The legal framework for partnerships for productive development: PDPs and PDILs
Renata Fialho de Oliveira
Veirano, São Paulo
renata.oliveira@veirano.com.br
Mauro Hiane de Moura
Veirano, São Paulo
Beatriz Marconi
Veirano, São Paulo
beatriz.marconi@veirano.com.br
Introduction
Recent changes in Brazil’s healthcare regulations have reshaped the legal framework governing public-private partnerships and innovation in the health sector. These changes illustrate the transition from the comprehensive structure established under Decree 9,245/2017 to the more detailed and streamlined but challenging framework introduced by Decree 11,715/2023 and subsequent ordinances, particularly Ordinances 4,472/2024 and 4,473/2024.
From Decree 9,245/2017 to Decree 11,715/2023
Before the recent regulatory changes, Decree 9,245/2017 was the main framework for guiding the actions of Brazil’s health economic-industrial complex. The framework was closely aligned with the National Policy for Technological Innovation in Health, providing clear mechanisms for cooperation between public and private agents, including partnerships for productive development (PDPs), technological order agreements (ETECs) and compensatory measures (MECs). By reiterating principles from other statutes, such as the Innovation Law (Federal Law No. 10,973/2004), the decree offered tax incentives and procurement mechanisms, creating a stable regulatory environment (albeit with criticisms and persecution by the federal audit courts on a considerably high amount of partnerships).
One of the key contributions of Decree 9,245/2017 was the establishment of clear selection criteria for PDP private partners, emphasising the government’s interest in securing ‘more advantageous proposals’. Importantly, the decree explicitly preserved the rights and obligations of preexisting contracts, reinforcing legal certainty and protecting parties from undue legislative intervention. While such provisions may appear self-evident given the Federal Constitution’s and general civil law’s protections, their explicit inclusion was critical to provide reassurance and deter improper administrative actions.
In 2023, Decree 11,715/2023 repealed Decree 9,245/2017, replacing its detailed framework with a brief enumeration of policy objectives for Brazil’s health economic-industrial complex. The new decree eliminated specific mechanisms and guidelines that previously provided clarity and security for public-private partnerships.
By focusing on broader goals rather than detailed procedural rules, the new decree aims to enhance flexibility but has also introduced uncertainty for stakeholders accustomed to the stability of the previous framework. The absence of explicit protections for pre-existing contracts, which were a hallmark of the earlier decree, raises concerns about the continuity of long-term agreements and the potential for administrative overreach, challenging the balance between regulatory adaptability and legal certainty.
Ordinance 4,472/2024: redefining PDP governance
Following the repeal of Decree 9,245/2017, the Ministry of Health issued Ordinance 4,472/2024, which introduced sweeping changes to the PDP framework.
For clarity, PDPs are collaborative agreements between public institutions, such as state-owned laboratories, and private companies. These partnerships focus on the transfer of technology and the local production of strategic health products, such as medicines, vaccines and diagnostic tools. The overarching goals of PDPs are to enhance national technological capabilities, lower the cost of public healthcare procurement, and ensure sustainable access to critical products through the unified health system ((Sistema Único de Saúde or SUS). The PDP model operates through a phased process, starting with the transfer of production technology from private partners to public institutions. Over time, this technology is localised, enabling full domestic production of the targeted products. In return, private partners benefit from government contracts for public supply.
The new ordinance established stricter monitoring and oversight mechanisms, mandating ongoing assessments and imposing sanctions for projects that fail to meet deadlines or goals. While these measures aim to enhance accountability and ensure efficient use of public resources, they also introduce significant complexity.
One contentious aspect of Ordinance 4,472 relates to the treatment of pre-existing PDP contracts. Although it states that earlier agreements will be ‘respected’, it also requires compliance with the ordinance’s new provisions and the adaptation of old contracts to the new standards. This creates ambiguity regarding the retroactive application of its rules, potentially undermining the legal certainty previously safeguarded by Decree 9,245/2017. Additionally, the ordinance suggests that agreements outside the PDP framework but aligned with its objectives must be adapted to comply with PDP requirements, further expanding the scope of administrative intervention.
The core issue lies in the apparent retroactive application of the ordinance, which contravenes fundamental principles of Brazilian Constitutional Law. The principle of non-retroactive application of regulations, rooted in the protection of ‘vested rights’ and ‘legitimate expectations’, is designed to ensure that stakeholders are not unfairly penalised by new rules that alter the legal framework under which their contracts were originally executed. However, the Ministry of Health does not appear to be giving proper weight to these principles, as Ordinance 4,472 stated explicitly that the new ordinance applies to contracts executed prior to its enactment.
This retroactive enforcement creates a significant problem for industry participants, as it forces them to renegotiate or reconfigure agreements under terms that were not part of the original bargain. This may jeopardise the financial stability and operational feasibility of ongoing projects. Stakeholders may find themselves unable to comply with new requirements without incurring disproportionate costs or delays, potentially disrupting the very objectives that PDPs aim to achieve.
In view of this scenario, affected parties may need to seek judicial recourse to assert the principle of non-retroactive application. Judicial intervention could help preserve the integrity of pre-existing agreements by reaffirming the protection of vested rights and legitimate expectations, thus preventing undue harm to stakeholders. The removal of explicit guarantees for pre-existing contracts from the regulatory framework has paved the way for possible administrative overreach. This underscores the importance of preserving seemingly ‘obvious’ rules within legal texts to prevent potential disruptions and ensure stability.
Ordinance 4,473/2024: introducing PDIL
In tandem with the changes to PDPs, Ordinance 4,473/2024 launched the Local Development and Innovation Programme (PDIL), a new mechanism to promote innovation and industrial growth in the health sector. PDIL seeks to foster partnerships and agreements that enhance local production capabilities and technological advancements, providing the government with greater oversight of contract execution and results.
Unlike the PDP, the PDIL does not establish a distinct contractual regime but relies on existing laws to regulate agreements within its scope. While this approach offers flexibility, it also raises questions about the uniformity and predictability of its implementation. PDIL’s success will depend on its ability to balance oversight with fostering innovation and attracting investment.
Impact on PDPs and the health economic-industrial complex
The regulatory changes have significantly impacted the PDP model, a cornerstone of Brazil’s health economic-industrial complex. Requiring older contracts to conform to new rules, especially in situations where under an ‘adaptation’ argument doing so may substantially change the quid pro quo of earlier agreements, jeopardising the stability and predictability essential for long-term public-private partnerships. Companies may hesitate to invest in large-scale projects if they perceive an unstable regulatory environment, undermining the government’s ability to attract and retain key industry players.
It is important to highlight that regulatory stability and respect for pre-existing agreements are critical to fostering confidence among private partners. While transparency and accountability are essential, they should not come at the expense of legal certainty. A pragmatic approach to policy development, focusing on sustainable growth rather than short-term measures, is necessary to ensure the continued development of the sector.
Conclusion
The shift from Decree 9,245/2017 to the framework introduced by Decree 11,715/2023 and Ordinances 4,472/2024 and 4,473/2024 reflects a significant evolution in Brazil’s healthcare regulations. While the new rules aim to enhance oversight and stimulate innovation, they also create an environment of uncertainty that could hinder the growth of the health economic-industrial complex.
Preserving legal certainty, particularly for pre-existing agreements, is essential for fostering trust and encouraging investment in the sector. By balancing innovation with stability, the government can ensure that these regulatory changes support the long-term goals of improving public health, strengthening local industries, and driving technological progress.