EU Open To 'Comforting' Drugmakers Cooperating Amid Virus

By Bryan Koenig
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Law360 (April 8, 2020, 5:59 PM EDT) -- European Union antitrust officials issued new guidance Wednesday aimed at helping companies know the types of coordination permitted to combat the COVID-19 pandemic, with a particular emphasis for drugmakers who got a "comfort letter" on generic-drug cooperation.

The European Commission's temporary framework on the antitrust issues of outbreak cooperation represents just the latest signal of antitrust enforcers in Europe and around the world trying to facilitate certain types of collaboration to get equipment and drugs where they're needed.

The guidance includes the ability for companies and trade groups to seek so-called comfort letters that are not unlike U.S. Department of Justice business review letters through which both agencies indicate their views on the competitive prospects of proposed conduct. DOJ letters are a regular practice even outside emergencies, while the commission says that European companies are generally on their own to assess the legality of proposed conduct. But enforcers on both sides of the Atlantic have now specifically said they would entertain letter requests for proposed coronavirus conduct, with the DOJ issuing its first over the weekend.

The European Commission's first comfort letter, disclosed Wednesday, is for EU generic-drug maker trade group Medicines for Europe. According to the commission, the comfort letter addresses a particular "voluntary cooperation project" that includes drugmakers in and outside of the trade group targeting shortage risks for "critical hospital medicines" used to treat coronavirus patients.

"In the current circumstances, this temporary cooperation appears indeed justifiable under EU antitrust law, in view of its objective and the safeguards put in place to avoid anticompetitive concerns and as long as it remains within the scope communicated to the commission," the agency said.

Medicines for Europe, which says it represents companies accounting for 67% of the bloc's prescription therapies market, welcomed the framework and the comfort letter in a statement Wednesday.

"In line with the EU solidarity principle, Medicines for Europe has developed a project which will assess the large demand spikes for these medicines in countries, working closely with the Commission and the [European Medicines Agency], and the support of countries, to best ensure their supply where they are needed most," the trade group said.

Worldwide antitrust responses to the coronavirus continue to evolve as the pandemic grows and its economic impacts deepen.

As of Wednesday, the European Centre for Disease Prevention and Control counted more than 675,000 cases on the continent and over 56,000 deaths. Spain and Italy have been the worst hit in Europe, with over 140,000 cases and more than 135,000 cases, respectively. The Italian dead number over 17,000 and in Spain, casualties have exceeded 13,000. In the United States, the Centers for Disease Control and Prevention reported over 395,000 cases and over 12,000 deaths, as of Wednesday.

The European Commission's guidance Wednesday also repeated the warning against anyone who might take advantage of the outbreak to fix prices or otherwise push past the boundaries of antitrust permissiveness established in the wake of the outbreak. Guidance on cooperation within those bounds, the commission said in a statement, is necessary to address supply disruptions and the risk of shortages for "critical medical goods."

To avoid those shortages quickly enough, the commission said "swift coordination" between companies may be necessary.

"This might in turn require either switching or up-scaling production in the most efficient way. For example, companies may need to coordinate on production stock management and potentially distribution so that not all undertakings focus on one or a few medicines, while others remain in under-production," the enforcer said. "Such coordination would be contrary to antitrust rules in normal circumstances. But in the context of a pandemic like the coronavirus outbreak, such coordination can, with appropriate safeguards, bring important benefits to citizens."

According to the guidance, accompanied Wednesday by separate guidelines from the Commissioner for Health and Food Safety on how member countries and companies can shore up the drug supply chain, a variety of measures may be employed to bridge "the gap between demand and supply."

Among the potential coordination listed in the antitrust guidance is joint transportation of raw materials, as well as information sharing to gauge capacity and potential shortages.

"Such activities do not raise antitrust concerns, provided that they are subject to sufficient safeguards (such as no flow of individualized company information back to competitors)," the commission said.

Coordinated conduct generally won't run afoul of EU antitrust rules, according to the guidance, if it's meant to "actually increase output in the most efficient way to address or avoid a shortage," if it's limited in duration to the outbreak, and doesn't go beyond what's "strictly necessary to achieve the objective of addressing or avoiding the shortage of supply."

--Editing by Michael Watanabe.

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