Esta publicación científica en formato digital  
es continuidad de la revista impresa  
ISSN 0041-8811  
E-ISSN 2665-0428  
de la  
del Zulia  
Fundada en 1947  
por el Dr. Jesús Enrique Lossada  
y Arte  
Año 12 N° 34  
Septiembre - Diciembre 2021  
Tercera Época  
REVISTA DE LA UNIVERSIDAD DEL ZULIA. 3ª época. Año 12 N° 34, 2021  
Marina V. Shmeleva // Public procurement in the healthcare sectors of Russia and EEUU, 150-166  
Public procurement in the healthcare sectors of Russia and EEUU  
Marina V. Shmeleva *  
The aim of the study is to analyze public procurement issues in the field of healthcare.  
Dialectical, logical, and comparative methods have been used. The author has studied the  
best practices of such procurement and conducted a comparative legal analysis of Russian  
and the US public procurement systems. The following results have been achieved: it has  
been found that public procurement in the healthcare sector is considered more complex  
than that in other sectors of the economy since there are more barriers and travails. This is  
because through healthcare public procurement the state purchases medical equipment and  
medications for state and municipal healthcare facilities. The author concludes that one of  
the main problems in the regulation of healthcare public procurement is that budget holders’  
supply agreements for medical equipment, medications, and medical products are often  
competition-free. Covering the efficiency of public procurement in Russia, the author  
highlights the main violations typical of the system at all levels (from regional authorities to  
municipal institutions). There are also some practical recommendations to improve Russian  
public procurement legislation.  
KEYWORDS: Russian Federation; USA; health services; innovation behaviors; budgets.  
Recibido: 07/06/2021  
Aceptado: 20/07/2021  
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Contratación pública en los sectores sanitarios de Rusia y EEUU  
El objetivo del estudio es analizar cuestiones de contratación pública en el ámbito de la  
asistencia sanitaria. Se han utilizado métodos dialécticos, lógicos y comparativos. El autor ha  
estudiado las mejores prácticas de dicha contratación y ha realizado un análisis jurídico  
comparativo de los sistemas de contratación pública ruso y estadounidense. Se han logrado  
los siguientes resultados: se ha comprobado que la contratación pública en el sector sanitario  
se considera más compleja que la de otros sectores de la economía ya que existen más barreras  
y tribulaciones. Esto se debe a que a través de la contratación pública de atención médica, el  
Estado compra equipos médicos y medicamentos para los centros de salud estatales y  
municipales. El autor concluye que uno de los principales problemas en la regulación de la  
contratación pública de atención médica es que los acuerdos de suministro de equipos  
médicos, medicamentos y productos médicos de los titulares del presupuesto a menudo están  
libres de competencia. Al cubrir la eficiencia de la contratación pública en Rusia, el autor  
destaca las principales violaciones típicas del sistema a todos los niveles (desde las  
autoridades regionales hasta las instituciones municipales). También hay algunas  
recomendaciones prácticas para mejorar la legislación rusa en materia de contratación  
PALABRAS CLAVE: Federación de Rusia; Estados Unidos; servicios de salud;  
comportamientos de innovación; presupuestos.  
Medical services are a social good. That is why effective healthcare public  
procurement tools are extremely important. In the OECD countries, the public sector  
provides about three-quarters of the total health system funds. In a number of countries, for  
example, in Denmark, the UK, and Sweden, up to 80% of budgets at all levels are spent on  
health (OECD, 2013).  
The main source of healthcare financing in any country is budget funds. Since each  
country bears the high cost of healthcare, the state is interested in making it more efficient  
through the procurement of high-quality goods, works and services.  
Such violations as miscalculation of the agreement price, its incorrect justification, or  
the lack of its justification are numerous and costly for the state. As a rule, the vast majority  
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of the violations are associated with the purchase of high-tech medical equipment, modern  
medications for severe and rare diseases as well as foreign-sourced medical products.  
The purpose of this study is to assess the efficiency of Russian healthcare public  
procurement and produce proposals for improving corresponding legislation. The results of  
the study provide valuable information for the state policy developers and implementers of  
national strategic plans in the healthcare system.  
. Research Methods  
The study is based on general scientific methods. The comparative legal method has  
been used to analyze and compare the characteristics of procurement legislation in Russia  
and the US. Specific scientific methods have also been applied, e.g. the method of analysis has  
been used for collecting and summarizing the data from Russian and foreign studies together  
with the methods of deduction and classification.  
