Impact of Spanish government's COVID-19 measures on life sciences companies operating in Spain

With more than 17,000 people currently infected in Spain, the national government has granted the Ministry of Health far-reaching powers to contain the coronavirus, and has issued several orders to safeguard the economy. These measures may affect the business of health care, pharmaceutical, and medical devices companies in Spain.

As authorities across the world are implementing measures to control the spread of the coronavirus, Spain has recently declared a state of emergency (Estado de Alarma) and implemented legislation[1] aimed at controlling the threat to public health and safeguarding the Spanish economy. The state of emergency is in force until 29 March but is likely to be extended by parliament until the crisis subsides.

For companies operating in the Spanish health sector, the most relevant measures are the following:

Increased power for the Ministry of Health (MoH)

While the crisis persists, the MoH concentrates all the authority of the Spanish public health institutions in order to monitor and manage the current situation and to take all measures that it deems necessary. This means that decisions are taken by the MoH at the national level in all health care matters affected by the coronavirus crisis, and no longer by regional health authorities – even if the latter support the MoH in implementing such central decisions in their respective territories.

To give the MoH the financial muscle required to deal with these extraordinary circumstances, a special fund of EUR 1bn has been set aside to cover COVID-19 expenses.

Critical supplies and direct awards

Considering the urgency, the government has seen a need for direct awards of procurement contracts to ensure efficient supply of the products and services that are critical for health care in Spain. Contracts can be concluded without formal tenders, even orally; hospitals and health care authorities are dispensed from formal budget requirements; and awards are not subject to any administrative or judicial appeal.

Seizures and other restrictions to free trade

Pharmaceutical and medical devices companies with plants in Spain should consider that the MoH has been given the authority to:

  • intervene and occupy temporarily companies and services in the pharmaceutical sector;
  • issue temporary orders to ensure critical supplies, take control of goods and assets of companies, and impose obligations required to protect public health such as the manufacturing and supplying of critical products; and,
  • restrict companies from selling to certain customers to ensure supplies needed for public health.

In addition, domestic and foreign companies located in Spain that manufacture or import a series of critical products (e.g., masks, diagnostic kits, safety goggles, gloves, protective clothing, hydroalcoholic gels and solutions, invasive ventilation devices and related consumables, alcohol for medical use) – as well as those that have manufacturing equipment capable of producing these – must inform the government of their stock and manufacturing or importing capacity.

Price regulation

The authorities can set the maximum retail price for over-the-counter (OTC) medicinal products and medical devices that the public needs to protect itself from the coronavirus. Normally the wholesale and retail price of these products, which are not subject to reimbursement by the public health system, can be freely determined by sellers – this freedom is now restricted until the COVID-19 crisis comes to an end.

Private health care under control of public authorities

Health care companies with operations in Spain must be aware that the MoH and regional health authorities can temporarily take control of operations of private clinics and health care institutions if the crisis requires it. Containment measures and medical assistance to infected persons are controlled centrally by the MoH during the current situation, and this may require privately-held health care business or assets to follow MoH orders – even if these private centers normally operate separately from the public health system.

Control on foreign takeovers

The government has also approved a notable change in foreign investment rules as a result of the current crisis: a non-EU/EEA investor must now obtain government approval for any transaction pursuant to which it holds 10% or more (or gains control over management) of Spanish companies that belong to "critical sectors" or when public health or public security is affected, and the same rule applies for investments in Spain by sovereign funds and entities controlled by foreign governments.

These "critical sectors" include health care infrastructure and biotech companies.

The government wishes to avoid takeovers that take advantage of the likely drop in valuation of Spanish companies in these sectors as a consequence of the economic distress that COVID-19 will cause in the Spanish market.

For guidance on what these measures may imply for your business in Spain, please reach out to your Hogan Lovells key contacts.

 

[1] For reference, the recent legislation includes:

Royal Decree-Law 7/2020 of 12 March 2020 on urgent measures to react to the economic impact of COVID-19 virus.

Royal-Decree Law 8/2020 of 17 March 2020 on urgent measures to address the economic and social impact of the COVID-19 virus.

Royal-Decree 463/2020 of 14 March 2020 declaring the state of emergency to manage the health crisis caused by COVID-19 virus.

Order SND/233/2020 of 15 March 2020 on certain information duties following Royal Decree 463/2020 of 14 March 2020.

 

Authored by Alex Dolmans, Santiago Garrido, Alvaro Abad, and Adrián Fernández

 

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