Pharma & COVID-19: An overview of EU and national case law

The current crisis which has ensued from the spreading of Covid-19 has upset the worldwide balance, seriously straining the entire healthcare system, with significant and inevitable consequences for many other sectors of the economy. Since the very beginning of the state of emergency, the institutions have tried to react by taking measures capable, on the one hand, of tackling the risk of the spread of the pandemic and, on the other, of remedying or avoiding severe repercussions such as, for example, the shortage of essential products, and also of ensuring that those products would be available at competitive prices. In this context, a central role is inevitably played by the pharmaceutical sector, it being the main addressee of the various emergency provisions and measures implemented, at national as well as at European level, to face the crisis. Moreover, it must be pointed out that, from a competition law point of view, the pharmaceutical companies may be exposed to multiple risks in the event they had to cooperate to ensure the supply of medicines used for the treatment of Covid-19, or if they decided to implement projects to develop new products. This situation has required the formulation of specific guidelines on this topic, as well as imposing the need to establish an open dialogue between undertakings and the competent authorities. Indeed, the final goal is to ensure consumer welfare, where the latter is deemed to prevail over any potential effects restricting competition. In this regard, the Guidelines on the cooperation among undertakings during the Covid-19 emergency, both at European and at national level, have demonstrated a wide opening in the setting of the criteria to assess temporary cooperation projects that are necessary to deal with the crisis.

The emergency measures at national level

Among the most relevant measures provided for at national level in order to face the health emergency situation, mention must firstly be made of Law Decree no. 23 of 8 April 2020, converted into Law no. 40 of 5 June 2020, implementing “Urgent measures on access to credit and tax obligations for companies, on special powers in strategic sectors, and also on interventions with regard to health and employment, on the extension of administrative and procedural deadlines”, which introduced some specific measures that affect the pharmaceutical sector.

Indeed, in the mentioned Decree, the Italian legislator established a number of rules concerning drug trials for the treatment of Covid-19. In this regard, attention should be focused on Article 40 of the Law Decree no. 23/2020, which repealed the previous Article 17 of the Law Decree no. 18/2020 and conferred to the Italian Pharmaceutical Agency with specific tasks related to the current health crisis. In particular, it is stated that, only for the period covered by the declaration of the state of emergency, and without prejudice to the existing provisions regarding clinical drug trials, the Italian Pharmaceutical Agency (IPA; in Italian, “Agenzia Italiana del Farmaco”, or “AIFA”) may access all data on clinical trials, observational studies and compassionate use programmes related to patients with COVID-19.

Moreover, it has been specifically established that the protocols for clinical trials on phases I, II, III and IV medicinal products, the protocols for observational studies on medicines and those for compassionate therapeutic use must be previously assessed by the Technical-scientific committee (TSC) of IPA. The TSC will then have to inform the technical-scientific committee of the Department of Civil Protection’s Crisis Unit of the outcomes of its assessments.

It has been further specified that, always within the time limits of the declaration of the state of emergency, the Ethical Committee of the National Institute for Infectious Diseases Lazzaro Spallanzani of Rome (“Ethical Committee”), being the only national ethical committee entrusted with the assessment of clinical trials of medicinal products for human use, of observational studies on medicines and of compassionate programmes related to patients with COVID-19, must issue, also on the grounds of the assessment carried out by the TSC of the IPA, a national opinion.

Finally, in derogation of the existing procedures for the acquisition of clinical trial applications, the IPA, having consulted the Ethical Committee, was due to issue, within 10 days from the entry into force of the mentioned Decree, a notice stating the simplified application procedures, as well as the simplified procedures to take part in trials [1].

In compliance with the aforementioned rule provided under Article 40, subarticle 5 of the Law Decree no. 23/2020, on 22 May 2020, the IPA published the Notice on the procedures for the submission and the approval of trials and compassionate therapeutic use programmes related to the COVID-19 emergency [2]. IPA plays a fundamental role in the ongoing context of health crisis, given that the Agency itself, has, since the very beginning of the emergency, been assigned some specific tasks, among which are the following: i) with respect to the “off-label” use of medicines, the IPA constantly updates the information available on the medicines which are used outside the scope of clinical trials, such as those that are marketed for different purposes and that are made available to patients even if there is no specific therapeutic indication for COVID-19; moreover, as already highlighted above, ii) the IPA deals with the research and development/access to experimental medicines, through its own Technical-Scientific Committee (TSC), monitoring as well as regulating the ongoing trials; furthermore iii) the IPA takes part, in cooperation with the Civil Protection Department (CTS) and with the National Institute for Infectious Diseases Lazzaro Spallanzani, in the the drafting of the so-called National Guidelines on management concerning Covid-19 cases; finally iv) the IPA has also dealt with the issue of avoiding shortages of medicines in hospitals, it being in touch with the holders of the marketing authorisations and with the importers. In particular, it has ensured the regular supply of the medicines used in hospitals during the emergency, as well as acilitating the import of critical products [3]

