Triggerwarnung: lang(weilig), trocken & schmutzig
Gerade hat die EU-Kommission die US-Amerikanerin Fiona Scott Morton zur Chefökonomin ihrer Generaldirektion Wettbewerb ernannt. Damit wird die Regulierung der digitalen Märkte einer mit Interessenskonflikten überladenen Lobbyistin der Big-Tech-Konzerne übertragen. Morton war nicht nur für das us-amerikanische Justizministerium, sondern auch für mehrere oligopolistische US-Digitalkonzerne tätig (Apple, Amazon, Microsoft), deren Beratung ihr mehrere Millionen Dollar eingebracht hat.
Geheime SMS, 35 Milliarden am Arsch, der lausigste Vertrag der Welt – und jetzt ermittelt auch noch die Europäische Staatsanwaltschaft. Diesen Muttertag hatte sich Kommissionspräsidentin vonderLeyen (“mother of six or seven”) sicher netter vorgestellt…
Auch zum Anhören:
Anbei der Text der Rede auf englisch:
Hello to everyone out there on their devices,
Details of the latest stage of contract renegotiations between the European Commission and the United States pharmaceutical giant Pfizer have recently emerged, provided not to US or to YOU OUT THERE, however, but to journalists on the Financial Times and the news agency Reuters.
If their reports are correct, the Commission is proposing to replace an obligation to pay Pfizer 10 BILLION EURO with an obligation to pay Pfizer 10 BILLION EURO.
An interesting sleight of hand.
And while we are still wondering why this sensational story has not appeared in the German press, here’s a brief recap of the history and content of the EU’s vaccine procurement contracts.
In May 2021 the Commission pulled off the biggest deal in pharmaceutical history. Following on from two initial contracts with Pfizer/Biontech (signed in November 2020 and February 2021) to buy a total of 600 million doses, the Commission placed a new order for an additional 900 million doses together with an option (thankfully never exercised) for a further 900 million.
It was the largest, by a long way, of all the EU’s vaccine procurement contracts – and with a value (it is said) of 35 BILLION EURO, the largest purchase contract the Commission had ever concluded with a single market actor. That in itself is reason enough for taking a closer look.
This third Pfizer contract involved a 25% increase not only in the quantity ordered but also in the price per dose: increasing from €15.50 to €19.50. A historically unique superlative deal, where increasing order volumes are linked to higher unit prices? For simplicity’s sake, we will call this ingenious mechanism the “Leyen effect”. And, when the opportunity arises, we will show this to a rookie economics student to analyse more closely, together with the economies of scale, Santa Claus, and volume discount effects, lol.
In addition, the Commission provided Pfizer, already a dominant player, with a quasi-monopoly in the EU vaccines market – in flagrant violation of EU anti-trust rules, usually kept under keen surveillance. Finally, for good measure, manufacturer liability and (subsequent) contractual revisions and exit clauses were excluded as far as possible.
In our view, this is as a whole the worst contract ever negotiated (or concluded) by the Commission’s own experts – remember EU officials are not only pumped full with clever stuff from elite universities but are fed courses such as “Negotiation skills for dummies” or “Achieving top deals” in thorough preparation for their primary task, to exploit correctly their assembled negotiating strength: 450 million individuals like you and I (the “largest single market in the world”). We have come across Year 3 special school pupils who, in these circumstances, would have negotiated far better contractual terms than all of those included in this third Pfizer contract.
Incidentally, the contract came about after months of direct telephone and text message communication between Ms vonderLeyen and Albert Bourla, CEO of a widely known manufacturer of a product for the treatment of erectile dysfunction, which, as its corporate history demonstrates, must be regarded at best as a dubious, if not CRYPTOCRIMINAL, firm. No other pharmaceutical company in the world has been subject to administrative and judicial sanctions for its commercial practices as regularly as Pfizer, on average four times a year. Over a period of 22 years the company has amassed some 90 documented instances of sanctions resulting from legal violations, some of which were very serious. (And, needless to say, this counts only those violations that were discovered.)
