Supreme Administrative Court repeals the Mechanism for 2021 guaranteeing predictability and sustainability of NHIF’s budget

Under the Mechanism, pharmaceutical companies involved in the marketing of medicinal products in Bulgaria were obliged to compensate the NHIF for 100% of the overspending related to sales of their medicinal products in 2021 that exceeded the NHIF’s approved budget for the same year. Each pharmaceutical company’s contribution to this compensation was determined proportionally based on its revenue increase compared to the previous year, with innovative pharmaceutical companies being particularly affected.

The SAC ruled that the Mechanism is unlawful and repealed it for both procedural and material reasons. From a procedural standpoint, the NHIF had failed to conduct the mandatory public discussion on the project of the Mechanism before its adoption. Additionally, the goals and implementation of the Mechanism were found to be contrary to the principles outlined in the Bulgarian Constitution regarding free commercial initiative and protection of ownership rights and the principles of the Health Insurance Act, which aim to ensure that Bulgarian patients have access to medicines.

The SAC was particularly harsh in its critique on the provisions of the Mechanism that companies may have to pay a compensation amounting to more than 100% of the increase in their revenue compared to the previous year. Amongst other things the court also criticized the provision of the Mechanism prohibiting companies for compensating the growth in revenue from their innovative medicinal products with the decline in sales of their older medicinal products with expired patent protection.

As a result of the repeal of the Mechanism by the court, pharmaceutical companies that paid compensations to the NHIF under the Mechanism may claim their money back from the NHIF. Due to conflicting case law of the Supreme Administrative Court on the admissibility of such court cases for damage caused by a repealed act, the claims of the companies must be carefully considered and prepared.

There are currently pending court cases for the unlawfulness of the Mechanisms guaranteeing predictability and sustainability of the budget of the National Health Insurance Fund for 2022 and 2023 too. While the Decision of the SAC discussed above does not directly affect these proceedings, the claimants in these cases will surely refer to its reasoning in their arguments for repeal of the newer mechanisms as they share a lot of the defects of the repealed one.