Last week, the European Commission launched legal action against Anglo-Swedish pharmaceutical company AstraZeneca for "not respecting its vaccine supply contract", hoping to "send a message" to chief executive, Pascal Soriot. AstraZeneca maintains it has "fully complied" with its obligations. 1
The Commission released a redacted version of the supply contract2 and unredacted versions circulate widely online.
In this article, Astraea Group's Rob Bedford and Amy Tully discuss what the statements and leaked documents tell us about the issues likely to play out in the litigation.
1. How big is the shortfall?
The contract anticipated delivery of 30-40 million doses in 2020, a further 80-100 million by the end of March this year, and a total of 300 million by the end of June.
Against these targets, the EU received around 30 million doses by the end of March and expects only around 70 million more by the end of June.
The shortfall is therefore in order of 160 million doses, or more than 50% of the total order.
2. Is AstraZeneca responsible?
It is unclear why AstraZeneca has fallen so far short of the targets it agreed to, but producing adenovirus-vector vaccines (such as AstraZeneca's) at scale requires growing vast quantities of human cells before introducing the virus. The yield is unpredictable, with the process described by one chemist as "voodoo"3.
Once produced, the vaccine must be placed into vials or syringes, sealed and packed for shipping - a process referred to in the industry as "fill and finish". The agreement expressly contemplates shortages of critical components such as glass vials and stoppers, including as a result of other manufacturers also seeking to fulfil orders placed by the EU.
While the causes of the current shortfall are unclear, AstraZeneca will almost certainly argue they are beyond its control.
3. Is AstraZeneca obliged todeliver specific does doses by specific dates?
AstraZeneca argues it is not obliged to deliver a specific number of doses, but rather to use only "Best Reasonable Efforts" to do so, meaning:
"the activities and degree of effort that a company of similar size with a similarly-sized infrastructure and similar resources as AstraZeneca would undertake or use in the development and manufacture of a Vaccine at the relevant stage of development or commercialization having regard to the urgent need for a Vaccine to end a global pandemic which is resulting in serious public health issues, restrictions on personal freedoms and economic impact, across the world but taking into account efficacy and safety"
The EU has also arguably waived any claims against AstraZeneca for delivery delays. For no immediately apparent reason, this clause was redacted in the version released by the EU.
4. Is the EU entitled to vaccines produced in the UK?
According to the Financial Times, the Commission stated in January of this year that AstraZeneca was "contractually obliged to use vaccines produced at UK plants" to meet its delivery obligations.4
The Commission may have been referring to a clause that requires AstraZeneca to (use best efforts to) manufacture in the EU or UK – perhaps to ensure quality and/or to avoid the issues associated with the 'vaccine wars' now playing out. Doses manufactured in the UK are certainly not excluded from the deal, but there is nothing to suggest AstraZeneca is obliged to make them available.
5. Was AstraZeneca upfront about its other commitments?
In addition to criticizing overall manufacturing levels, the EU clearly intends to argue that it has not received an adequate share of the doses that were produced.
In this regard, it may point to AstraZeneca's warranty that "it is not under any obligation, contractual or otherwise... that would impede the complete fulfillment of its obligations under this Agreement".
That said, the UK agreement was with another company in the AstraZeneca group5.
6. How much is at stake?
It is unclear exactly how the EU intends to calculate losses suffered from under-delivery (and what impact the Member States' stop-start approach to deploying the vaccine will have) but AstraZeneca's liability under the agreement is limited to the amounts received for vaccines.
This is potentially €870 million for the 300 million doses referred to above, the price based on estimated production costs without any profit element.
7. Is this really about the money?
While the sums at stake are substantial, they represent only a fraction of both parties' costs associated with the pandemic and subsequent vaccine race.
Perhaps the EU sees this litigation as leverage to obtain a greater share of vaccines as they become available. Hopefully, it is more than simply a political distraction or a clash of egos.
8. Who will win?
In reality, the case will likely settle. If not, the Belgian courts will have to make a decision based on their interpretation of the relevant facts and law.
That said, there is something deeply unattractive about one of the few companies to have developed and manufactured vast quantities of a safe and effective vaccine, being penalised for overly optimistic production targets or struggling to meet competing obligations. Even more so in this case, given this contract precludes AstraZeneca from making a profit on the deal.
It is also difficult to see how anyone benefits from either party being focused on litigation, rather than vaccine production and rollout.
9. When will we find out more?
Large international disputes are often resolved by confidential arbitration. That is not the case here and, assuming the courts in Brussels operate on a similar open justice basis to those in the UK, further details will come to light. As above, the case will most likely settle in the coming months but, if not, there is the tantalising prospect of senior figures from both AstraZeneca and the EU appearing as witnesses in open court.
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