. Results and Discussion  
Currently, the health systems of most countries of the world are facing daunting  
challenges even if their priority objective remains the same. The objective is to ensure an  
effective and sustainable healthcare system in the context of current and projected  
demographic changes and the needs of the population. The quality and efficiency of medical  
care and high standards of medical services have always been crucial. Of course, the quality  
and efficiency of medical care depends on medical equipment. Consequently, the equipment  
should be procured in a timely manner. This is a long-standing economic and procedural  
problem in many healthcare systems, which is evidenced by many reports on public  
procurement as well as scientific works of Russian and foreign researchers.  
In recent decades, the health systems of many countries have solved many complicated  
problems. However, the process of demographic aging of the population requires the proper  
development of legal rules to maintain the healthcare system. It is also necessary to develop  
effective tools for public procurement. Today, population aging is leading to a decreased  
portion of working-age people per pensioner. Trends in health indicators among older people  
are mixed. Severe disabilities have been cut down in some countries but expanded in others.  
Mild disabilities and chronic morbidities are gradually increasing.  
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A decline in the number of able-bodied population will result in a shortage of financial  
inflows to healthcare systems. An aging population is more susceptible to numerous chronic  
diseases. Consequently, people will need more medical care. The need to procure high-  
quality medical equipment triggers strong pressures on the state budget.  
In the future, the share of public health spending in GDP is expected to grow. This is  
also confirmed by the population aging forecasts by 2060. The main factors inducing this  
avalanche are the following: the demand for high-quality medical services, rising  
expectations, and steady technological progress.  
In Russia, while procurement is being conducted, there are often violations on the part  
of the health management authorities. At the municipal level, healthcare procurement  
legislation is regularly violated by public authorities (health departments, ministries, or  
administrations). At the regional level, potential violators are the local authorities that  
manage and conduct procurement procedures.  
Public inspections often reveal omissions on the part of healthcare duty holders. The  
omissions are expressed in the lack of control over the execution of agreements, improper  
registering of agreements, and escaping penalties for non-execution or improper execution  
of agreements.  
At the level of the ultimate beneficiaries, i.e. public (state-owned) and municipal  
state-owned) healthcare facilities, the range of procurement legislation violations is much  
wider. The scope of purchases made by those customers is very extensive: from the repair of  
medical facilities to the purchase of food for them.  
The level of competition lags far behind most countries of the world, even though  
recently there have been many positive changes in the Russian healthcare public  
procurement legislation. In Russia, the low efficiency of public procurement stems from  
many factors, including the abuse of the lowest price criterion while conducting  
procurement, arrangements for public procurement without any preliminary study of how  
effective this procurement would be, etc. Nonetheless, public procurement procedures in the  
Russian healthcare system can get better and more efficient through the use of advanced  
diagnostic tests and treatment methods.  
Up to the present, medical facility managers are likely to make agreements on terms,  
which are different from the ones specified in the procurement documents and approved by  
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the customer. There are also violations of the legislation related to the protocols on the results  
of the procurement procedures.  
This is only a small sample of violations detected in the field of public procurement of  
medical services, medications, and equipment. Unfortunately, the current Russian legislation  
does not make it possible (as it has been planned by the legislators) to fully eliminate public  
and municipal agreements with suppliers, contractors, or implementers affiliated to  
customers. Thus, the Russian legislators failed to bring new, competitive and transparent  
relationships into public procurement.  
At the same time, violations in the way medical equipment, medical products and  
medications are supplied have had true negative impact. For example, by extending the  
delivery time, suppliers unintentionally accelerate a patient’s disease progression and  
provoke geographical, class and racial discrimination in the field of healthcare. Ensuring the  
supply of high-quality medical products is crucial to address the disparities in the spread of  
diseases and the related outcomes.  
The main goal of each state, conducting procurement for healthcare facilities, is to  
purchase medical equipment and medications. But at the same time, the state solves other  
problems, e.g. supporting the development of competition and innovation, helping domestic  
manufacturers, etc. The regulatory function of the state in the field of public procurement is  
increasing not only in Russia, but also in the countries where private medical services are  
very well developed (Improving Public Procurement, 2012). Thus, when the directors of  
medical facilities conduct procurement, they face a bunch of tasks, including ensuring the  
quality of purchased medications, treatment tools, and equipment. They also get involved in  
developing competition, stimulating small and medium-sized businesses, and implementing  
the imports phase-out policy (Sirotkina and Skrebtsova, 2013).  