As regards national measures, Law Decree no. 34 of 19 May 2020 ( “Decreto Rilancio”) introduced, together with a number of urgent measures concerning health and the support of employment and the economy, a framework scheme on State aids. In particular, with regard to what is strictly related to the pharmaceutical sector, it allows the Italian Regions, the Autonomous Provinces, the other local authorities as well as the Chambers of Commerce to adopt measures favouring research and development projects concerning COVID-19 and appropriate antiviral medicines [4]

These aids are granted in the form of direct subsidies, repayable advances or tax benefits, within the limits provided for by the EU’s Temporary Framework [5], and not later than 31 December 2020. The eligible costs and the aid rates for each recipient are set in accordance with the rules provided under the EU’s Temporary Framework. Moreover, it is highlighted that it is formally stated that “the recipient of the aid commits itself to grant non-exclusive licences to third parties within the EEA on market conditions” [6].

Within the aforementioned framework, measures have also been implemented for investments in tests and upscaling infrastructure and for investments in the production of COVID-19 related products in the form of direct subsidies, reimbursable advances or tax relief, in accordance with the conditions of the EC Temporary Framework, as well as in the form of a guarantee to cover losses [7].

Finally, in the framework of the emergency measures outlined above relating to the pharmaceutical sector, the recent amendments on the Golden Power rules are worth mentioning [8]. The Golden Power mechanism, which was provided for by the Law Decree no. 21 of 2012, grants to the Italian Government the authority to exercise some special powers in respect of all the companies that carry out activities of strategic relevance. Such special powers consist, in particular, in the veto power that the Government may exercise in respect of the decisions of shareholders, of corporate documents or transactions, in the power to oppose the purchase of assets by foreign companies or, alternatively, in the power to impose on the buyer specific conditions aimed at preserving national interests. The Law Decree no. 23 of 8 April 2020, converted into law no. 40 of 5 June 2020, has widened the scope of the Golden Power provisions so that they are now applicable also to the protection of other production chains that are deemed essential in the context of a crisis, such as the healthcare sector. This aims at avoiding that the health emergency be transformed into a chance for foreign entities , to speculate on Italian companies operating in strategically relevant sectors. .

In brief. The emergency measures at European level

Looking at the initiatives of the European Commission to tackle the health emergency situation, the first fact that must be pointed out is that, in a press release published on 8 April 2020, the European Commission asked the Member States to optimise the supply and the availability of medicines [9].

With specific reference to the pharmaceutical sector, the European Commission published, on 28 April 2020, the Guidelines on clinical trials, aimed at ensuring the continuation of clinical trials within the EU [10] and proposed a collaborative framework in order to ensure the universal and affordable access to the tools against Covid-19 [11].

This framework is characterised by the following main features:

  • Its goal is to provide a coordination structure that can guide and monitor the progress made at global level in accelerating the development of vaccines and of therapeutic and diagnostic tools that are universally accessible, as well as in properly strengthening the healthcare systems, so that they can address such priorities.
  • It is limited in time (2 years, renewable).
  • It is built on existing organizations, without creating new structures.
  • It is grounded on three partnerships, which are based on the aforementioned priorities, that bring together the worlds of industry and research, foundations, regulatory authorities and international organizations.

Finally, on 17 June 2020, the European Commission presented a European strategy to accelerate the development, production and distribution of vaccines against Covid-19, declaring itself available to support the efforts of those involved - at global, not just European level - in the development of vaccines in order to achieve the availability of safe and effective vaccines within 12 to 18 months.

In particular, this strategy shall pursue the objective of (i) ensuring the quality, safety and efficacy of vaccines; (ii) ensuring rapid access to the vaccine for Member States and their population while leading the global solidarity effort; (iii) providing equitable access to an affordable vaccine as quickly as possible.

The EU strategy is based on two pillars:

  • ensure the production of vaccines in the EU and thus sufficient supplies to its Member States thanks to prior purchase agreements with vaccine producers through the Emergency Support Instrument;
  • adapt the EU regulatory framework to the current emergency situation and use existing regulatory flexibility to accelerate the development, authorisation and supply of vaccines.

In this respect, it should also be noted that the European Commission will finance part of the initial costs incurred by vaccine manufacturers through preliminary purchase agreements.

