Competition in Pharma – Exceptions to the Rules during Covid-19 Outbreak

16 April 2020

The European Commission has recently issued a Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak.

Through this communication, the authority provides guidance to companies active in the pharmaceutical industry with regards to actions which could be undertaken in order to address the shortage of medicines and medical equipment that are used to test and treat COVID-19 patients or are necessary to mitigate and possibly overcome the outbreak, actions which (as a way of exception, and only for a limited period of time) shall not be considered as breaching competition rules.

The European Commission considers that the internal EU market is under a general supply shock, resulting from the disruption of supply chains, combined with an asymmetric demand shock caused by either an abrupt decline in consumer demand for certain products and services or a rise in demand for other products and services, notably those related to the health sector.

Due to this reason, it decided to intervene and detail the main criteria that it will follow in assessing the cooperation projects aimed at addressing the shortage of essential products and services, with focus on the pharmaceutical sector, during the COVID-19 outbreak.

It is important to specify from the outset that the Romanian Competition aligned to the position adopted by the European Commission, and therefore the temporary rules established by the European Commission may be taken into account for cooperation on the Romanian market in order to ensure that essential medicines and medical equipment are available in order to fight the coronavirus pandemic.

To start with, cooperation in the health sector might for example consist in entrusting a trade association (or an independent advisor, independent service provider, or a public body), to perform actions such as:

●coordinate the joint transport for input materials;

●contribute to identifying those essential medicines for which, in view of forecasted production, there are risks of shortages;

●aggregate production and capacity information, without exchanging individual company information;

●work on a model to predict demand at national level, and identifying supply gaps;

●share aggregate supply gap information, and request participating companies, on an individual basis and without sharing that information with competitors, to indicate whether they can fill the supply gap to meet demand (either through existing stocks or increase of production).

The above activities do not raise antitrust concerns, if they are subject to enough safeguards in order to avoid, for example, exchange of sensitive commercial information.

In addition to them, the European Commission understands and accepts that other more intrusive activities might be needed to adapt production, stock management and, potentially, distribution.

Given that such projects may require exchanges of commercially sensitive information and a certain coordination, they are – by way of exception – temporarily allowed to the extent that they are:

●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, such as those that are used to treat COVID-19 patients;

●temporary in nature (i.e. to be applied only as long there is a risk of shortage or in any event during the COVID-19 outbreak); and

●not exceeding what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.

Companies are advised to document all exchanges and agreements between them and make them available to the competition authority on request.

It is also recommendable that any coordination which companies envisage in order to face the difficulties generated by the COVID-19 outbreak is discussed and confirmed in advance with the Romanian Competition Council.