Agency used drug firm guilty of breaches

[okarol]

Agency used drug firm guilty of breaches

    * Natasha Bita, Consumer editor
    * From: The Australian
    * October 05, 2010 12:00AM

THE Defence Department has spent more than $500,000 on medical supplies from a company that misused its market power in contracts.

The Defence Materiel Organisation has used direct procurement -- contracts that are not put to tender -- to buy "medical consumables" worth $506,874 from Baxter Healthcare over the past three years.

The most recent of the 19 contracts were $50,929 for medical supplies in June and $49,938 in March.

Baxter Healthcare was recently fined $4.9m in the Federal Court for breaching the Trade Practices Act.

The court ruled that Baxter had misused its market power by bundling the supply of sterile fluids with peritoneal dialysis products used by people with kidney failure.

The case related to Baxter's contracts with the health departments of Western Australia, South Australia, NSW and Queensland from 1998 to 2001.

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The court found that the states had been "largely compliant" in relation to the tender process, through which Baxter gave higher quotes if sterile fluids were purchased without also buying its dialysis products. This made it "uneconomic" for any of the states to buy the fluids separately from Baxter.

The federal government's consumer watchdog, the Australian Competition & Consumer Commission, launched its prosecution against Baxter in 2002.

In his judgment in August this year, judge John Mansfield found that each of the states' procurement agencies "generally were of the view that sole supply arrangements were in their interest, and each was a willing party to the bundled tender contract".

Baxter was fined for misuse of market power but Justice Mansfield said: "There is no evidence to suggest that it was price gouging.

"The states are not shown to have paid too much."

The Australian has revealed that federal government agencies ducked the tender process to buy nearly half the $45.5bn in goods and services contracted out in 2009-10.

Direct procurement, which circumvents the open tender process and does not require any comparison of quotes, accounted for $20.3bn of the government's purchasing bill in 2009-10.

The Defence Department could not respond yesterday about why it had chosen to procure medical supplies directly from Baxter.

Baxter Healthcare was also unavailable for comment yesterday.

http://www.theaustralian.com.au/national-affairs/agency-used-drug-firm-guilty-of-breaches/story-fn59niix-1225934048076