Many Russian and foreign authors are engaged in research on the efficiency of public  
procurement. Their main goal is to study the determinants of public procurement and to find  
ways to make procurement procedures more efficient. As a rule, the contents of the studies  
is often contradictory. However, these works are rather valuable because they analyze and  
compare all the ways to solve emerging problems. Most studies analyze such factors as  
corruption, competitiveness, and transaction costs that affect the efficiency of public  
procurement (Huculová, 2018; Baldi and Vannoni, 2017; Ochrana and Maaytová, 2012).  
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In the US, patients depend on medical supplies and prescription drugs, which are  
mainly produced by international companies located in Southeast Asia and Europe. With  
each US hospital sourcing these products alone, hospital procurement officers are running  
into a bewildering array of middlemen, international procurement rules, import quotas,  
and exorbitant freight charges. The quality of public procurement supplies is also a concern,  
as hospitals face unverified brokers and counterfeit goods.Moreover, as the crisis transitions  
into a chronic concern, the finances of hospitals, particularly those that serve the safety net,  
are now at risk. For some hospitals and communities, the purchasing of potentially needed  
supplies at exorbitant “crisis” prices can become an existential threat. Hospitals require  
many medical products including PPE and prescription drugs on a regular basis. Most  
hospitals maintain a procurement officer or department to manage their inventory and order  
when needed. They do this themselves or through their parent institution. While hospitals  
can source products themselves through wholesalers, most contract with group purchasing  
organizations (GPOs), such as Premier Inc. GPOs aggregate demand across many hospitals,  
buy supplies in bulk, and in many cases obtain better prices for products than individual  
hospitals can by themselves. In exchange, hospitals pay membership fees to GPOs. GPO  
memberships are rarely exclusive arrangements, and it is common for a hospital to be a  
member of multiple GPOs. GPO contracts feature characteristics that make them  
challenging partners for hospitals when there is a surge in demand or shortage in supply.  
First, larger purchasers of medical products, including regional/national hospitals, tend to  
receive preference over smaller hospitals in traditional GPO arrangements. This can lead to  
disparities in access across hospitals, even in the same city or country. Second, most GPO  
contracts do not contain “failure to supply” arrangements that would hold them accountable  
for failing to supply products that they are unable to procure and that hospitals require. This  
leaves hospitals to source needed products on their own.  
Third, there are no product price guarantees in a typical GPO contract. This means  
that manufacturers of these products can and do charge prices above the contracted amount  
and what may seem reasonable when there is a surge in demand or in the prices of base  
products and ingredients. While US states have price gouging laws, cross-border federal  
laws fall under the umbrella of trade and tariffs and don’t prohibit price gouging. Fourth,  
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GPO contracts do not guarantee the quality of products that they procure for hospitals. For  
some products, minimum quality standards set by regulators serve as a backstop. For  
example, the Food and Drug Administration (FDA) regulates the quality of most prescription  
drugs and maintains a database of approved PPE manufacturers as a resource to hospitals.  
However, many products procured by GPOs are not regulated by federal agencies, which  
incentivizes suppliers to maintain very low-quality standards or even cheat. There is also no  
public information about the quality of products sold by manufacturers. GPOs and  
wholesalers have no legal or contractual obligation to provide this information to their  
members(Devaiah et al., 2020).  
In our opinion, an important element of healthcare public procurement is innovation-  
oriented public procurement (IOPP). Among other tools, it is considered extremely effective,  
since it allows the state to act as a leading buyer, stimulating the innovative development of  
domestic companies and achieving social goals.  
Innovative public procurement can be defined as the purchase by a medical facility of  
equipment and medications, which do not yet exist but can be produced by the supplier  
within a reasonable period. The equipment and medications are to be manufactured on the  
basis of additional or new research as well as science and technology.  
In addition, innovative public procurement contributes to the development of  
innovations in many ways, e.g. through the use of new methods of treatment that are more  
effective and painless.  
Innovative public procurement is being actively debated all over the world. Though  
this issue has been studied a lot in Europe, there are very few research papers on this issue in  
the US. Moreover, American public procurement primarily embraces innovations in the  
sphere of national defense and security. Most of the strategic procurement in the US is aimed  
at achieving social goals, e.g. environmental protection, energy conservation, and assistance  
to socially vulnerable groups.  