Cooperation between competitors

As mentioned in the premise, in this particular context, pharmaceutical companies could be better incentivised to cooperate in order to ensure the supply and distribution of medicines used for the treatment of Covid-19 patients, as well as to develop and market new products. Both the national competition authorities and the European Commission are well aware of this perspective. Indeed, since the beginning of the state of emergency, the latter have been softening the application of the current rules in order to allow companies operating in the essential services sectors to deal with the particular emergency situation. At the same time, however, it will be crucial to ensure that such a context will not result in an opportunity to share markets or fix prices.

Indeed, in any event, it should be recalled that the agreements between pharmaceutical companies should be made in such a way that the collaboration should result in consumer benefits prevailing over the potential restrictive effect(s). Furthermore, should it be necessary for health professionals to exchange information in order to ensure the supply of pharmaceutical products, it will be essential that the exchange of information is limited to what is strictly necessary. It should also be reiterated that the purpose of antitrust law, aimed at maintaining fair competition, remains relevant even in times of crisis. For this reason, pharmaceutical companies will have to be particularly cautious and sensibly judicious in their conducts, always bearing in mind that the competition authorities are adopting a more vigilant attitude than ever before in order to ensure that the current crisis instilled by the spread of Covid-19 is not seen as a ’shield’ against the application of competition rules.

During this period of crisis, the competent national authorities and the European Commission have expressed their views and provided some guidance on cooperation between undertakings through a series of communications.

In this regard, the first instructions were provided by the European Competition Network (ECN), which made it clear that the authorities will not actively intervene with respect to temporary conducts aimed at avoiding a shortage of supply of essential goods.

Indeed, in the current context, such cooperation would not be likely to raise antitrust concerns, as this form of cooperation does not constitute a restriction of competition within the meaning of Article 101 TFEU and would in any event be capable of generating efficiencies justifying a temporary and limited restriction of competition. At the same time, it has been highlighted that the competent authorities will not hesitate to intervene if undertakings take advantage of the ongoing health crisis to implement cartels or abuse their dominant position [12]

Also the International Competition Network (ICN) adopted the same approach and, after reaffirming the importance of products and services remaining available at competitive prices, especially those essential for health needs, urged the authorities to remain vigilant with regard to merger operations and to anti- competitive conducts. Furthermore, in the same ICN release, the inevitability of temporary cooperation between competitors to ensure the supply of deficient products and services was reiterated. Finally, it was expressly recognised that the national competition authorities should embrace cooperation projects between competitors which are necessary to tackle the crisis by establishing a direct and open dialogue with them. [13]

Further instructions in this regard were subsequently provided by the European Commission which, in the framework of the so-called Antitrust Temporary Framework i) illustrated the main criteria that will be adopted in the evaluation of cooperation projects; ii) established a temporary procedure to provide ad hoc written guidelines in relation to individual cooperation projects (so-called comfort letter). The Antitrust Temporary Framework will be applicable to all sectors and will be in force until a new Notice from the Commission is issued. In particular, the European Commission has pointed out that the cooperation in the health sector could entrust trade associations with certain tasks including: (i) coordinating the common transport of incoming materials; (ii) assisting in the identification of essential medicinal products for which, based on expected production, there is a risk of shortages; (iii) providing aggregated information on production and capacity, without exchanging information on each undertaking; (iv) activities relating to a model for forecasting demand at Member State level and identifying supply shortages; (v) sharing information on supply shortages and requesting participating undertakings - on an individual basis and without sharing this information with competitors - to indicate whether they are able to address the shortage in order to meet demand (through existing stocks or the increase of the production).

With regard to the exchange of commercially sensitive information and the coordination between undertakings, by way of derogation from what is provided for under normal conditions, the European Commission has pointed out that, in the current context, such measures would not be problematic under EU competition law as long as they are:

  • designed and actually needed to increase production in the most effective way possible to address or avoid shortages of supply of essential products or services, such as those used to treat patients with COVID-19;
  • of a temporary nature (i.e. applicable only as long as there is a risk of shortage or in any case during the COVID-19 pandemic) and
  • not exceeding what is strictly necessary to achieve the objective of addressing or avoiding supply shortages.

The Antitrust Temporary Framework has also made clear that cooperation is allowed when requested by public authorities in order to deal with urgent situations related to the COVID-19 epidemic.

