Amendments to regulations for traceability of medicines and medical devices

Amendments to regulations for traceability of medicines and medical devices - CorralRosales - Lawyers Ecuador
Regulation ARCSA-DE-010-2021-LDSS issued on May 19, 2021, amended Regulation ARCSA-DE-030-2020-MAFG, published in the Official Gazette of November 26, 2020, through which the “Substitute Technical Sanitary Regulation establishes the guidelines for the Control of Traceability of Medicines, Biological Products and Medical Devices” was issued. The main aspects of this reform, which entered into force on the date of its subscription, are the following:

1.It is clarified that the inclusion of the unique traceability code in the packaging of medicines, biological products, and medical devices does not require a modification to their marketing authorization unless changes must be made to the packaging to include said code.

2. The maximum term to implement the traceability of medicines, biological products, and medical devices (hereinafter, the “Products”) is modified, depending on the phase to which they correspond. The national health authority shall determine the Products list for each phase.

3. The members of the National Traceability System (hereinafter, “SNT”) must submit to the National Agency for Sanitary Regulation, Control and Surveillance (hereinafter, “ARCSA”) a gradual plan for the implementation of the traceability of their Products (hereinafter, “Gradual Plan”), according to the regulations issued[1] by ARCSA for this purpose.

4. Until ARCSA has a computer system to control the traceability of the Products, the members of the SNT must record the logistical movements of their Products in the system they have for that purpose.

5. The ARCSA computer system will have a database where all the records generated by the systems of each SNT member will be stored. The characteristics of the ARCSA system shall be indicated in the regulations issued by the said authority for this purpose.

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The acquisition of medicines through small amount

The acquisition of medicines through small amount - CorralRosales - Lawyers Ecuador

The small amount is a public procurement procedure regulated in the Organic Law of the National Public Procurement System (hereinafter, the “LOSNCP”), the Regulation to the LOSCNP (hereinafter, the “Regulation”), and the Codification and Updating of Resolutions issued by the National Public Procurement Service (hereinafter, the “Codification”).

Public entities[1] can make direct contracts with suppliers through the small amount as long as they meet the following requirements:

  • The object of the contract must be: (i) the acquisition of standardized goods or services[2], which do not appear in the electronic catalog[3]; (ii) the acquisition of non-standard goods or services; or (iii) the contracting of works, solely and exclusively for the repair, remodeling, adaptation, maintenance or improvement of an existing construction or infrastructure. In no case can consulting services be hired[4].
  • In the year, the amount of the contract must not exceed the value that results from multiplying the coefficient 0.0000002 by the Initial State Budget for the corresponding fiscal year. In 2021, this value is $ 6,416.07.

Article 332 of the Codification provides that, during the year, the contracting entities may consolidate their needs and carry out a single contract for a small amount or carry out several such amounts for the same good or service, but the amount of the consolidated contract or the total amount of individual contracts may not exceed the maximum value indicated. 

These contracts may or may not be part of the annual planning that public entities are obliged to carry out[5]. But, in any case, the “small amount” tool must be used within the COMPRAS PÚBLICAS Portal[6] (www.compraspublicas.gob.ec) to publish: the needs of goods, works or services, the information of the public servant responsible for the hiring, the email in which they will receive the offers of the interested suppliers, and the maximum delivery time of said offers.

To participate in a contract for a small amount, suppliers do not need to be registered in the RUP[7]. Suppliers will be selected under the following criteria[8]:

  1. In standardized goods and services, the supplier that offers the lowest price must be chosen.
  1. In non-standard works or goods and services, the supplier that offers the best technical, financial, and legal conditions must be chosen, without the lowest price being the only selection parameter.

Once the contracting has been carried out, the contracting entities must publish its relevant information on the COMPRASPUBLICAS Portal. This information and that which, at any time, is required by[9] the National Public Procurement Service (hereinafter, “SERCOP”), will serve for this body to identify if there are non-compliance with the requirements applicable to this figure or if it was used to circumvent[10] other hiring procedures. If there are non-compliances, SERCOP will inform the competent control bodies so that they can initiate the corresponding actions.  

There are special or exceptional cases[11]in relation to this type of contracting for a small amount, such as the acquisition of medicines.

The LOSCNP does not expressly foresee the acquisition of medicines for a small amount, however this is possible under numeral 2 of article 54.2. of the Law[12], since medicines can be classified as standard goods. 