It would seem that vonderLeyen was successful in circumventing the EU’s official contract negotiations with the pharmaceutical industry, in which Commission experts and officials holding a negotiating mandate were required to act in accordance with a fixed procedure, instead taking responsibility herself for the negotiations on the crucial features of this third, most sizeable, most expensive, most anti-competitive and most bungled Pfizer contract. And, in doing so, overstepped her competence as Commission President and acted in breach of the procedural rules to which EU officials are bound.
That would at least explain why in relation to this SPECIFIC contract, unlike all others, the Commission was unable to provide the European Court of Auditors with any internal documentation, no minutes of the negotiations, no draft contracts, no doodled hangman figures, nothing.
For two years now, the Commission and vonderLeyen, who has feigned her commitment to transparency always in deafeningly distasteful verbal cascades, have refused to publish the CONTRACTS agreed – not even the European Parliament and its Special Committee have received anything but versions redacted so heavily as to be unrecognisable.
They also refuse categorically to produce the TEXT MESSAGES exchanged between vonderLeyen and Bourla in the lead-up to the contract – resisting not only the (lawful) requests for information made by journalists and MEPs but also inquiries from the European Ombudsman and even the (fairly) insistent demands of the European Court of Auditors.
This is getting beyond a joke. However understandable all the whispering about deals, profits and confidential information may have seemed (to some) during the exceptional times of the pandemic, it is now untenable. More than two years after the contracts at issue were agreed, the continued insistence on this institutional intransparency is rapidly approaching an act of wilful political impediment. An “obstruction” in the words of the European Ombudsman Emily O’Reilly, who is said to find it highly disconcerting that vonderLeyen is maintaining her refusal to even acknowledge the countless complaints and lawsuits pending (including a claim brought by the New York Times).
This (insistent) obfuscation is unworthy of democratic institutions – and it is also entirely unnecessary as anything considered “confidential information worthy of protection” at the time in question has long been printed for all to read in the annual reports, sales strategies and price lists of “fuck firm” Pfizer.
In other words, if it was ever the actual intention of anyone “to strengthen” “transparency”, “democracy”, “proximity to citizens” and “trust” in “politics” (yes, you are reading sentiments expressed in the inaugural address of your most senior civil servant), all we can scream at the Commission President is: GO ON, GET STARTED. No one is stopping you.
And while the criminal investigations pursued by the European Public Prosecutors Office into the original contracts are still in full swing, as we found out last October, the Commission has gone and done it again.
It has entered into new negotiations with Pfizer – evidently, not without the firm intention of a slow motion repeat of each of its previous mistakes. Once again, behind closed doors in secret negotiations excluding the public and in circumvention of its (own) obligation of accountability, decisions are being taken on how to use EU funds for the EU-wide purchase of the products of one particular US manufacturer. A system entrenched behind a thicket of institutional structures could not demonstrate more clearly its notorious inability to learn from its own mistakes.
The (accessible) information is (as a consequence, once again) sparse and not without its uncertainties. Nonetheless, we have attempted to reconstruct the current events as follows.
The issue here is an “adjustment” to the massive (third) vonderLeyen/Pfizer contract, under which the Commission entered a binding commitment to purchase 900 million doses by the end of 2023. Around 400 million of these have already been supplied, with the remaining 500 million due to be purchased by the EU Member States in the course of this year.
It is hardly necessary to mention that the demand for vaccines has now come to a practical halt, whereas vaccine storage facilities are bursting at the seams and, one after another, the expiry dates embossed (even in braille) on the packaging are – surprise, surprise – now being reached.
For a good year or more the Member States (tormented in any event by multiple pressures) have been attempting, somehow or other, to escape their contractual fate. In the hope of encountering a goodwill gesture on the part of the manufacturer, one of them has requested – in best civil servant Danish – a price reduction, whereas others believe reference to their overflowing storage facilities (“No room here”, “Storage unit full”, “Closed due to overcrowding”) might be of help (Slovenia).
Slovakia and Latvia are ready to swallow, in place of the vaccine, a huge consignment of other treats from Pfizer’s (diverse) product range, anything in fact, perhaps something for a sore head or erectile problems. And whilst, out of pure resignation, Spain is destroying surplus stocks at least to avoid being confronted on a daily basis with the misery, Greece has had the brilliant and thoroughly anarchic idea of simply downgrading the packages dispatched by the pharmaceutical industry to the category of Amazon returns, sending them back with the words “No use at all. Send correct size next time. Byeeeeee!”
