The Commission has published a temporary competition framework and guidelines for ensuring supply of essential products and services during the Covid-19 crisis

In a previous article we emphasised the importance of ensuring compliance with the competition rules even during an economic crisis – there are inter alia strict rules on cooperation between competitors. The outbreak of Covid-19 has led to a shortage of certain healthcare products. In order to remedy this, the Commission has published a communication on a temporary framework for assessing possible forms of cooperation that can be allowed during the crisis and specific guidelines for ensuring supply of essential medicines.

The Commission’s temporary framework and guidelines of 8 April 2020

On 8 April 2020 the Commission published a communication on a temporary framework for assessing competition issues related to business cooperation aimed at addressing the shortage of essential products and services during the Covid-19 crisis. There is in particular a need for cooperation to ensure the supply of medicines. In addition to the temporary framework for cooperation, the Commission has issued specific guidelines on the optimal and rational supply of medicines to avoid shortages during the COVID-19 outbreak. Below, these two communications from the Commission, as well as the first cooperation approved by the Commission under the framework, which refers to Medicines for Europe’s cooperation to ensure supply of critical hospital medicines, are described.

The Commission’s communication on a temporary framework for assessing business cooperation

Background and purpose

The Commission has published a communication on a temporary framework for the assessment of business cooperation in response to situations of urgency stemming from the current Covid-19 outbreak. The aim of the framework is to ensure the availability of essential products. This includes medicines and medical devices used to treat and fight Covid-19.

The purpose of the communication is to explain the main criteria that the Commission will apply in assessing these possible cooperation projects and to set its enforcement priorities during the crisis. The Commission is also introducing a temporary process to issue, where appropriate, ad hoc written comfort letters to companies in relation to specific and well-defined cooperation projects.

Cooperation can take place between companies active in the pharmaceutical and medical technology industry or between companies in other sectors that are converting part of their production lines to start producing scarce products. Depending on the evolution of the crisis, the Commission may amend or supplement the communication to cover other forms of cooperation. The communication shall remain applicable until the Commission withdraws it (once it considers that the underlying exceptional circumstances are no longer present).

In the past, companies could notify cooperation agreements to the Commission to receive an approval in the form of a so-called individual exemption. This possibility was removed in 2004. Nowadays companies are themselves responsible for assessing whether a cooperation is in compliance with the competition rules. These assessments are often conducted with the assistance of a lawyer specialised in competition law. The Commission recognises that cooperation between companies might help in more efficiently addressing the shortage of essential products and services during the crisis. The Commission therefore sees that there may be a need for specific guidance for companies planning to work together to secure access to such products and services during the current crisis. The Commission has set up a dedicated website[1] and a working group with a dedicated mailbox[2] that can be used to seek informal guidance on specific initiatives.

Trade associations or an independent third party

Cooperation in the healthcare sector might be limited to actions carried out by a trade association or an independent third party. The Commission states that such a party can be entrusted with, e.g. the following:

i. Coordination and exchanges are limited to what is necessary to address the risk of shortages.
ii. Exchanges are supervised by the Commission and individual company data is collected by an external consultant.
iii. The cooperation will be open to any pharmaceutical manufacturer willing to participate.
iv. Cooperation is characterized by transparency – minutes of all meetings and information exchanges will be created and kept, and copies of any agreement entered into between undertakings in the context of this cooperation will be shared with the Commission.
v. Sales and pricing are not part of the collaboration and excessive pricing may not occur.
vi. Time limitation: the cooperation is permitted as long as it is necessary to avoid shortages during the pandemic.

Such measures do not give rise to any competition problems, provided that they are subject to sufficient safeguards (e.g. that competitors only receive aggregated information, and no individualised company information).

Assessment of temporary cooperation projects aimed at addressing the shortage of essential products and services

However, the Commission notes that collaborations in the healthcare sector may need to go further than that to address critical delivery deficiencies, e.g. through a coordination of how production is reorganized to increase and optimise production, so that all companies do not focus on one or a few medicines, while other medicines remain in under-production.

