DOJ blesses covid-19 collaboration for medical supplies

Ben Remaly

06 April 2020

DOJ blesses covid-19 collaboration for medical supplies

Credit: Shutterstock/Antonio Rico

The procompetitive benefits of coordination between medical equipment manufacturers to produce more protective equipment for first responders fighting the covid-19 pandemic outweighs any harm, the Department of Justice has said. 

The DOJ’s antitrust division on Saturday said it would not challenge collaboration between McKesson, Owens & Minor, Cardinal Health, Medline Industries and Henry Schein as they seek to address a national shortfall of personal protective wear such as masks and gloves.

“These 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,” assistant attorney general Makan Delrahim said in a statement.

About 333,000 Americans have tested positive for covid-19, resulting in more than 9,000 deaths, according to an NBC News tally from Sunday night.

Medical professionals across the US have been pleading for additional materials, especially masks, designed to stop the spread of the highly contagious coronavirus. 

Last month, President Donald Trump invoked the Defense Production Act to mobilise the production of personal protective equipment from private companies in coordination with the Department of Health and Human Services. 

President Trump specified in an executive order that this was intended to immunise certain voluntary coordination of the private sector from antitrust scrutiny as part of what the government has named “Project Airbridge”. 

The DOJ and Federal Trade Commission have promised a quick turnaround on issuing advisory opinions for collaborative efforts to combat the covid-19 pandemic. 

Counsel for one of the requesting medical equipment manufacturers said the DOJ accomplished that here as it blessed the already-ongoing conduct within four days.

“[The] DOJ took the request very seriously,” the attorney said on the condition of anonymity. 

The attorney said this type of quick response appeared to lack precedent.

“I don't think they’ve done anything like this before,” they said.

The five medical equipment manufacturers submitted an urgent request for the Antitrust Division's review of their collaborative efforts on 30 March.

The requesting parties said their collaboration intends to help HHS and the Federal Emergency Management Agency address supply bottlenecks, monitor areas of increased demand, distribute supplies and negotiate for competitive prices. 

The medical equipment suppliers said that FEMA and HHS may eventually request production of other items and that a review of their conduct “may require more flexibility” than traditionally performed by antitrust enforcers due to disruptions caused by the pandemic. 

DOJ’s response

Federal agencies are not subject to scrutiny under federal antitrust law, an immunity that is extended to private parties that have been compelled and are monitored by the government to carry out a defined policy goal, the DOJ said in its 4 April business review letter

“The Department will not challenge conduct that satisfies this standard in responding to the COVID-19 pandemic and its aftermath,” the agency wrote. 

Even without being compelled or monitored by the government, rival collaboration may not run afoul of antitrust law if it offers unique benefits, the DOJ said. The authority pointed to a 1993 DOJ letter that enabled a working group of rivals to develop a standardised test for HHS for testing smokeless tobacco.

The agency acknowledged that the collaboration between medical suppliers here provides “several unique benefits” to Americans while supply shortages threaten the health and safety of millions in the US. 

“These benefits have the potential to save lives and limit the tremendous damage physically and economically the pandemic is causing,” the DOJ said. 

Any further collaboration would fall under the rule of reason as specified by the joint FTC and DOJ competitor collaboration guidelines issued in 2000, the DOJ said. 

“The proposed conduct is limited in scope and duration, necessary to address COVID-19-related scarcity, and will not extend beyond what is required to facilitate the availability of needed supplies,” the DOJ said. 

“Based on these representations and given the current circumstances, it appears as if the procompetitive aspects of any arrangement far outweigh any potential harm,” it added. 

The agency said the requesting parties had agreed that any collaboration would be specifically intended to further US government policy and not be used to increase prices, reduce output or quality. 

Advocates of the consumer welfare standard have rebuked calls to use antitrust law to further policy goals such as income inequality. 

“No goal, well-intentioned or otherwise, is an excuse for collusion or other anti-competitive behaviour that runs afoul of the antitrust laws,” Delrahim wrote in a September editorial following criticism of the DOJ’s investigation into automakers for jointly agreeing to reduce tailpipe emissions for vehicles sold in California.

In recent years, the DOJ has raised policy arguments in certain instances related to national security and 5G access in rural communities

Counsel to one of the medical suppliers GCR spoke to said they felt the DOJ’s analysis fell within the consumer welfare standard here. 

The attorney said they believe the DOJ performed a traditional antitrust analysis, evaluating the covid-19 related benefits as procompetitive effects under the rule of reason. The proposed conduct is being performed in coordination with the federal government and falls within the FTC and DOJ’s competitor collaboration guidelines, the attorney added.