Thus, the US government encourages the procurement and the development of  
innovative solutions to meet various social needs. However, a direct reference to the purchase  
of advanced technologies through federal procurement was found only in one US Executive  
Order No. 13834 of 17 May 2018. In this Executive Order, “the Congress has enacted a wide  
range of statutory requirements related to energy and environmental performance of  
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executive departments and agencies (agencies), including with respect to facilities, vehicles,  
and overall operations. It is the policy of the United States that agencies shall meet such  
statutory requirements in a manner that increases efficiency, optimizes performance,  
eliminates unnecessary use of resources, and protects the environment. In implementing this  
policy, each agency shall prioritize actions that reduce waste, cut costs, enhance the  
resilience of Federal infrastructure and operations, and enable more effective  
accomplishment of its mission” (Presidential Document by the Executive Office of the  
President, 2018).  
Public procurement can be classified in different ways according to what is procured,  
for whom, and why.  
On the first classification level, there is general and strategic procurement. Any public  
procurement implemented to meet the buying agency’s need for finished products refers to  
general public procurement. Procurement is considered strategic when the demand for  
certain technologies, products, or services is spurred in order to boost a certain market.  
The next basis for classification is the forms of innovative public procurement. They  
depend on the level of promoted innovations. Development procurement refers to the  
acquisition of technologies that must be developed almost from scratch. Adaptive  
procurement refers to the acquisition of innovations, which are necessary to refine some  
specific technology when the basic technology already exists (Edquist, Hommen and  
Tsipouri, 2000).  
Another classification of public procurement is based on the end-user of acquired  
goods, services, and works. Direct public procurement takes place when the final consumer  
of the things purchased is the Government itself. Cooperative public procurement is defined  
as joint purchasing, i.e. state-owned companies buy something jointly with private buyers.  
Afterward, both public and private parties use the purchased innovations. Catalytic public  
procurement happens when a public agency initiates a purchase, but afterward, the  
innovation is used exclusively by a private person.  
On top of it, three main roles of innovative public procurement have been identified.  
The creation of a market occurs if there is no market for a procured technology. Market  
escalation is triggered when there is a stable market for the technology, but it requires further  
development to attain commercial success. Market consolidation helps to standardize the  
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criteria or technical specifications for the technology to be used in the public sector. This  
entails similar changes in the private sector.  
Moreover, serious risks are provoked by restrictions related to public procurement of  
high-tech medical devices, for example, ultrasound machines. It should be noted that Russia  
has legislative restrictions for foreign suppliers on the delivery of medical devices and  
equipment. That is why not all the devices are equally good since in most cases only foreign  
equipment provides for quick and efficient diagnostics.  
We believe it is really good that there are no such restrictions on foreign medications.  
The reform of the Russian public procurement system has become an urgent issue in  
recent decades. It is also essential to realize that investing in innovations is an expensive and  
risky gamble. An emphasis on minimizing costs and risks in the procurement legislation may  
impede innovations. Similarly, the tightening of financial management can increase an  
administrative burden, which would keep the most innovative organizations away from  
participating in procurement.  
The Russian procurement legislation is characterized by a pronounced antimonopoly  
orientation. Russian procurement procedures seem to be tailored only to one criterion, i.e.  
the low price. The rules that ban any limitations on the number of participants in  
procurement apply to almost all purchases in medical facilities, but special attention is paid  
to the procurement of medications under the Federal Law on the Contract System. Thus, in  
accordance with Article 33 (1) (6) of the Law, the procurement documents must reveal  
international unlicensed names of medical drugs. If the procured medications do not have  
such names, the documents must specify the chemical names and the grouping names of the  
medications. There are exceptions to this rule, i.e. there are cases where the legislation allows  
the procurement of medications under their trade names.  
First, the procured medicinal product must be on the list of medications approved by  
the Government of the Russian Federation. The procedure for forming the list is defined by  
the Government Decree No. 1086 “On approval of the rules for forming the list of medications  
procured under their trade names and on amendments to the Regulation on the Government  
Commission on Public Health Protection” of 28 November 2013.  
Second, the procurement of medications must be conducted through a request for  
proposals under Article 83 (2) (7) of the Law on the Contract System. The Article covers the  
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