Warsaw, 18th May, 2018

 

COMMENTARY OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON REGULATORY PROPOSALS HOW TO REMEDY THE PROBLEM OF PAYMENT BLOCKAGES

 

Delayed payments between entrepreneurs are one of the most serious economic problems in Poland. Our country is not, of course, the only one suffering from this issue – no member state of the European Union has developed a fully effective solution, and payment blockages constitute a major problem also abroad. Research shows that more than 80% of entrepreneurs have come across delayed payments in Poland. One must bear in mind that the group of entities for which payment blockages are a particularly dangerous phenomenon are entrepreneurs from the SME sector. The reasons are twofold. First of all, as a rule, it is them – as subcontractors, alternatively simply smaller contractors – that have to wait for payments for services rendered or products sold for an absurdly long period of time. Secondly, the effects of untimely payments from invoices issued are much more severe for them than for large entities. Payment blockages make it very difficult for them to continuously plan their finances, have a negative impact on their liquidity, and – in extreme cases – may lead to bankruptcy.

Taking the above-mentioned facts into account, we take the position that there are two dimensions to the problem with payment blockages. The first one is a problem taking place already at the contracting stage when, at the time of signing the contract, the smaller contractor is de facto forced to accept and extended the invoice payment period. Due to the large difference in counterparty strength, as well as their scale of operation and market position, small companies accept unfavourable contractual provisions. The second dimension manifests itself after the service has been completed or the goods delivered, when the payment is made within a longer period than is required by the contract. In this case, entrepreneurs from the SME sector are in a much worse position than their larger business partners. As research indicates, they do not exercise their rights granted in the “Act on payment periods in commercial transactions” to charge interest or to demand a flat-rate compensation for the costs of recovering a claim in the amount of EUR 40. Sometimes this is a consequence of ignorance, but often it is out of fear of losing a contractor. One must remember that the companies in question are often small subcontractors or suppliers working for large networks.

First of all, in order to effectively fight against the phenomenon of trade credit extortion on small companies, it is necessary to take into account in the proposed regulations that small entrepreneurs, due to their incomparably weaker position on the market, will not usually be willing to use the tools available to them to collect their debts on time, or debts increased by interest and additional fees.

The proposal presented by the Ministry to solve the problem of payment blockages by means of specific tax sanctions (increasing the debtor’s tax base by the amount of debt resulting from late payments, and likewise lowering the creditor’s tax base by this amount) we consider noteworthy and fair in its essence. It should be remembered, however, that it would only partially solve the problem associated with not being paid on time, which often leads to financial liquidity-related problems for the company. Tax tools can be useful in the fight against payment blockages, but it is doubtful whether they alone will constitute an effective enough solution.

In connection with the statement above, we would like to propose a directional bi-module solution, which in our opinion may indeed lead to a significant reduction in payment blockages. As part of the proposed regulations, we would address both of the aforementioned issues related to the problem of late payments. At the same time, we would like to point out that these are prototype proposals that will certainly require further refinement and clarification in the course of potential legislative works.

We propose that the catalogue of acts of unfair competition be supplemented with the use of market position in order to force suppliers or service providers to accept grossly long payment deadlines. Such action should be subject to a fine. The issue of precise naming of this act is also discussed, as well as its premises (one can assume that a deadline exceeding 60 days could be recognised as a grossly long period, and that the disproportion in the size of contracting companies could be a premise of market position abuse, as well as the regular nature of contractual infringement). At the same time, we must remember not to interfere too much with the freedom to conclude contracts, while designing solutions in this area, as it is an absolute fundament of the free market economy.

Regarding late payments, we suggest two-way actions. First of all, following the British model, we postulate the introduction of mandatory reporting to the President of the Office of Competition and Consumer Protection of data and information on payments made by large entities. The issue of the frequency of such reporting remains a matter of debate – it seems that taking into account both the necessity of effectiveness of the proposed solution and the principle of proportionality in imposing new obligations on companies, it would be optimal to submit a similar report every quarter. In the report, large entities would have to clearly indicate in a separate section the amount of late payments (both aggregated and divided into individual transactions), the payment deadlines specified by contracts, the invoice issue dates, as well as the data of contractors whom they owe money. The Office could use this data, for instance, to create annual statements that reliably regulate the liabilities of contractors. The introduction of the reporting obligation would also allow for a deeper understanding of the problem of payment blockages and for the identification of industries in which this problem is particularly severe.