The Regulation develops this figure as follows:

“Art. 85.4.- Application of small amounts.- In duly justified and exceptional cases, contracts for the acquisition of medicines and strategic goods, the amount of which is equal to or less than multiplying the coefficient 0.0000002 of the Initial State Budget, will be carried out for a very small amount , in accordance with the provisions issued by the SERCOP for this purpose, and provided that the good is not available in the virtual repertoire for direct purchases enabled in the PUBLIC SHOPPING Portal.

The acquisition of medicines by this procedure will be within the current National Basic Medications Table. “[13] (highlighted out of text)

Although the Regulation uses the name “virtual repertoire” and not “electronic catalog” as happens in small amounts for other standardized goods, the fundamental requirement is the same: the good must not be available on the COMPRASPUBLICAS Portal for direct purchases. Additionally, the Regulation clarifies that only the medicines that appear in the current National Basic Medicines Table may be purchased.

Therefore, the small amount of medicines comes when the good: (i) is not available in the virtual repertoire enabled in the COMPRASPUBLICAS Portal (hereinafter, the “Directory”); (ii) is included in the current National Basic Medicine Chart; and (iii) the amount of the contract does not exceed the established limit.   

Reforms[14] to the Regulation and Codification provide that the contracting entities of the Integrated Public Health Network[15] (hereinafter, “RPIS”) have the obligation to contract storage and distribution and delivery or dispensing services of medicines, prior to their acquisition (hereinafter, the “Services”).  

So far, the Services have not been contracted by the RPIS. However, when this happens and the SERCOP communicates it[16] on the COMPRASPUBLICAS Portal,  Chapter II of Section III of Chapter II of Title VIII of the Codification will come into force. It contemplates specific regulations that all public entities must comply with to acquire medicines for a small amount. Among the new provisions, the following stand out: 

  1. The circumstances are established for the small amount to proceed, according to the contracting entity: 
  1. For RPIS entities, it proceeds when the medicines are not available in the Directory. In this case, the contracting of the Services is not mandatory, so the cost of the delivery-receipt of the medicines must be included in the acquisition.
  • For other public entities, it is appropriate if the medicine has not been contemplated in the annual planning or, if it has been included, it does not constitute a constant and recurring requirement during the year, that can be consolidated in a contract whose amount exceeds the maximum allowed.
  1. The contracting entities, through electronic means, may invite various suppliers, whether natural or legal persons, national or foreign, as well as their associations or consortiums. In the invitation, the entities must include the technical specifications of the medicine and the delivery conditions.
  1. The entities must have at least three offers, prior to selecting the supplier. If this is not possible, the entity must justify that it carried out all the actions and requirements necessary for this purpose.
  1. Invited providers, who do not necessarily have to be registered in the RUP, must necessarily present the medicine’s marketing authorization.

Until these regulations come into force, the provisions developed at the beginning of this article must be applied. Notwithstanding this, the SERCOP has established that, during this transition period, the contracting entities of the RPIS may carry out various small amounts of medicines in the year and their total amount may exceed the maximum value, provided that“… due to external factors, outside of the contracting entity duly justified, the contracting cannot be consolidated to use a contracting procedure under a common or special regime, other than the Small Amount. “[17]

Additionally, as of August 10, 2021, according to the fifth[18]  and tenth[19] reformed provisions of the Organic Law Reform of the Organic Criminal Code on Anti-Corruption, all public entities must obtain a prior report of relevance and favorability from the State Comptroller General to celebrate the small amount and any other contract under the LOSCNP.  

In conclusion, the acquisition of medicines for a small amount is exceptional and is subject to specific requirements. However, the dispersion of the applicable norms and their constant reforms generate confusion and an inappropriate use of this figure. For this reason, suppliers must be duly informed to avoid risks in the conclusion or execution of contracts, as well as in subsequent controls by the competent bodies.

[1] When speaking of “public entities”, reference will be made to those provided for in article 1 of the LOSCNP.

[2] According to Article 42 of the Regulation, standardized goods and services are “… those whose characteristics or technical specifications… are homogeneous and comparable under equal conditions”.

[3] In accordance with numeral 3 of article 6 of the LOSNCP, the electronic catalog is the registry of standardized goods and services published on the COMPRASPUBLICAS Portal for direct contracting.

[4] Codification and Updating of Resolutions issued by the National Public Procurement Service, Official Registry 245, January 29, 2018, Art. 330, no. 4.

[5] Organic Law of the National Public Procurement System, Official Registry 395, August 4, 2008, Art. 22.