Needless to say, that was all in vain. The contract leaves the Member States no means of escape. A total of 500 million doses must be taken up as quickly as possible. Pfizer insists on all parties keeping to the contract, has threatened lawsuits and will not even consider a meteorite hit or the outbreak of war as a force majeure event allowing for a revision of the contract. Poland tried this. Without success.
Remarkably, the Commission itself long balked at revisiting this huge mother of all disaster-struck contracts – despite an oversupply (of vaccines in the EU) that simply could no longer be overlooked. Only following extreme pressure from Bulgaria, Poland, Hungary, Lithuania, Italy, Austria and Romania, amongst others, did the Commission agree to open renegotiations, albeit with a grating of the teeth so blood curdling it reached an intensity of 8 (on the Richter scale).
The starting point for the renegotiations are the 500 million doses which the EU is still committed to buy. Given the list price of €20 that produces an obligation (arising from the contract negotiated by amateurs in 2021) in total of €10 BILLION.
According to the Financial Times, the contract now provides, following renegotiations, for a reduction in the units which the EU is committed to purchase from 500 million to 280 million. From now on 70 million doses will be purchased each year, with delivery being spread over a longer period to 2026. Pfizer is willing to cancel the units originally ordered, but not being taken up, for a “cancellation fee” of €10 per unit. But only if, in return, the EU accepts a higher price for the units to be supplied until 2026. In dark corners of the school playground (and the pharmaceutical industry) this is what is known as a “flexibility fee”.
If we are not mistaken in our calculations, this results, on the basis of 220 million vaccine doses cancelled in comparison with the original contract, in a total of €2.2 BILLION.
A cancellation fee of 2.2 BILLION for not supplying items – that sounds like a deal we would also love to agree – in particular as in this case we have the purest of pure profits, given that not even the unit costs of manufacturing at 70 cent per unit are likely to be incurred. Unless of course Pfizer were nonetheless to manufacture the vaccine doses that have been cancelled, simply to be able to reduce their own creative product to nothing by way of complete destruction – just for fun perhaps. (A fate, by the way, that befell 90% of the vaccines supplied to the EU by Sanofi and Novavax.)
A written comment by Health Commissioner Stella Kyriakides states that, in addition to a “significant reduction in doses” (cancellation fee: 2.2 BILLION), also “an extension of our contract in time far beyond 2023” has been achieved.
Extension. Yes, you heard that correctly. According to the latest draft, the Commission intends to commit to the purchase of 70 million doses annually until 2026 to facilitate its “upgrade to newer vaccines”. However, these will be invoiced not on the basis of the existing price list (€20 per shot) but on the basis of an as yet unknown price list, which sets out for every “modified” vaccine an equally “modified” higher price.
If we are not mistaken in our calculations, this means that, under binding EU contracts, a minimum of a further €5.6 BILLION will be paid into the savings books and offshore accounts of Pfizer, unless these have exploded by then, because they are so full. And given the selling price of 110 to 130 US dollars per dose that Pfizer is currently charging in the United States, we are now so dizzy that we can no longer reliably calculate the total amount payable. (In fact, it corresponds to 280 million €100 notes. Or 28 BILLION €1 coins.)
To recap, the Commission is proposing to forego 220 million Pfizer doses that it originally ordered, incurring a cancellation fee of €2.2 BILLION, and, in return, is placing a new order for 280 million units disguised as the result of the renegotiations, resulting in a cost of between 5.6 and 28 BILLION.
In doing this, the Commission is replacing an obligation to pay Pfizer (almost exactly) €10 BILLION with an obligation to pay Pfizer (at least) €10 BILLION. An interesting sleight of hand.
It is hardly worth mentioning that, before the profits earned here leave the EU, Pfizer will process the transactions through the EU’s own lawful tax havens: Ireland, the Netherlands, Luxembourg (motto: tax optimisation) at tax rates that will bring tears to your eyes.