In connection with the introduction of the above-described solution, it would be possible to grant the President of the Office of Competition and Consumer Protection the right to put forward a motion to initiate enforcement proceedings. The President, acting in the interest of and for the benefit of the creditor, would request the enforcement of amounts increased by both the interest resulting from the Act and a flat rate compensation of 40 euros, as well as enforcement costs. This way, the risk of losing a contractor would be removed from micro, small and medium-sized enterprises (because the enforcement of receivables increased by interest and compensation would not result from activities undertaken by them). At the same time, large entities in the face of the need to pay the amount resulting from the invoice, plus interest, compensation and enforcement costs, would be much more willing to pay invoices on time. Of course, due to the calibre of this tool, the said power should be vested in the President only in special situations, i.e. in the case of gross delays in payment (the premises should be specified in a potential legal act; one can assume that a delay exceeding by 30 days as per contract might be considered a gross delay, or no special circumstances justifying the delay in payment). Moreover, before the motion would be submitted, the President should send the debtor a pre-trial request to pay the designated amount to the creditor. The aim of such a solution would be to limit the number of initiated proceedings (we assume that a large part of debtors would decide to pay the debt voluntarily after receiving such a summons), which would have a positive impact on their duration.

Implementation of the above-described regulations would de facto mean transferring the issue of limiting payment blockages to the competence of the President of the Office of Competition and Consumer Protection. This seems to be a reasonable solution – the President is a body of the central government administration competent in matters of competition and consumer protection, i.e. its activities include actions aimed at combating practices restricting competition. According to Art. 31 item 3 of the “Act on competition and consumer protection”, the scope of the President’s activities also includes conducting research on market behaviour of entrepreneurs. As payment blockages often cause that entrepreneurs are less willing to invest and therefore do not develop, there is no doubt that delayed payments have a significant negative impact on competition. We are dealing with a situation in which some entities, not through fault of their own, are temporarily deprived of funds due to late payments and unsettled invoices. As the problem of payment blockages also impacts industries affected by the grey zone, late payments often aggravate the competitive position of entities honestly accounting for all public-law obligations. Subsequently, transferring the issue of researching and counteracting the problem of payment blockages to the President of the Office of Competition and Consumer Protection seems to be justified and advisable.

Apart from the above-mentioned activities, we would like to propose a number of complementary activities. Above all, we advocate that the legislator refrain from taking actions that legally limit the possibility of using the methods of managing receivables that are conducive to maintaining the financial liquidity of a given entity. A prominent example are public hospital suppliers who pursuant to Art. 54 sec. 5 of the “Act on medical activities” are de facto deprived of the possibility of selling their claims against the hospital (consent must be expressed by the creating entity – the law does not specify the mode thereof, nor is there an appeals procedure). We therefore propose to repeal this harmful provision and refrain from proceeding with changes that may further restrict the use of tools such as, for instance, factoring. In addition, we propose some interference in the principle of freedom of contracting (important especially in economic relations), namely the recognition of a contractual ban on the transfer of rights to receivables as a prohibited clause. Due to a number of undesirable phenomena taking place in the economy, one can imagine the creation of a whole catalogue of abusive clauses relating precisely to business-to-business relations, and not only, as it presently is, to business-to-consumer relations. Among such clauses one could distinguish, among other things, the prohibition of transfer of rights. Other proposals of abusive clauses in business should be developed in the course of cooperation between entrepreneurs and the legislator. The aim of these actions would be to limit the phenomenon of abuse of the contractual advantage of large entities, which is manifested not only by extended payment periods. As of now, the “Act on counteracting unfair use of contractual advantage” is in force, but it only applies to trade in agricultural and food products. It would be worth solving the problem on the scale of the whole economy, and due to the limited resources available to the Office of Competition and Consumer Protection, it seems to be a good solution to create a catalogue of abusive clauses in business.

Regardless of the recommendations listed above, we point to the judiciary as a key element in counteracting market pathologies. Only in a situation in which the proceedings in the economic case will last for a reasonable time, it will be possible to independently enforce the claims by the interested entities. For this reason, the Union of Entrepreneurs and Employers has for a long time postulated a simplification of judicial procedures in commercial cases, especially the smallest ones. If the value of the dispute does not exceed tens of thousands of zlotys and the parties involved are entrepreneurs, the proceedings should be carried out in a maximally simplified and informal manner, while maintaining the highest possible procedural economy. We also postulate the introduction of the principle of the trial hearing day by day.