[6] The COMPRASPUBLICAS Portal is the Official Computer System of Public Procurement of the Ecuadorian State, as provided in numeral 25 of article 6 of the LOSCNP.

[7] Numeral 29 of article 6 of the LOSCNP, defines the Unique Registry of Suppliers or RUP as “… the Database of the suppliers of works, goods and services, including consulting services, authorized to participate in the procedures established in this Law . “

[8] Codification and Updating of the Resolutions issued by the National Public Procurement Service, Official Registry 245, January 29, 2018, Art. 336.

[9] Regulation to the Organic Law of the National Public Procurement System, Official Registry 588, May 12, 2009, Art. 60.

[10] Numeral 2 of article 330 of the Codification provides that “Contracts for Small Amounts must not be used as a means of circumventing pre-contractual procedures.”.

[11] For example: leasing of goods, acquisition of fuels in operations of the entity, purchase of air tickets, contracting of travel agencies, acquisition of spare parts or accessories, among others.

[12]Art. 52.1.-Contracts of a small amount.- It may be contracted under this system in any of the following cases: […] 2.-Contracts for the acquisition of goods or provision of standardized services, except consulting, which do not appear in the electronic catalog and whose amount is less than multiplying the coefficient 0.0000002 of the initial budget of the State of the corresponding fiscal year… ”

[13] Regulation to the Organic Law of the National Public Procurement System, Official Registry 588, May 12, 2009, Art. 85.4.

[14] In this regard, Executive Decree No. 1033, published in Official Registry No. 208 of May 21, 2020, Section II of Chapter VII of Title III of the Regulations was amended; Resolution No. RE-SERCOP-2020-0111, published in the Official Registry Special Edition No. 1078 of September 28, 2020; and Resolution No. RE-SERCOP-2021-0114 published in Official Registry No. 432 of April 15, 2021.

[15] “… Made up of the set of public institutions that provide health services and which are known as << health subsystems >>, made up of the MSP, the IESS, the Social Security Institute of the National Police (ISSPOL) , ISSFA and the Complementary Health Network ”. Ecuador Constitutional Court of Ecuador, “Sentence No.: 679-18-JP / 20 and accumulated”, in Judgment No.: 679-18-JP and accumulated, August 5, 2020, 17.

[16] Codification and Updating of the Resolutions issued by the National Public Procurement Service, Official Registry 245, January 29, 2018, Twenty-fifth Transitory Provision.

[17] Codification and Updating of Resolutions issued by the National Public Procurement Service, Official Registry 245, January 29, 2018, Twenty-eighth Transitory Provision, no. 3.

[18] “… In the event of determining the relevance and favorability … the rest of the procedure established for this purpose in the law may be continued on a regular basis …”

[19] “… The Office of the Comptroller General of the State will issue a report of relevance, as a prerequisite for the signing of the public procurement processes determined in the law on the matter, by public sector entities and agencies …”

Mario Fernández García
Asocciate at CorralRosales
mfernandez@corralrosales.com

Income and VAT withholdings regime applicable to payment aggregators and online markets

Income and VAT withholdings regime applicable to payment aggregators and online markets - CorralRosales - Lawyers Ecuador
Regulation NAC-DGERCGC21-00000026 issued by the Tax Authority and published in the Third Supplement to Official Gazette 461 of May 28, 2021, establishes special rules for income tax and value added tax (VAT) withholdings.

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Effects of the derogation of the Regulations for the Application of the Organic Law of Communication in advertisement production

Effects of the derogation of the Regulations for the Application of the Organic Law of Communication in advertisement production - Lawyers Ecuador - CorralRosales
The President, Guillermo Lasso Mendoza, issued the Executive Decree No. 32 on May 24th, 2021, which ordered the derogation of the Regulations for the Application of the Organic Law of Communication.

The Organic Law of Communication (“LOC”) determines, in article 98, the rules of nationality for the production of advertisement to be disseminated through social communication media (“Rules of Nationality of Production”) which establish that advertisements transmitted through the social communication media:

Art. 98. – Production of National Advertising. – Advertising that is disseminated in Ecuadorian territory through the communication media must be produced in Ecuadorian territory by Ecuadorian natural persons or foreigners residing in Ecuador or produced abroad by Ecuadorian persons residing abroad or foreign legal entities whose ownership of the majority of the shares in said entity is held by Ecuadorian persons and whose payroll for its realization and production is made up of at least 80% of people of Ecuadorian nationality.

This payroll percentage will include the hiring of professional services.

