Two contracts, lots of questions and not nearly enough vaccines…
The devil is in the detail. The revelation of the contract between AstraZeneca and the UK yesterday is ample proof of that wisdom.
As the UK contract speaks of “best reasonable efforts” in the production and delivery of AstraZeneca’s Covid vaccine — which is also the case with the EU contract — part of the press was quick to conclude that there is no significant difference between both. At least not a difference that can explain the dramatic gap in delivery of doses between the EU and the UK.
A more in-depth analysis however tells a different story.
While there is already a huge difference in size and detail between both contracts (the EU contract contains 18 articles over 34 pages, the UK agreement has 31 articles on 46 pages), and the two diverge in some of their essential provisions:
- The first thing to note is the timing of the signature: While the UK and AstraZeneca had an agreement already in May, it was eventually signed only a day after the contract with the EU.
Unlike the EU, the UK contract has an additional article (13.2.9) stating that AstraZeneca “shall not enter into any agreement with any foreign government, funder or third party that would by its terms conflict with AZ’s obligation hereunder or would be reasonably expected to prevent AZ from performing its obligation hereunder.”
Cleary, Astra already saw its commitments to the EU, finalised a day earlier, as not impacting on its agreement with UK.
- Important, because differing outcomes in supply and delivery have off course become the main issue since.
The EU contract is based on an “estimated time schedule”, full stop. In the British contract by contrast, there is a precisely described procedure to guarantee a timely delivery of doses. This procedure is based on a “preliminary calendar” (with five delivery dates and volumes). AstraZeneca is obliged to notify to the UK authorities ultimately 30 days in advance the details of each of these deliveries. Once notified, AstraZeneca can no longer escape these precise commitments without permission of the UK authorities. Only a minor variance of dates (up to 5 business days) compared to the delivery schedule is possible due to the “unpredictable nature of the manufacturing of the products”, the so called “grace period”. All this is not foreseen in the EU agreement.
- Also different is the pricing. In both contracts the price is based on the “Cost of Goods”. But while the EU contract contains a fixed figure, the UK contract does not. The price charged in the UK contract will be calculated on an “Open Book Basis”, giving flexibility to AstraZeneca to later include costs that where not initially foreseen. And conversely giving the UK authorities leverage, through the open book method, to oblige AstraZeneca to fulfill its commitments on supply and delivery.
- The UK contract is fully concentrated on the UK supply chain, so as to guarantee the UK deliveries, while the EU contracts are solely focused on the overall supply chain, without special emphasis on the fulfillment of the EU-wide demand for doses.
This is the case in art. 4.2 of the UK contract, which states that AstraZeneca “owns or operates the facilities [to] ensure supply and Delivery of Products”. It also states that to “AstraZeneca’s knowledge” the UK supply chain is sufficient to provide the ordered quantities. No such clause is visible in the EU contract. (Interestingly, part of the UK supply chain appears to be based on the continent.)
- Remember that the EU has paid €336 million upfront to support production, before the products existed and had been authorized. The UK however only pays on invoice 30 days áfter delivery. So in effect the EU has helped pre-fund the production of vaccines that the UK only has to pay for afterwards.
- Lastly, there is the issue of transparency: The UK has written in provisions that it may disclose confidential information under certain circumstances, notably “to Parliament and Parliamentary Committees or if required by any Parliamentary reporting requirement “(17.13.2). The European Parliament will note that the Commission has failed to demand or achieve a similar opening.
In sum, the balance of power tilts notably towards the UK. Considering the timing and difference in approach of the two contracts, this appears to be no coincidence.
Since trust between the parties to any agreement is vital, and since the outcome of this particular contract has led to an enormous amount of public distrust, both the Commision and AstraZeneca have a lot of explaining to do.