And it is also hardly worth mentioning that, by way of this deal, the Commission has provided the company for a second time with an uncontested MONOPOLY POSITION in the European COVID vaccine business. A “person familiar with the negotiations” is quoted in the Financial Times as saying “If [BioNTech/Pfizer] supply around 70 million doses per year for the next few years, that’s pretty much the totality of the market”. That is not only a further breach of the principle of fair competition, cherished throughout the EU, but is in stark contrast to the doctrine of diversification which is applicable in the field of EU procurement just as much as in the health portfolio, where, according to Emer Cooke, head of the European Medicines Agency, portfolio diversification is crucial.
Perhaps at this point we should remind ourselves who exactly these decision makers are. The European Commission is not on a manned mission heading to the legal vacuum of a nihilist orbit without values, nor does Commission President vonderLeyen have a status that would allow her, not even on a trial basis, to approach the position of ruler in a banana republic or an absolutist monarchy, as existed in periods of history long since concluded. The Commission and vonderLeyen are senior civil servants – and as such are accountable to EU citizens, no matter which secret door on the calendar conceals their contractual amendments.
“Transparency is one of the EU’s key principles. It requires the EU to disclose information on policy-making and spending and to uphold the principle of freedom of information,” is how the EU itself, with usual assiduous accuracy, describes this principle. And the last time we checked, its multiple anchoring in the EU treaties has not yet been repealed. Article 10 of the Treaty on European Union, Article 15 of the Treaty on the Functioning of the European Union, etc. are still there.
Under the tenure of Commission President vonderLeyen, the tendency of EU institutions (and officials) to evade accountability, entrenching themselves behind a bastion of opacity with complete disdain for democracy, has increased to an alarming extent.
Remind yourself regularly, transparency is not a favour to be bestowed on you by distant authorities entranced with metaphysics. No, it is something to which you are absolutely entitled. You have the (inalienable) right to know in full what the public officials that you have put in power are doing in your name.
And the media ought to be your reliable booming bass amplifier. Anything else would not be a modern democracy, but the societal order of 1648. Or a live concert by the Kelly Family (unplugged).
The same principle applies, incidentally, also in relation the increasingly uninhibited arms spending by the European Union on your behalf. Here the Commission has given the authority to approve projects under the €8 billion European Defence Fund to an obscure network of “external experts” with not even the slimmest of provision to safeguard against conflicts of interest and ensure respect for the EU’s code of conduct. Politico reports that the European Ombudsman Emily O’Reilly “pointed out that these experts’ names are nowhere to be found — which is unusual by EU standards and undermines public scrutiny, in her estimation.”
This is a view we share. And also that this lady might shortly become Commission President. Given all the effects she reliably triggers, we cannot afford a second vonderLeyen period of office.
P.S.: By the way, in the European Parliament, Green MEPs have not obstructed a COVID committee of inquiry, rather they have pushed for this – not the German ones, naturally, but the French, who for a long time now have shared little more than a political party name with their desolate colleagues in the German Bundestag.
P.P.S.: Pfizer CEO Albert Bourla did not have the time to attend a hearing and answer questions before the European Parliament COVID Special Committee. Perhaps he was busy digging the foundations for a new vault for storing wealth, smile emoji. He also does not appear to possess a modern communications device, otherwise he would surely have taken the opportunity to respond to the convolute of unanswered questions via the comfort of a video link.
Both statements apply likewise to the Commission President – notwithstanding a summons to attend she has never appeared for questioning before the Special Committee.
P.P.P.S.: A request tabled by the French Green MEP Michèle Rivasi to at least deprive the Pfizer lobbyists of their privileged access to the EU institutions in response to their disregard for European democracy was blocked by the Bureau of the European Parliament whose members include, alongside the face of the European Parliament President Roberta Metaxa, also the well-known Vice-Presidents from Germany: Rainer WIELAND (Christian Democrats), Katarina BARLEY (Social Democrats) and Nicola BEER (Free Democrats). The Bureau has intimated that it too would like to question Ms vonderLeyen in relation to the text message affair, in the presence, at most, of the chairs of the political groups, but – needless to say – to the exclusion of the public in any form. And that only on some day in the distant future, given that, as we have seen, only ten meetings of the Bureau have been held in the intervening time.