We hope that the proposals presented will be of interest to representatives of the Ministry of Entrepreneurship and Technology. We are well aware of their draft character and that it would be necessary to thoroughly discuss them in detail. We believe, however, that they provide an adequate response to the challenge of payment blockages gnawing at Polish economy.

Warsaw, 21st May, 2018

 

The Public Health Forum of the Union of Entrepreneurs and Employers calls for the creation
of a framework within Polish regulations for the use of solutions in the field of telemedicine,
including teleradiology

The world is changing and so are our lifestyles which means that today’s society is exposed to a much greater extent to the so-called diseases of affluence. Their early detection is enabled, among other things, by modern diagnostic imaging. In Poland, there is a sufficient number of diagnostic apparatuses available and the available research indicates that the possibilities of this equipment are much greater than is their actual use. The reason for this situation are, first of all, the regulations in force imposing an obligation on physicians to directly supervise the course of the examination at an institution. The Public Health Forum of the Union of Entrepreneurs and Employers is in favour of creating a framework in Polish law for the use of telemedicine solutions, including teleradiology.

The introduction of teleradiology to the Polish healthcare system will enable patients to have specialist examinations performed under remote supervision of a physician, who would not be able to reach them under traditional circumstances. This in turn will translate positively into an increase in tests executed and a decrease of people waiting for their turn to be examined.

The dissemination of teleradiology as a form of medical services requires detailed legal changes – appropriate proposals were drafted by the Public Health Forum.

“We are convinced that the dissemination of telemedicine in general, including teleradiology, is in the best interests of patients,” says Marcin Nowacki, Vice-President of the Union of Entrepreneurs and Employers. “At the same time, it is a process that requires some involvement on the part of the legislator and amendments in a number of legal acts. We have prepared several concrete proposals of changes and we hope that they will be met with understanding and interest among key decision makers.”

The basic conditions for the provision of guaranteed services in the field of outpatient specialist care are described in the Regulation of the Ministry of Health dated November 6^th, 2013. Unfortunately, in this act, with regard to computer tomography and magnetic resonance, there is no mention of teleradiology. The Union’s Public Health Forum postulates that conditions for execution of services be supplemented in the scope of personnel – there should be an alternative for a specialist physician performing radiological patient supervision in the form of remote supervision over the examination.

At the same time, the Act of November 29^th, 2000, known as the Atomic Law, which does not explicitly describe teleradiology and radiological supervision, also requires an amendment. The Public Health Forum postulates to introduce to the Act a special power for the Minister of Health to specify, by regulation, the requirements and detailed rules for the implementation of a patient supervision system in X-ray diagnostics, in particular the separation of remote radiological supervision from direct supervision of the patient.

The Regulation of the Minister of Health of February 18^th, 2011, on the conditions of safe use of ionizing radiation for all types of medical exposure also needs to be amended. The Union’s Public Health Forum calls for a broader definition of teleradiology, as well as for setting minimum organisational conditions during the implementation of the service in a remote form. In the opinion of experts of the Public Health Forum, a definition of radiological supervision should also be added, which could be provided for both in person and remotely. It would also be necessary to consider the possibility of remote description of a medical examination.

“The implementation of the amendments that we are proposing will enable the commencement of services within the scope of teleradiology, which will constitute great progress for both medical institutions and patients,” says Marcin Nowacki representing the Union.

We invite you to watch the video prepared as part of the Public Health Forum of the Union of Entrepreneurs and Employers “Telemedicine in Radiology”.

 

Photo. Jamison McAndie / for lic. Unsplash

Warsaw, May 17^th, 2018

Dispute about 1% of pharmacies in a voivodeship ends. The SAC on the side of patients and entrepreneurs

 

A written justification of the key and precedent judgment of the Supreme Administrative Court regarding the provisions on 1% of pharmacies in a voivodship has been published. The SAC confirmed that the principle of universal succession apply to licences for running pharmacies, and pharmacy licenses acquired through capital acquisitions by law are transferred to the purchaser. Thus, the Court confirmed the rights of entrepreneurs who in the last dozen or so years had been buying pharmacies, also from the State Treasury. The verdict undermines the interpretation pushed by the pharmaceutical inspection and the pharmaceutical corporation, which in recent years took action against entrepreneurs, trying to change the meaning of the provisions on 1%, after more than a decade of their validity, without changing their wording by the parliament.

The judgment of the Supreme Administrative Court of February 27^th, 2018 in the case of II GSK 2510/17 is a breakthrough, as it ends the interpretive chaos around the principle of universal succession concerning licences to operate a pharmacy.

