COVID-19 European Commission guidance on antitrust and medicines supply

In brief

On 8 April 2020, the Commission issued important antitrust guidance to companies cooperating in response to urgent situations related to the COVID-19 outbreak. On the same day, it has also put forward guidance to optimize the supply and availability of medicines. The aim of these measures is to address the inevitable disruptions in the supply chains of health-related companies.


Contents

(i) Antitrust guidance

The Commission refers to the COVID-19 outbreak as not only a severe public health emergency but also as a "major and unprecedented shock to the global and Union economies". Supply chains are disrupted, demand is shocked either because of an abrupt decline in certain products and services or because of a steep rise in demand for others (notable in relation to the health care sector). The exceptional challenges undertakings are facing may trigger the need for them to cooperate with each other in order to overcome, or at least mitigate, the effects of the crisis to the ultimate benefit of citizens.

For that reason, the Commission assesses in its new communication, which entered into effect on 8 April 2020 (and continues to apply until it is withdrawn), potential forms of cooperation that may enable companies to address the rapidly growing demand in essential products and services, notably medicines and medical equipment, necessary to control the COVID-19 outbreak.

Understanding the complexity of self-assessing compliance with competition law required under these unprecedented circumstances, the Commission engages to assist companies on how to evaluate the legality of their cooperation projects. To this end, DG COMP has already set up a dedicated
webpage (https://ec.europa.eu/competition/antitrust/coronavirus.html) and a dedicated
mailbox (COMP-COVID-ANTITRUST@ec.europa.eu) that can be used to seek
informal guidance on specific initiatives.

The communication's key messages:

  • The communication sets out the main criteria and process according to which the Commission will provide (ad hoc) guidance to companies that need to cooperate with each other to address the shortage of essential products and
    services during the COVID-19 outbreak.
  • The Commission recognizes that the response to the emergency situations related to the COVID-19 outbreak might require different degrees of cooperation, with a varying scale of potential antitrust concerns.
  • The Commission explicitly refers to the role that trade associations (or independent advisors, service providers or other public bodies) may play (subject to sufficient safeguards) in steering the cooperation between companies active in the health sector, notably to (a) coordinate joint transport for input materials, (b) contribute to identifying those essential medicines at risks of shortages, (c) aggregate production and capacity information (without exchanging individual company information), (d) work on a model to predict demand on a Member State level and to identify supply gaps, and (e) share aggregate supply gap information, and request participating undertakings, on an individual basis and without sharing that information with competitors, to indicate whether they can fill the supply gap to meet demand. Provided these activities are subject to sufficient safeguards (as indicated in the Commission's Guidelines in relation to horizontal co-operation agreements), they do not raise antitrust concerns.
  • On another note, the Commission recognizes that measures to adapt production, stock management and, potentially, distribution in the industry may require exchanges of commercially sensitive information and certain coordination of which site produces which medicines. Ordinarily, the Commission considers those exchanges and coordination between undertakings to be problematic under EU competition law, but given the current exceptional circumstances, it considers that they are either not problematic or would in any case not give rise to an enforcement priority insofar as the guidance set out in the Communication is respected (in particular, designed and objectively necessary to increase output or avoid shortage of essential products or services, temporary in nature, and limited to what is strictly necessary).
  • Although the exact process is unclear, the Commission can provide guidance by way of an ad hoc "comfort" letter swiftly. It will do so at its own discretion and "exceptionally". Self-assessment under the existing Vertical and Horizontal Guidelines remains the rule.

 

(ii) Guidance on the optimal and rational supply of medicines to avoid shortages

The guidelines aim to ensure the continued supply of medicines necessary for the treatment of COVID-19 and equitable distribution of such medicines for patients in Europe. It is addressed to EU Member States and EEA countries. Therefore, companies are advised to monitor further action at Member State level within the next days.

Importantly, the measures in the guideline are not legally binding but are presented as best practice seen in Member States and shared with the Commission. It is therefore not clear to what extent the guidelines will be followed by all Member States.

We have identified three highlights.

  •    Solidarity

In the spirit of European solidarity, Member States are called to lift export bans which are impeding the trade of COVID-19 medicines within the internal market and to refrain from requisition of medicines, intermediates or active pharmaceutical ingredients.

Member States are also called to ensure that companies increase production where needed and work at full capacity. Pharmaceutical companies may need to cooperate and coordinate with other companies in the supply chain in line with the antitrust guidance described above.

Member States are encouraged to support the industry in the efforts to increase capacity or reorganize products, in particular through fiscal incentives and State aid.

Member States are also called to guarantee adequate access to PPE (Personal Protective Equipment) material for actors in the supply chain to avoid contamination. Employees working on manufacturing sites should be allowed to travel to their place of work. This includes cross-border workers

  •   Regulatory flexibility

The guideline foresees significant relaxation of regulatory measures. In particular, Member States shall streamline and accelerate variation procedures concerning the change of API (Active Pharmaceutical Ingredient) suppliers, the designation of new manufacturing sites or extension of expiry dates. The guideline does not address products approved through the centralized procedure. The argument can, however, be made that similar flexibility should be demonstrated for those products.

Member States should also simplify control procedures for illicit and psychotropic substances used to manufacture intensive care medicines and processing of import permits should be accelerated to facilitate movements within the internal market.

  • Ensuring optimal use in hospitals and pharmacies

National authorities should be able to reallocate stock between hospitals to ensure an equitable distribution of medicines. This should be done on the basis of efficient reporting systems that allow hospitals to communicate and coordinate.

Hospital protocols should be shared EU-wide and should foresee the following measures in case of confirmed shortages:

    • Use of alternative medicines
    • Extension of expiry dates where possible
    • Use of magistral formulas and veterinary medicines
    • Use medicines off label and in clinical trials

The need for coordination extends to pharmacy level. Member States are called to introduce measures to prevent excessive purchasing and introducing restrictions to sales.

Conclusion

These measures aim to ensure that patients throughout Europe have access to essential medicines and medical equipment during the COVID-19 outbreak. The antitrust communication provides competition law guidance for increased possibilities for companies to work together. In addition, the guidance on optimal supply provides guidance to EEA countries to ensure continued supply and equitable distribution of medicines necessary for the treatment of COVID-19.
 

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