The import of advertising pieces produced outside the country by foreign companies is prohibited, with the exception set forth in the first paragraph regarding foreign legal entities with a majority of the share package held by Ecuadorian persons.

For the purposes of this law, advertising production is understood to be television and film commercials, radio sports, photographs for static advertising, or any other audiovisual piece used for advertising purposes.

The advertising of international campaigns designed to promote respect and the exercise of human rights, peace, solidarity and human development is exempt from what is established in this article.

Social communication media are defined in the LOC as: “… public and private entities and community organizations, as well as the concessionaires of radio and television frequencies, who provide the public service of mass communication that utilize print media o radio services, television and audio and video subscription services, whose contents can be generated or replicated by the media through the internet.”

The Regulation for the Application of the LOC, among other aspects, regulated the application of the Rules of Nationality of Production for advertisement through alternative channels other than social communication media; and clarified on its application for each type of advertising piece in the case of advertisements aimed at promoting tourist destinations or events abroad or those in which the images of famous people or animated fictional characters that are the image of the brands are used. The derogatory provided by Executive Decree 32 has the following relevant implications in terms of advertising:

– Advertisement to be disseminated through alternative media such as (i) billboards or photographs located in public space in commercial premises; (ii) catalogs; (iii) flyers is no longer subject to the Rules of Nationality of Production.

– Importing printed advertising materials such as diaries, notebooks and catalogs is allowed.

– There is no prohibition for advertisement photography to be disseminated by social communication media to be taken by a foreign photographer – that is not an Ecuadorian resident – as long as the Rules of Nationality of Production regarding the property of the producer is complied with and the production team is at least made up of 80% Ecuadorians.

– There are no guidelines that regulate the application of Rules of Nationality of Production in the case of advertising intended to promote touristic destinations or events located outside Ecuador, the use of images of famous people or animated characters that are the international image of a brand (the derogated Regulations for the application of the LOC allowed the use of these videos/images for up to 20% of the duration of the video or the composition of the piece).

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Standards of govermental ethical behavior

Standards of govermental ethical behavior - CorralRosales - Lawyers Ecuador
The President Guillermo Lasso Mendoza issued on May 24, 2021 Executive Decree No. 4 regarding the Standards of Governmental Ethical Behavior.

This Executive Decree establishes the standards to which the public servants of the Executive Branch to achieve a transparent and efficient public administration at the service of the citizens.

Below the main standards of the Executive Decree No. 4:

Nepotism: Relatives of the president, vice president, ministers and vice ministers of State, secretaries and undersecretaries of State, managers, and directors of public companies, up to the fourth degree of consanguinity and second degree of affinity or those with whom there is a relationship by common-law relationships, cannot be hired or appointed within the same administrative entities. The relatives of the aforementioned officials, within the stated degrees, cannot contract directly nor indirectly with public entities of the Executive Branch.

The use of public assets and resources shall be exclusively for the performance of specific duties

Conflicts of interest shall be declared, and the public servant is prevented form intervening in matters in which such conflicts exist.

Transparency, which includes:

– The promotion of good corporate practices.

– The entities that are part of the Executive Branch will promote the contracting of national and foreign companies that have adopted codes of good corporate practices, including commitments against corruption, environmental protection, promotion of human rights, labor safety and non-discrimination.

– Companies that have their corporate headquarters in countries where executives of such companies are not sanctioned for corrupt practices incurred abroad will not be contracted. It is prohibited to contract with individuals or legal entities that have outstanding assessments from the Comptroller General’s Office.

– It is prohibited to receive gifts, presents, or any other type of benefit, gift or reward, invitations, payments in restaurants, from national or foreign executives or private persons who do or intend to do business or have any other type of commercial relationship with the State.

– When a public official attends an event due to his/her functions, and the protocol so dictates he/she may give and receive gifts that its value does not exceed USD$200.

Equal opportunity and fair treatment by Executive Branch officials who will not discriminate any person based on race, ethnicity, gender, marital status, nationality, age, political affiliation, religion or sexual orientation. Public servants shall be kind, friendly and polite and shall not get involved in situations, activities or interests incompatible with their functions, refraining from any conduct that may affect their independence of judgement.

The Secretary of State for Public Administration and Cabinet will oversee supervision and compliance.

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Data Protection Law

Data Protection Law - Lawyers Ecuador - CorralRosales
The President approved the new Data Protection Law, without any observation.

This is the first data protection law in Ecuador, which represents a radical change in the processing and security mechanisms of personal data.

The Data Protection Law has 77 articles distributed in 12 chapters. The main elements and obligations are the following:

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