Cooperation measures to adapt production, stock management, and potentially even distribution, may require exchanges of commercially sensitive information and a certain coordination of which site produces which medicines, so that not all companies focus on one or a few medicines. Such exchange of information and such coordination is in normal circumstances problematic under EU competition rules. However, considering the current exceptional circumstances, the Commission recognises that such temporary cooperation may be permissible or that, in view of the emergency and its temporary nature, it would not give rise to an enforcement priority for the Commission, provided the following circumstances are met:

i. The measure has been designed for and is objectively necessary to actually increase output in the most efficient way to address or avoid a shortage of supply of essential products or services, such as those that are used to treat COVID-19 patients;
ii. the measure is temporary in nature (i.e. to be applied only as long as there is a risk of shortage or in any event during the COVID-19 outbreak); and
iii. the measure does not exceed what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.

In the context of an imperative request from public authorities to undertakings to temporarily cooperate in response to urgency situations related to the current COVID-19 outbreak (e.g. to organise production and delivery in order to meet an urgent need to keep up the functioning of healthcare for COVID-19 patients), such cooperation is allowed.

The Commission states that companies should document all exchanges and agreements between them and make the documentation available to the Commission upon request. The fact that cooperation is encouraged and / or coordinated by a public authority (or implemented within a regulatory framework established by the authority) is also a relevant factor to consider in concluding that such cooperation would not be problematic under EU competition law or would not be an enforcement priority for the Commission.

The Commission further announced that it can provide guidance to companies and trade associations on specific urgent cooperation initiatives with an EU dimension and it is possible to obtain guidance by means of a temporary “comfort letter”. We would recommend contacting a lawyer specialised in competition law before taking such contacts.

In the communication the Commission points out that it will not tolerate that companies take advantage of the current situation to engage in anti-competitive cooperation or abuse their dominant position by e.g. exploiting customers and consumers (e.g. by charging higher prices) or by limiting production, which ultimately harms consumers.

Comfort letter issued for Medicines for Europe cooperation

On 8 April 2020 the Commission applied the procedure outlined in the communication for the first time by issuing a comfort letter to Medicines for Europe (former European Generics Medicines Association (EGA)).[3] The comfort letter relates to a specific voluntary cooperation project between pharmaceutical manufacturers – both members and non-members of Medicines for Europe – that focuses on the risk of a shortage of hospital medicines that are important for the treatment of Covid-19 patients.

The Commission (through the Health Commissioner and DG SANTE) had requested the industry to join efforts to deal with the urgent risk of shortages of the most critical medicines for Covid-19 patients.

The aim of the cooperation is to quickly and efficiently increase production of the most critical medicines and to streamline inventory and distribution so that the medicines can quickly be delivered to the patients who need them most. Furthermore, the cooperation involves central data collection and modelling of demand and production, to identify the greatest risks of shortages and coordinate the specialisation of production to avoid oversupply of certain products and shortages of others.

The Commission came to the conclusion that the cooperation is necessary and aims to increase production and improve supply. The Commission is actively involved in the process and has also laid down conditions for cooperation:

i. Coordination and exchanges are limited to what is necessary to address the risk of shortages.
ii. Exchanges are supervised by the Commission and individual company data is collected by an external consultant.
iii. The cooperation will be open to any pharmaceutical manufacturer willing to participate.
iv. Cooperation is characterized by transparency – minutes of all meetings and information exchanges will be created and kept, and copies of any agreement entered into between undertakings in the context of this cooperation will be shared with the Commission.
v. Sales and pricing are not part of the collaboration and excessive pricing may not occur.
vi. Time limitation: the cooperation is permitted as long as it is necessary to avoid shortages during the pandemic.

The Commission’s guidelines for optimising supply of medicines during the Covid-19 crisis

Introduction

On 8 April 2020, the Commission published a communication with guidelines for optimizing the supply of medicines during the Covid-19 crisis. Initially, it is mentioned that the Commission has formally called on the pharmaceutical industry to increase the production capacity for all medicines for which there is an increased demand as a result of Covid-19.

Calls to counter the protectionist measures of the Member States

The strong increase in demand for certain medicines has led to protectionist measures, such as export bans and national stockpiling, being taken by many countries both within and outside the EU, which affects the global pharmaceutical supply chain. The Commission states that total export bans on medicines are not in line with the EU Treaty and impede the functioning of the internal market. With regard to these protectionist measures, the Commission has requested the Member States to:

i. Lift all export bans on medicines within the internal market. Export bans are detrimental to the availability of medicines for European patients even when they are legally justifiable.

ii. Avoid national stockpiling of medicines. Member States should ensure that stockpiling by wholesalers and pharmacies (including hospital pharmacies) is prevented.

iii. National authorities should ensure that supply chain operators have access to reliable information on the use of medicines in the context of the Covid-19 outbreak. The purpose of this is to prevent panic buying or irrational consumption by individuals and excessive purchasing by wholesalers and pharmacies.

