Bajsić Bogović: Wholesalers and hospitals can resolve the dispute over debt collection through mediation

In the midst of the crisis caused by the coronavirus epidemic and the significant burden on the Croatian healthcare system, Croatian hospitals, and indirectly all Croatian citizens, face a new major crisis – representatives of wholesalers have announced that due to accumulated debts, more than 20 hospitals in Croatia will not receive ordered medicines.

While negotiations between the Government and representatives of wholesalers are currently ongoing to find an appropriate and lasting solution as soon as possible, we asked Kristina Bajsić Bogović, a lawyer from the law firm Horvat & Zebec & Bajsić Bogović, for a comment on the legal options available to all parties involved.

– This issue needs to be viewed from two aspects. One is the aspect of the creditor (wholesalers), while the other relates to the aspect of the debtor (hospitals) – says Bajsić Bogović.

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Kristina Bajsić Bogović

—When entering into business relationships, including the specific business relationship that arose between wholesalers and hospitals due to the ordering and delivery of medicines, the creditor requires the provision of appropriate security instruments, such as promissory notes, debt securities, and similar, which will provide some assurance that, in the event of non-payment by the debtor within the agreed timeframe, they will be able to collect their claims based on the delivered goods, specifically medicines and medical supplies.

– In this specific case, as far as we know from media reports and the business practice of wholesalers, wholesalers have requested and received, in most cases, security instruments for the collection of claims in the form of debt securities. Based on the debt securities that wholesalers have received (taken) from hospitals, wholesalers have the option to use them and initiate direct collection proceedings against the hospitals that have failed to pay on time. Of course, the debt securities follow the fate of the legal transaction for which they were issued, meaning they must be fulfilled in accordance with the conditions specified or agreed upon in the relevant legal transaction – explains Bajsić Bogović.

Before initiating any enforcement proceedings, it is necessary to check the debtor’s assets so that the creditor gains as much insight as possible into all legal options available to them. The second option is for the creditor, in this case, the wholesalers, to decide to file a lawsuit with the competent court, which represents a process in which hospitals can protect their rights and interests in the appropriate civil proceedings.

– In the case of our clients, we often advise mediation in such proceedings, as our clients often need to continue further cooperation with the debtor. Mediation thus achieves a quick and efficient solution, the collection of claims is carried out in almost all cases without additional questions and the need for further collection actions, and likewise, the continuation of business cooperation is no longer in question, allowing both parties to confidently continue their previously somewhat disrupted business relationship due to the problems that arose in the collection of work and/or services provided – adds Bajsić Bogović.

Regarding what the Government and relevant institutions can do, it is important to emphasize that the Government can, within the limits of its authority, submit a proposal to the Croatian Parliament for the adoption of regulations or laws that will establish the prerequisites for when, how, and for which claims the procedure for collecting overdue and unpaid claims can be initiated, or how to proceed in cases initiated for the collection of specific claims. Another option the Government can indicate is the attempt at peaceful, extrajudicial resolution of the dispute through mediation.

– However, all of the above is like trying to extinguish a fire with a liter of water. A deep analysis by experts and a reorganization of the entire healthcare system is needed, controlled investments, and undeniable reform of the system itself to minimize or eradicate certain arbitrariness, questionable public procurement procedures, and similar problems, ensuring that patients receive the best possible care, which is currently too often not the case. And of course, the payment of a million amounts to the accounts of wholesalers, how this will happen, and whether it will happen at all, is primarily a question that the Ministry of Finance and the Ministry of Health must resolve – believes Bajsić Bogović.

And what can Croatian patients do in the end if the worst-case scenario occurs?

– The legal mechanisms for patients in the case of unavailability of necessary medicines and materials are very limited, associated with the duration of proceedings and a very high degree of uncertainty. The Republic of Croatia, like all other EU member states, does not depend on itself in the case of unavailability of medicines and materials, as production does not take place in the Republic of Croatia, and increasingly so in the European Union, of which we are a member and whose economic market we belong to. For example, if it is not possible to procure the original medicine (if it is not available in its original form), it will be necessary to resort to so-called substitute, generic medicines regarding which health insurances, especially in economically stronger EU member states, are increasingly entering into exclusive contracts with pharmaceutical companies (leading to a decrease in medicine prices, but also increasing pressure on manufacturers) – explains Bajsić Bogović.

What would be the long-term solution to this important problem?

– This crisis should prompt us to think deeply, as the frameworks for supplying medicines lead to the conclusion that the Republic of Croatia is completely dependent on so-called ‘external partners’ and it would be necessary to change such practice, or consider whether this is a key moment for introducing support for manufacturers and/or suppliers of essential medicines.

Thus, politics should also think in that direction, namely how essential (active) substances should be produced within the borders of the Republic of Croatia, thereby helping patients – concludes Bajsić Bogović.

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