The national as well as global health emergency caused by the novel coronavirus (COVID-19) is having a direct impact on different industries, and the pharmaceutical sector is not alien to this reality.
This is the vision of the governments of different countries, who have expressed that given the situation it is critical to address the impact of the COVID-19 outbreak and ensure an adequate supply of medicines and health products.
What is the situation in Uruguay?
In Uruguay, the bulk of the health products sold in the market and the raw materials for locally manufactured products are imported. Thus, the measures taken by the different governments have a direct impact on the industry, the market and the population. In this sense, the provisions on compulsory isolation, limitation and even prohibition of circulation, de facto or de jure restrictions on foreign trade and other measures around the world could result in a decrease in production, difficulties and delays in shipping and distribution of products.
What challenges do companies in the industry face?
A double challenge: trying to fulfill their basic purpose of being at the service of the health of the population and health care systems and, on the other hand, doing so in a context where the regulatory, labor and contractual environment is constantly changing as a result of the pandemic, as we will analyze below.
1.1 Procedures with Ministry of Public Health (MSP)
The procedures with the MSP are affected by the declaration of a health emergency. In general, one of the measures that the MSP has taken is suspension of attention to the public and of new registrations (with exceptions); email must be used for all communications.
In addition, different departments of the MSP have made various announcements in recent days.
The Technology Assessment Department has announced that:
- No new products are being received for registration
- Friday meetings with the director’s office have been canceled.
- With regard to queries on Thursdays for companies and registrations: (i) the same scheduling regime continues; (ii) queries will be taken only by telephone.
- The deadlines for lifting observations will be postponed for as long as this emergency situation goes on.
- Products whose expirations fall from March 18 to Friday March 27, inclusive, and for which an incoming import is pending may request entry through VUCE (Foreign Trade Single Window) during this period by attaching a copy of the corresponding certificate.
For its part, the Drug Department has announced, among other things, that:
- The procedures for new registrations, modifications, registration renewals or launch communications (with exceptions) will be accepted once the health emergency is over. The request for urgent evaluation of procedures is suspended until further notice.
- The following procedures will be requested by e-mail: (i) application for customs clearance of pharmaceutical specialties and raw materials for the preparation of pharmaceutical specialty, with registration expired more than two years ago and in the process of renewal, (ii) application for entry of unregistered drugs (compassionate uses) that are managed by laboratories; (iii) application for entry of unregistered drugs managed by health providers, Ministry of Foreign Affairs (MRREE) or individuals.
- Receipt of serious and fatal notifications related to drugs will be managed through the Pharmacovigilance Unit on-call cell phone and e-mail.
- Urgent consideration notes (shortages, product withdrawals, etc.) will be sent by e-mail.
- The deadlines for faxes and notifications (including urgent procedures) are suspended from 03/18/2020 until the end of the health emergency.
- Thursday consultations with department technicians and interviews with the director’s office are suspended until further notice.
1.2 Communication of supply disruption or shortage
In some cases, product sale interruptions must be reported to the Drug Department. This communication must be justified and the measures that will be implemented to ensure the availability of the product to the users under treatment must be indicated. It should also be considered whether there are “similar” products on the market (same principles and for the same pathologies) and what health impact the interruption or discontinuation has. The necessity of such communication must be evaluated on a case-by-case basis. Additionally, other authorities shall also be notified in the future.
Some important aspects to be considered by the company, depending on the case, may be:
- Maintain a workspace with adequate safety and hygiene measures.
- Maintain communications and transparency as to the situation with employees.
- Prepare protocols and possible rotating shift plans in the organization of work.
- Reduce insofar as possible the number of employees who must use public streets.
- As far as possible, temporarily, try to promote work from home in line with the reality of each employee and the service needs. In this case it is important to consider the following aspects:
- Work must be carried out in a suitable environment, such as a place free of distractions and safe for equipment and work documents.
- The employee must maintain the confidentiality of the information handled and take the necessary precautions to comply with this requirement.
- Maintain telephone and Internet connection, so that employees can carry out all their work activities.
- The change of workplace does not imply changes in the tasks to be carried out or responsibilities assumed by each employee.
- The usual working hours must be complied with: the working day cannot be reduced, and the employee cannot work overtime without the express authorization of the company.
- In the case special benefits are granted to employees, in addition to labor aspects taxes must also be considered.
- Evaluate the possible consequences and measures to be taken in the event that the Government must decree compulsory isolation, limitation and/or suspension of movement, or there is a reduction in staff due to the possible impact of the virus on employees. In this case, it should be analyzed whether it is viable for the company to be included in a possible exception due to its essential nature. If so, issue certificates so that employees can use public streets to get to their workplace.
COVID-19 has a direct impact on contracts in the pharmaceutical industry. There is a possibility that in the future one of the parties may be unable to fulfill their obligations under a contract.
What if I do not comply with the services or the supply of products? Am I breaching the contract? Must I indemnify the other party?
To answer these questions, each case must be evaluated to define, among other things, whether there is any contractual provision that covers this situation, for example, force majeure, or if there are other remedies.
Can the COVID-19 pandemic be considered a Force Majeure event?
The answer on whether the COVID-19 pandemic can be considered an event of "force majeure," or if it is covered by some other similar concept with the same effects, will depend on:
- What is set forth in the contract.
- Applicable regulations, according to the type of contract and the contracting parties (services, supply, distribution, loan, etc.).
- Especially, on facts. The specific conduct of the parties before the start, during and after the event or state of emergency.
We recommend the analysis on effects of COVID-19 on contracts
Contracts with the Administration
In general, bidding specifications for the supply of health products establish that the Administration may declare the contract terminated (totally or partially) in cases in where the awardee was unable to deliver or did not do so in due time. In addition, it establishes economic sanctions or could even disqualify such party from participating in subsequent calls for bids or suspend/remove it from Registries of Suppliers.
Prior to termination and/or sanction, the Administration will notify the awardee of the situation so that it can submit justifications. In this instance, the awardee must indicate the causes giving rise to the fact. Depending on the case, the awardee could allege force majeure or other alien cause not attributable to it.
Therefore, it is important to keep records of documents and communications indicating or showing the reasons why the party has not been able to fulfill its obligations.
On the other hand, bid specifications by the Centralized Procurement Unit (UCA) generally foresee the possibility for suppliers to request, with justified cause and only once in the bid process, suspension of the supply for a maximum period of 30 days. Although each specific specification must be reviewed to determine if this possibility is expressly provided for, it could be used if applicable.
In this context, all communications with client public institutions - even the UCA, ASSE (State Health Services Administration) - should be analyzed regarding possible supply alternatives (if any), the stock of existing products, the product in question, the possibility of imports from other origins, among others.
It is to be expected that few insurers would have foreseen a situation of the magnitude of this pandemic, and this assumption would apply to the insured as well. For this reason, it is essential to analyze the scope of the policies contracted in order to verify the coverage and the exclusions, in the light of possible economic losses.
Other aspects to be considered
The health emergency may have other consequences that have already been noticed.
As an example, in accordance with some measures already adopted, the Government does not rule out possible price regulation measures for certain essential products for combatting the spread of COVID-19. This is based on examples from other countries where the situation is more advanced and the disproportionate increase in prices of health products was noted in the face of strong demand and the consequent reduction in supply.
Furthermore, the situation could give rise to anticompetitive and unfair commercial practices.
All of the above without prejudice to possible reputation damages that companies may face for failing to deal with their situation beforehand.