In 2004, the legislator introduced to Art. 99 sec. 3 of the Pharmaceutical Law, the provision according to which the licence to operate a pharmacy “is not issued if the entity applying for the licence runs in a given voivodeship more than 1% of generally accessible pharmacies”. For more than a decade, it was consistently assumed that the ‘one percent rule’ applies, as is clear from the quoted provision, only in cases where the entrepreneur requests a new licence to run a pharmacy. It does not mean, however, a general ban on having more than 1% of pharmacies, for example, through capital acquisitions.

For ten years, many state institutions in official documents stated that there is no ban on having more than 1% pharmacies in a voivodeship. These included, among others, the Ministry of Health, the President of the Office of Competition and Consumer Protection, and the Ministry of Treasury, which on the basis of the aforementioned provisions sold state-owned Cefarm pharmacies and their pharmacy chains to entrepreneurs for over PLN 0.5 billion.

Furthermore, there were two draft bills discussed with the intent to introduce such a ban (the ban eventually did not come into force). In the justifications of those amendments, it was clearly indicated that the then (and current) provision applies only to the stage of licence issuing.

Suddenly, at the end of 2014, the pharmaceutical inspection, under the pressure of the authorities of the pharmacy self-government, concluded that the phrasing “is not issued if” translates into an absolute ban on anyone having more than 1% of pharmacies in a voivodeship. As a result, an administrative procedure was commenced to challenge and withdraw existing licences, including the procedure to refuse licence changes in the case of capital mergers.

In the case covered by the decision of the Supreme Administrative Court, the entrepreneur, after the acquisition of another company, applied to the Chief Pharmaceutical Inspectorate for a change in the licence to run a pharmacy. The entrepreneur referred to the principle of universal succession, provided for in Art. 494 par. 2 of the Commercial Companies Code, according to which the acquiring company enters into the entire rights and obligations of the acquired company on the merger date. The CPI refused to change the licence to operate a pharmacy, claiming that the entrepreneur exceeded the permissible threshold of 1% of pharmacies owned in a voivodeship. The CPI further stated that in such a situation Art. 99 sec. 3 of Pharmaceutical Law applies. In its opinion, this article is an exception to the principle of universal succession specified in the Commercial Companies Code, and thus the licence was not transferred to the entrepreneur.

The Voivodeship Administrative Court did not agree with the arguments put forward by the Chief Pharmaceutical Inspectorate that were supported by the Chamber of Pharmacists, indicating that the succession took in fact place and Art. 99 sec. 3 of Pharmaceutical Law had no impact upon it. In the judgment under review, the Supreme Administrative Court unanimously confirmed the VAC’s argumentation. The judgement states as follows: “The Supreme Administrative Court rules that the interpretation of the provisions of Art. 494 § 2 of the Commercial Companies Code and Art. 99 sec. 3 of Pharmaceutical Law do not allow to accept that the second of the referred provisions is a provision referred to in Art. 494 § 2 C.C.C., i.e. a provision stating that the acquiring company is not allowed to operate a pharmacy. The provision of Art. 99 sec. 3 P.L. determines situations in which no licence to operate a pharmacy is granted, but in no way refers to the situation of a licence transfer in the event of a takeover of a company”.

The justification in ink is the more important, as the court battle for the defence of pharmacies abounded in much manipulation on the part of the supporters of closing down pharmacies. Hopes arise that such an unambiguous ruling of the case by the Supreme Administrative Court will prevent further attempts to misinterpret the ‘one percent rule’. The more so, because the court clearly ruled that the licence to operate a pharmacy passes to the acquirer of the pharmacy by law (ex lege) without the need to issue any administrative decision, and the provisions concerning 1% of pharmacies in a voivodeship by virtue of Art. 99 sec. 3 of Pharmaceutical Law do not apply. In the ruling, it was stated: “The aforementioned provision does not provide any basis for examining these premises in a situation when the transfer of a licence is based on Art. 494 § 2 of the Commercial Companies Code, when the acquiring company acquires the permit by law without the need and the possibility to issue a decision in this matter”. The court suggested that the formal confirmation of the transfer of a license take place through material and technical activities, which the body is obliged to perform, without examining the substance of the case.

The ruling of the Supreme Administrative Court introduces an understandable interpretation of pharmaceutical law provisions referring to the classic rules for the interpretation of the law and the actual wording of the provisions. The attempts by the Chief Pharmaceutical Inspectorate to create artificial rules regarding the succession of licences were thus suppressed.

