Competition Regulators relax rules to facilitate COVID-19 measures

Published 29 abril 2020

As many in the pharma sector will be aware, cooperation between competitors is restricted by competition law. The European Commission has recently published guidance relaxing the competition rules to facilitate collaboration in the fight against Covid-19. In Ireland, the CCPC has indicated it will take a similar approach. 

This guidance comes in the form of a temporary framework to assist businesses in assessing competition issues where this cooperation is aimed at ensuring the supply and distribution of essential and scarce medical supplies.

Any such cooperation between competitors seeking to rely on the rules must be: a) objectively necessary to increase medical supplies/avoid a shortage of supplies, and b) limited in both time and scope to address the challenges presented by Covid-19. This guidance aims to assist companies in increasing production of critical medical supplies necessary to fight the coronavirus pandemic.

EU Temporary Framework

Since 2003, companies in the EU have been responsible for self-assessing compliance of their agreements and practices with EU competition law. The competition rules restrict cooperation between competitors and have been enforced vigorously in the pharma sector in particular. One recent example resulted in the imposition of a €16 million fine against Johnson&Johnson and Novartis for collusion to delay market entry of a painkiller.

The Temporary Framework relaxes the restrictions on certain cooperation between companies to address the shortage of essential medical supplies during the pandemic and has provided specific guidance to facilitate the self-assessment of such cooperation initiatives. The CCPC has published similar statements on its website and is expected to follow the Commission’s approach in this regard.

Many EU Member States are already experiencing shortages of medicines or supplies used to treat patients with Covid-19 or expect such shortages very soon. The guidance acknowledges that different measures may be needed to bridge the gap between supply and demand and will require cooperation between competitors including:

• A very significant, rapid increase of production of products that are needed and currently in short supply;
• The reallocation of stocks which would require companies to agree to exchange/ communicate information on sales and stocks; or
• The switching of production lines from non-essential medicines or other products to products necessary to address the outbreak.

The association ‘Medicines for Europe’, has already made use of these relaxed competition rules to supply essential medicines during Covid-19. Its members supply 67% of prescription medicines in Europe and include many generic pharmaceutical producers such as Mylan, Teva and Sandoz. The Commission recently approved its voluntary cooperation project among pharmaceutical producers to address shortages of ICU medicines in countries across the EU where they are most needed.

Assessment of Proposed Measures

The Commission guidance acknowledges that exchanges of commercially sensitive information between companies may be required where it is necessary to efficiently spread production, stock management and potentially distribution between companies. In normal circumstances the exchange of such information is prohibited. In the current exceptional circumstances the Commission has stated that these measures will not be an enforcement priority provided that they fulfil three strict conditions. The measures must be:

• Designed and objectively necessary to actually increase output in the most efficient way to address or avoid a shortage of supply of essential products or services used to treat Covid-19 patients;
• Temporary in nature and apply only as long as there is a risk of shortage; and
• Not exceed what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.

Where the cooperation initiative is more limited (e.g. joint transport, demand predictions etc.) and does not require the exchange of commercially sensitive information, it will not raise competition concerns.

The Commission and the CCPC have emphasised that they will not stop tackling businesses seeking to exploit the current crisis and the position of customers through anti-competitive conduct (such as the charging of higher or unusually high prices) which will be an enforcement priority for competition regulators.

Practical tips for cooperation

Companies considering enhanced cooperation with competitors to address the challenges of the  Covid-19 crisis should ensure that any proposed measures are:

• objectively necessary to increase output or avoid a shortage of supply, and
• limited in both time and scope to address the challenges presented by Covid-19.

You should also document any price increases of products which are scarce or essential at this time to avoid accusations of anti-competitive pricing.

In an unexpected reversion to the pre-2003 notification system, the European Commission has agreed to provide guidance directly to businesses relating to the temporary framework. This may take the form of “comfort letters”, one of which was provided to Medicines for Europe, to provide legal certainty for businesses. This approach has also been followed by the CCPC in its most recent statement on 25 March. Should you have any questions our competition team would be happy to assist.