no industry or supplier can be guaranteed confidentiality of their net prices. If the supplier operates in several markets, the ramifications of net price leaks in Norway may have far-reaching consequences.
Norway has ambitious plans to attract foreign investments and build industries to increase mainland exports by 50% by the end of this decade. However, the signals now being sent may not incentivize investments. While transparency is an obvious basis for any healthy business environment, confidentiality of key competitive assets in public procurement processes are equally as important. If not upheld, the State may risk not being offered the best prices on goods and services for fear of the prices not being kept confidential.
"The real question is to what extent this ruling has consequences across industries supplying the Norwegian State?"
Debates and political statements indicate that the matter of price confidentiality seems to be ideologically driven. Former Norwegian Competition Authority Chief Economist Kurt R. Brekke has commented that while deciding on net price transparency is a political choice, patients benefit when net prices are kept confidential. He pointed out better prices, faster access, and healthier competition between bidders as factors for why this is the case.
Currently, there is a growing concern that Norway is on its way to becoming a less regulated market. This time it was pharmaceuticals, but this is only one of many industries supplying the State. If this is contrary to what the Government wants to achieve, the business community needs tangible assurances that net prices and other trade secrets will be kept confidential in the future – and that breaches will have legal consequences. At the end of the day, this is about securing suppliers’ ability to provide the State with the best prices possible.
Dr Muhammed “Mo” Ali
Managing Director, MSD Norway AS
Member of the Board, AmCham Norway