Warsaw, May 9^th, 2018

 

 

POSITION OF THE UNION OF ENTREPRENEURS AND EMPLOYERS
ON THE SUPPLEMENTARY PROTECTION CERTIFICATE FOR MEDICINAL PRODUCTS

 

Beginning with Council Regulation (EEC) No 1768/92 of June 18^th, 1992, followed by Regulation (EC) No 469/2009 of the European Parliament and of the Council of May 6^th, 2009, concerning supplementary protection certificates for medicinal products, the EU legislator introduced into the legal order an instrument to extend the protection of medicinal products beyond the duration of basic patent protection. In accordance with Article 2 of this Regulation, any medicinal product protected by a patent within the territory of a EU Member State and before being launched on the market may be the subject of a supplementary protection certificate. The terms and conditions for obtaining such a certificate are described in Article 3: the product must be protected by a basic patent remaining in force, admitted to be traded on the basis of a valid permit, which must be the first authorisation for the product to be placed on the market as a medicinal product, and additionally the product could not be the subject of a certificate in the past. Under Article 5 of this Regulation, the certificate confers the same rights as are granted under the basic patent. The design thereof is such that the supplementary protection certificate is in a sense an extension of the patent. Ultimately, the medicinal product is thus protected for 20 years by a patent and then, for a maximum of 5 years, by the said certificate.

 

The state of affairs described above, means in practice that even for 25 years after obtaining the patent protection of a given drug, it is impossible to produce generic and biosimilar drugs based on it in the European Union. SPC prevents the production of generic and biosimilar drugs even for the markets of countries outside the European Union, in which the regulation does not apply. The result is easy to predict. Manufacturers of medicines from countries such as India and China, immediately after the expiry of patent protection, begin the production of generic and biosimilar drugs, and sell them to non-European markets. From the point of view of a multinational corporation, SPC is not a huge problem, because such a corporation can always open production outside of Europe.

 

The supplementary protection certificate is an important development barrier, especially for smaller pharmaceutical companies. Compared with their competitors from other continents, as well as with huge, international corporations that benefit, among others, from the economies of scale and because of their huge revenues also possess significant staff resources, smaller entities do not have too many advantages on their side. The current shape of SPC regulations only deepens this disproportion. In a situation in which entrepreneurs from Asian countries, or the afore-mentioned global corporations, start production of generics and biosimilars shortly after the expiry of patent protection, smaller enterprises operating in the European Union de facto have their hands tied. Not only individual EU Member States lose out on this solution (the competitiveness of their pharmaceutical industry is diminished), but so does the economy of the European Union understood as the sum of the potentials of the economies of individual EU Member States.

 

In connection with the above conclusions, it seems reasonable to present a legislative proposal that would maintain the basic value resulting from the supplementary protection certificate, i.e. the extension of up to five years of the protection of a medicinal product on the market of the European Union, while allowing European entities to compete with other companies on the markets of third party countries. Strengthening the position of European drug manufacturers is particularly important in the context of the added value that this industry provides to individual economies. One must keep in mind that pharmacy and biotechnology are one of the fastest growing industry branches, and one can assume that their importance will only grow in the decades to come. For this reason then, the dynamic development of this industry should be of particular interest to decision-makers in EU Member States, as well as the whole Union as such, which as a Community will have to compete with other huge markets.

 

Therefore, it is proposed to introduce the SPC MW mechanism (SPC Manufacturing Waiver), which would enable the production of medicines in Europe (while SPC protection is in force) for export only to third party markets where protection under SPC does not apply. This way, the primary objective of the supplementary protection certificate will be maintained – the mechanism will not infringe intellectual property rights or the essence of SPC regulations, at the same time allowing smaller European entities to produce medicines for third party markets, while protecting them with additional certificates. It seems that this proposal would set the optimal shape of the regulations in question and would constitute a sensible compromise between taking into account the interests of those interested in prolonged protection of intellectual property and the needs resulting from the necessity to increase the competitiveness of European enterprises. Introducing the postulate into the legal order would require the European Commission to take a legislative initiative, i.e. to submit a draft of an amendment to the regulations both to the Council of the European Union and the European Parliament. We hope that our arguments will be taken into due consideration by key decision makers and that such a project will be put forward to the above-mentioned EU bodies in an appropriately short period of time.

 

At this very moment, timing is important. Therefore, it is of such paramount importance that the European Commission put forward a legislative proposal in the current term, which ends in 2019.