US Department of Justice Announces That It Will Not Challenge Collaborative Effort to Manufacture and Distribute COVID-19-Related Medical Supplies
The Antitrust Division of the US Department of Justice has determined in a business review letter that it will not challenge a plan for several medical supply companies to work together to expedite the distribution of supplies needed to combat the COVID-19 pandemic.
On March 24, 2020, the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) (collectively, the “Agencies”) issued a joint statement (the “Joint Statement”) of antitrust guidance for public and private efforts to address the COVID-19 pandemic.[1] In recognition of the urgent and rapidly evolving nature of the ongoing public health emergency, the Agencies expressed an intention to “respond expeditiously to all COVID-19-related requests, and to resolve those addressing public health and safety within seven (7) calendar days of receiving all necessary information.”[2] The Agencies further explained that “[w]hile these processes generally take several months after the agencies receive all necessary information, the agencies recognize that many individuals and businesses are trying to address a rapidly evolving crisis as quickly as possible.”
The Joint Statement provided a representative list of collaborations that would be viewed by the Agencies as consistent with antitrust laws where they are intended to assist with the country’s health and safety response to COVID-19, including: (i) collaboration on research and development; (ii) sharing technical knowledge; (iii) developing standards for patient management to assist providers in clinical decision making; (iv) joint purchasing arrangements among healthcare providers; and (v) lobbying and private industry meetings with federal government to discuss strategies on responding to the pandemic.[3] The Joint Statement also indicated flexibility in its review in stating that the Agencies will consider exigent circumstances, such as the need to pool resources to provide for communities without immediate access to critical medical supplies, in evaluating collaborative efforts. However, the Agencies warned that they remained prepared to pursue remedies against those individuals and businesses that seek to profit from the pandemic through fraudulent or other illegal schemes including agreements to hike prices, lower wages or reduce output or quality, in addition to attempted “exclusionary conduct” by monopolists.[4]
On April 4, 2020, in the first business review letter issued under the March 24 Joint Statement, the DOJ announced that it will not challenge a collaboration among McKesson Corporation, Owens & Minor Inc., Cardinal Health Inc., Medline Industries Inc., and Henry Schein Inc. (together, the “Medical Supplies Distributors”). The intent of the collaboration by the Medical Supplies Distributors is to expedite and increase manufacturing, sourcing, and distribution of personal-protective equipment (PPE) and coronavirus-treatment-related medication.[5] Under this arrangement, the Medical Supplies Distributors will be working at the direction of the Federal Emergency Management Agency and US Department of Health and Human Services as part of Project Airbridge—a public and private initiative intended to rapidly source and transport PPE such as masks, gowns, gloves, and other equipment designed to protect against infection, as well as other vital coronavirus-related medical supplies, to those US communities facing the most urgent shortages. The companies also agreed not to use the program to “increase prices, reduce output, reduce quality, or otherwise engage in COVID-19 profiteering.”[6]
The DOJ concluded that “[b]ased on these representations and given the current circumstances, it appears as if the procompetitive aspects of any arrangement far outweigh any potential harm.”[7] Assistant Attorney General Makan Delrahim praised the joint public and private effort, stating that “[t]hese Medical Supplies Distributors should be applauded for their efforts to both assist the United States in responding to the COVID-19 pandemic and stay within the bounds of antitrust law. I also applaud the attorneys and economists of the Antitrust Division, who worked expeditiously to finish in days a review process that ordinarily takes many months.”[8]
The rapid approval of the collaboration of the Medical Supplies Companies in connection with Project Airbridge confirms the Agencies’ commitment to facilitate legitimate collaborative efforts aimed at alleviating the public health challenges arising from COVID-19. It also confirms the sentiment expressed by the DOJ and FTC in the Joint Statement that such efforts will be prioritized, and met with substantially reduced administrative barriers. Other businesses seeking to establish legitimate collaborative efforts in order to assist with the current public health emergency can view this business review letter as confirming that their proposed collaboration will receive an expedited antitrust review provided that the businesses are prepared to fully engage with the Agencies and provide the necessary information.
[1] See Joint Antitrust Statement Regarding COVID-19, Department of Justice Antitrust Division & Federal Trade Commission (Mar. 24, 2020), available at https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19.
[2] Id.
[3] Id.
[4] Id.
[5] See Department of Justice Issues Business Review Letter to Medical Supplies Distributors Supporting Project Airbridge Under Expedited Procedure for COVID-19 Pandemic Response, Department of Justice (Apr. 4, 2020), available at https://www.justice.gov/opa/pr/department-justice-issues-business-review-letter-medical-supplies-distributors-supporting.
[6] See Request Letter, McKesson, Henry Schein, Medline, Cardinal Health, and Owens & Minor (Mar. 30, 2020), available at https://www.justice.gov/atr/page/file/1266516/download.
[7] See Expedited Business Review Letter, Department of Justice Antitrust Division (Apr. 4, 2020), available at https://www.justice.gov/atr/page/file/1266511/download.
[8] See Department of Justice Issues Business Review Letter to Medical Supplies Distributors Supporting Project Airbridge Under Expedited Procedure for COVID-19 Pandemic Response.
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