• Potential probe would be first FSR intervention against US company
• Epic Systems allegedly benefitted from US grants, tax breaks
• Bid not notified to EC amid disputed accounts of tender value

Healthcare software provider Dedalus is urging the European Commission (EC) to launch a Foreign Subsidies Regulation (FSR) probe against its US rival Epic Systems over the award of a German hospital tender, two Dedalus representatives told this news service.

The company claims that Berlin’s Charité hospital failed to seek FSR approval for the public procurement award despite allegedly surpassing the law’s notification thresholds.

Dedalus, an Italian healthcare IT firm backed by Ardian, is in contact with the EC over whether this situation would merit the launch of an FSR probe on the EC’s own initiative, also known as ‘ex officio’, one of the company representatives said.

That would give the Commission the opportunity to revisit the already awarded contract and examine alleged US subsidies received by Epic Systems in the form of grants and tax exemptions, according to a third source close to Dedalus.

If the EC decided to pursue the case, it would be the first time the enforcer deploys FSR scrutiny against a US firm. Up until now, the Commission has focused its enforcement efforts on China and the United Arab Emirates (UAE) associated companies.

Germany’s ‘academic lighthouse’

Both Epic and Dedalus participated in the public tender that was launched in 2024 to provide software services for the university hospital Charité, in Berlin. One of the Dedalus representatives describes Charité as the “academic lighthouse” of the country.

The contract, which was awarded to the US heavyweight, was shrouded in controversy. Dedalus challenged the tender in court because it claimed that it had been designed in a way that was tailor-made for Epic Systems’ offering, but Berlin’s Court of Appeal sided with Charité.

The company also took action against the hospital’s decision to exclude it from the tender due to a procedural defect, but it ultimately waived its rights to a legal appeal, Dedalus said in a press release.

Under the FSR, public procurement bids for contracts that are valued above EUR 250mn need to be notified for EC approval by the contracting authority carrying out the process.

Charité said in its press release announcing the award that the budget for this project is of “approximately EUR 200mn”. However, one of Dedalus’ representatives said they believe that this project exceeds the EUR 250mn FSR threshold “by far”.

An EC spokesperson said that with regard to the Charité procedure, the contracting authority informed the Commission that the procurement estimated value was below the FSR notification threshold.

Contracting authorities failing to notify to the EC the procurement bids they receive has been a recurring issue for the enforcement of the FSR in public procurement.

This is already having legal repercussions. On 31 August, the Belgian Council of State suspended the award of a casino concession due to the contracting authority’s failure to comply with the FSR’s notification obligations.

Dedalus is in talks with the EC to persuade it that the Charité tender award to Epic Systems merits an FSR ‘ex officio’ review, one of the company representatives said. This is also important because there could be other high value tenders in the sector in the future where a similar situation could arise, the representative added.

The Commission has already carried out a preliminary FSR ‘ex officio’ review following a complaint by EDF that Czechia awarded its Dukovany nuclear project to Korea Hydro & Nuclear Power, but the EU enforcer finally decided against in-depth intervention.

Foreign subsidies

The source close to Dedalus estimated that Epic Systems surpassed the FSR threshold of EUR 4mn in foreign financial contributions received from a non-EU country in the three years prior to a notification just with the funds it got via the US’ Health Information Technology for Economic and Clinical Health Act (HITECH).

It could have also benefitted from other public funds over the three years prior to the tender, including from the US Epidemiology and Laboratory Capacity program, as well as from the country’s Trusted Exchange Framework and Common Agreement, the source said.

This source added that Epic Systems could have also benefitted from a 20-year sales tax exemption from 2022 and a full exemption from property taxes from the state of Minnesota.

However, the foreign financial contributions that could be reviewed by the EC in an ‘ex officio’ investigation go beyond the three-year limit established for public procurement filings. In these cases, the EC can review foreign subsidies that were granted starting from 12 July 2018. This would significantly increase the amount of foreign financial contributions in scope for a potential FSR probe, according to the source close to Dedalus.

This source said that US subsidies granted to Epic Systems helped it build a dominant, closed electronic health record (EHR) platform, which in turn allowed it to generate significantly higher cashflows than its competitors and to invest more in research and innovation.

Epic offers a natively bundled product, which differs from European EHR vendors that have prioritised interoperability with third-party systems. In recent years, some tenderers have shifted their procurement requirements to favour native bundle products, which allows Epic to charge significantly higher prices without losing the tenders, according to this source.

“Europe risks reducing competition by weakening European vendors and leaving the market increasingly to Epic and other US suppliers that developed their technology at scale in the US, supported by public funding”, it added.

Epic Systems is also facing regulatory scrutiny at home, with Texas suing the company for allegedly unlawfully monopolizing the electronic health records industry with exclusionary tactics. According to Reuters, the company is also facing an antitrust investigation by the Federal Trade Commission (FTC).

Epic Systems and Charité did not respond to requests for comment.