What the EU learned from panic-buying Covid vaccines

Good morning. It’s a big day for the EU defence sector. Member state ambassadors will try (again) to find a deal on how to spend €1bn on procuring artillery shells for Ukraine, with France and Germany divided over how non-EU companies can contribute.

Alongside that, a fight over the details of an even bigger prize will begin, as the European Commission unveils its proposals for how to use EU budget cash to finance an expansion of European defence production capacities.

Today, our trade correspondent explains the EU’s post-Covid approach to pharmaceutical regulation and our competition supremo unpacks opposition to the American frontrunner for a top Brussels job.

Bitter pill

As the coronavirus pandemic recedes, Brussels is facing an unexpected challenge — having too many of some medicines and not enough of others, writes Andy Bounds.

Context: EU member states are dealing with a glut of Covid-19 vaccines as infections drop and people decline booster shots. Meanwhile, the disruption to supply chains has led to shortages of regular drugs such as paracetamol and antibiotics for children.

Health commissioner Stella Kyriakides is trying to fix things, helped (but at times also hindered) by national governments.

She has renegotiated a contract with US drugmaker Pfizer signed in the desperate days of the pandemic when everyone was scrambling for shots — unlike now, as EU members even struggle to donate doses to third countries.

Pfizer has agreed to cut annual dose supplies to around 70mn over the next three years at a price of around €20 a shot, according to people familiar with the deal. Member states will pay half price for each cancelled dose.

However, that is not enough of a cut for Poland. Warsaw has already declared force majeure and refused to pay for additional doses. Yesterday, health minister Adam Niedzielski wrote to the US company’s shareholders, urging them to pressure it to give more concessions.

Poland is providing care for 1.5mn Ukrainian refugees and cannot afford to waste money, Niedzielski said: “Maximising profits in times when solidarity and a humanitarian approach is needed should not be the ultimate goal.”

Pfizer said it was “committed to finding pragmatic solutions to address public health and the evolving pandemic needs”.

Meanwhile, Brussels seems to have learnt its lessons from the pricey and panic-induced oversupply.

The commission last month proposed a new compulsory licensing scheme that would force manufacturers to share their drug recipes with others for a fee, enabling a swift scale-up of production at lower prices in an emergency.

To counter drug shortages, Brussels intends to draw up a list of critical ingredients, require stockholders to inform it of supply levels and manufacturers to notify it if they are facing shortages.

But governments do not think this is enough to guarantee safe supplies.

At an informal ministerial meeting today, member states including Belgium, Germany and France will push for a Critical Medicines Act to reduce dependence on imported ingredients and medicines, for instance from China.

Chart du jour: Recoupling

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European investment into the Chinese car sector surged to a record high of €6.2bn last year, more than three times investment in other sectors, as European carmakers warn that cutting ties would be “unthinkable”.

Competing views

An American economist with ties to Big Tech is poised for a top job in Brussels. But not everyone is happy with that prospect, writes Javier Espinoza.

Context: One of the most influential positions in the EU single market is the chief competition economist, who has the ear of the European Commission on all matters of economic policy and can potentially block mammoth mergers.

Fiona Scott Morton is a lead candidate for the role, according to multiple people with direct knowledge of the matter. The Yale professor was a top figure during the Obama administration.

But civil society groups, including the Open Markets Institute, an anti-monopoly coalition, have written to Margrethe Vestager, the EU’s executive vice-president in charge of competition, with a number of concerns.

One of them is that Scott Morton did consulting work for corporations such as Apple and Amazon. The “proximity to Big Tech firms will hamper her ability to enforce the EU’s competition laws neutrally and effectively against them,” the groups write in their letter.

They also noted that not being an EU citizen could raise questions over Scott Morton’s selection process and wondered why another EU candidate without conflicts of interest was not selected.

The letter also takes issue with how she sees competition, notably her support of “maximising the output and sales to consumers at the lowest prices possible, ignoring other actors and issues affected by concentrated economic power, including workers, small businesses, the environment, democracy and the wider public interest.”

A person close to Scott Morton defended her record by saying the consulting work she has done for Big Tech ended two years ago and there may not be conflicts of interest.

Scott Morton and the commission declined to comment.

What to watch today

1. EU commission presents proposals on anti-corruption initiatives and ammunition production.

2. EU employment and social affairs ministers in Stockholm for an informal meeting.

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