Finally, the Commission has highlighted the need for undertakings cooperating on a temporary basis to document - including by means of minutes - all the exchanges of information and agreements between them in such a way as to be able to make them available to the Commission if requested. [14]

At national level, the Italian Antitrust Authority, on the basis of the guidelines provided at European level, has implemented its own Guidelines on the compatibility of cooperation agreements aimed at tackling the lack of supplies of essential goods and services in the Covid-19 emergency with the rules protecting competition. The Italian Antitrust Authority (IAA), though expressing its intention not to take action against the necessary, temporary and proportionate measures adopted to avoid shortages of supply, has preliminarily specified that the objective of antitrust law, aimed at maintaining fair competition, remains relevant even in times of crisis. For this reason, it was expressly reiterated that, despite the existence of mechanisms that allow the same antitrust law to adapt, where appropriate and necessary, to changing economic and market conditions, the IAA will not hesitate to use all the instruments available to take action against undertakings that seek to profit from the current situation, either through cartel agreements or by abusing their dominant position.

The IAA, in view of this cooperation with companies, has provided a special e-mail address (accordi- which can be used to request information where there are still uncertainties about the legitimacy of the cooperation agreements.

More specifically, in the “Notice of the Antitrust Authority on cooperation agreements and the COVID-19 emergency” - which will be in force until new provisions are introduced - the following have been indicated: (i) the general criteria by which cooperation agreements can be assessed; (ii) the European comfort letter model has been reproduced to provide guidance to companies on specific cooperation projects. With reference to the health sector, the IAA in its notice has reiterated the same instructions contained in the EU’s Antitrust Temporary Framework, extending them ’if necessary’ to the agri-food sector and referring to the Commission’s Guidelines on the applicability of Article 101 of the TFEU to horizontal cooperation agreements. [15]

More generally, with regard to disaggregated and sensitive exchanges of information, which are prohibited under normal conditions, the IAA pointed out that they could be evaluated more flexibly where they are actually necessary to facilitate the production of drugs or medical devices important for the fight against the virus or goods and services considered essential, and provided that such exchanges of information are implemented for the time strictly necessary and are characterised by a high degree of proportionality.

Finally, the IAA, through the Directorate-General for Competition, has declared itself available, exceptionally and at its own discretion, to express its evaluations in writing on specific cooperation projects. In this respect, it has been stressed on the one hand that the specific initiatives will have to be ’sufficiently defined’ by the requesting undertakings; on the other hand, that such comfort letters will concern exclusively the application of national antitrust law (Law No 287/90).

The first comfort letters

A first example of concrete application of the procedure aimed at providing ad hoc guidance by the Commission is the comfort letter to “Medicines for Europe” - formerly the ’European Generics Medicines Association’ (EGA). In the context of this comfort letter, a specific voluntary cooperation project between pharmaceutical manufacturers was expressly considered justifiable and not contrary to antitrust law. Specifically, coordination between companies could (i) include the mutual supply of active pharmaceutical ingredients; and (ii) the identification of sites where the production of certain products could be concentrated.

The Commission concluded that the cooperation set out in the presentation of Medicines for Europe does not give rise to concerns under Article 101 TFEU as it has the overall aim of increasing the supply and production of COVID-19 medicinal products in a rapid and effective manner and provided that (i) participation in the cooperation remains open to any pharmaceutical manufacturer; (ii) minutes of the meetings and copies of any agreements entered into between the companies in the context of such cooperation are drawn up and stored; (iii) the exchange of confidential business information is limited to what is strictly necessary; (iv) the cooperation is limited in time to what is necessary to address the risk of shortcomings [16]

At the national level, the IAA applied the comfort letter model for the first time by assessing the compatibility with competition regulations of i) a cooperation project for the distribution of disposable surgical masks through pharmacies and parapharmacies voluntarily submitted to the IAAby the Association of Pharmaceutical Distributors (ADF) and by Federfarma; and ii) the agreement concluded at association level by ASSOFIN in order to adopt a common moratorium scheme for consumer credit by its members (COV1-DC9901). With particular regard to the agreement entered into by ADF, Federfarma and all pharmacists’ and para-pharmacies’ associations, it should be noted that the agreement consists of a joint purchase of surgical masks and their subsequent pro quota distribution among distributors at the unit purchase price negotiated with suppliers until 30 June 2020. This agreement was deemed by the IAA to aim ’at managing an effective and homogeneous supply of surgical masks throughout the entire national territory’ and, therefore, no elements were considered to necessitate an in-depth investigation. [17]

Note from the Editors: although the e-Competitions editors are doing their best to build a comprehensive set of the leading EU and national antitrust cases, the completeness of the database cannot be guaranteed. The present foreword seeks to provide readers with a view of the existing trends based primarily on cases reported in e-Competitions. Readers are welcome to bring any other relevant cases to the attention of the editors.

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Elisa Teti, Alessandro Raffaelli, Pharma & COVID-19: An overview of EU and national case law, 3 August 2020, e-Competitions Pharma & COVID-19, Art. N° 95938

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