Measures for ensuring supply of medicines

The Commission stated inter alia the following as regards ensuring supply of medicines:

i. The current crisis requires a significant increase in production and may also require re-organised supply chains and production lines. The Commission refers to its communication on a temporary framework for the assessment of cooperation initiatives (see above). Member States should inter alia request that operators in the supply chain monitor stocks and production capacity and share information with authorities.

ii. Pharmaceutical production (including all necessary raw materials and components) should be considered as an essential activity and such operations should be allowed to continue. Member States should support companies to increase their manufacturing capacity, in particular through fiscal incentives and state aid.

iii. Member States should ensure access to personal protective equipment for those active in the pharmaceutical supply chain, as such equipment is not only required by current EU legislation on occupational safety and health but are also necessary to prevent cross contamination and ensure the quality of medicines. Employees working in manufacturing sites should be allowed to continue to travel to their place of work. Particular flexibility should be granted to cross-border workers in line with Commission guidelines.

iv. Regulatory flexibility for the pharmaceutical industry is encouraged in relation to variations of marketing authorisations. The procedures for changes in suppliers of APIs, the designation of new manufacturing sites or the extension of expiry dates should be accelerated as long as quality is ensured. Simplified control procedures can be introduced for controlled substances that fall under international rules against the illicit traffic of drugs and psychotropic substances and that are used to manufacture many intensive care medicines.

v. Contacts between the national authorities and the industry should be improved and should be organised via a single contact point. Member States should share information with marketing authorisation holders, wholesalers and hospital pharmacies, such as epidemiological forecasts, that help them to better plan for increased demand and respond to that Member State’s needs.

vi. Ensure necessary support to medicine wholesalers. The Commission states that, in order to ensure deliveries, drivers should be allowed to travel without restrictions and be granted access to hospitals, pharmacies and other dispensing sites (especially in quarantined areas).

vii. So-called “green lanes” should be fully implemented at the borders. The purpose of these lanes is to allow transports with important goods to cross borders without delay.

viii. Air freight and other forms of transport should receive support. The current confinement measures that a majority of the Member States have implemented have led to a decrease in air freight capacity and price increases.

ix. Ensure fair distribution of supply. Member States should ensure that wholesalers, community pharmacies and hospitals receive their usual stocks of medicines. In situations of high demand, national coordination between authorities, procurement and business should be introduced to ensure a fair distribution of medicines. The flexibilities outlined in the Commission guidance on using the public procurement framework in the emergency situation related to the COVID-19 crisis should be taken into account. Procurement should be organised regularly at short intervals to avoid shortages and prevent stockpiling. In order to increase efficiency, purchases for hospitals should be bundled and organised by central purchasing bodies active in the healthcare sector.

Using medicines off label and in clinical trials

For medicines under development, or medicines currently authorised for other diseases that are being used for the treatment of Covid-19 patients outside their authorised indications (off-label) under national early accessprograms or clinical trials, it is important that a complete forecast can be made about the supplies needed, taking into account the needs of patients using the medicines on-label  (i.e. for the authorised indications). The Commission states that large clinical trials, as far as possible on a European scale, should be prioritized as these are necessary to generate the reliable data needed to establish evidence of the efficiency of the medicines and to provide appropriate advice to healthcare professionals and patients and enable regulatory decision-making.

Optimal use of medicines in hospitals and optimisation of sales in community pharmacies

In addition to the above measures to ensure the availability of medicines, the Commission also expresses its opinion on optimal use of medicines used in hospitals. National authorities should be able to reallocate stock between hospitals and encourage hospitals to update hospital protocols regarding alternative medicines in the event of a confirmed shortage of medicines.

Furthermore, the Commission commented on optimisation of sales in community pharmacies to avoid hoarding. The Commission inter alia encourages Member States to limit dispensing and sale at community pharmacies of medicines at a risk of shortages and to limit the online sales of essential medicines. Member States should also consider strengthening information on the common EU logo that identifies legally operating online retailers to avoid that patients buy falsified medicines from unauthorised sellers.

[1] https://ec.europa.eu/competition/antitrust/coronavirus.html

[2] COMP-COVID-ANTITRUST@ec.europa.eu

[3] See https://ec.europa.eu/competition/antitrust/medicines_for_europe_comfort_letter.pdf