Business Negotiation - Group Case Analysis

European Union: The Covid-19 vaccines Negotiation

March 22, 2023

For Charlotte SAGLIO

Emma BERTHOULOUX, Tess CAVROT, Marie CRISTINI, Raphaël DECKER,

Romain DESVERONNIERES, Chloé RENOU, Marine ZHAN, Elodie ZHENG
Introduction: The social context of the negotiation

The European Commission has played a crucial role in negotiating the procurement of Covid-19
vaccines on behalf of the European Union, attempting to secure favorable agreements on pricing and other
issues with manufacturers. However, this process took time and resulted in a relatively slow rollout of the
vaccines compared to other countries such as the United States, Britain, and Israel. Unfortunately, the
failure of wealthy countries to jointly negotiate an orderly and comprehensive rollout of Covid-19 vaccines
worldwide likely contributed to the emergence of new variants of the virus in places where vaccines were
insufficient. Nevertheless, the COVID-19 pandemic has prompted the EU to promote a common strategy
to produce and make available to all a safe and effective COVID-19 vaccine. This strategy could allow for
joint action at the EU level on health policies, including the market for medicines and vaccines, thereby
unifying the different national health policies and eliminating unwarranted functional duplication between
the European Medicines Agency and each national medicines agency about negotiation procedures.

The European Commission began negotiating Covid-19 vaccine purchases on behalf of the European Union
early in the pandemic. Their goal was to secure favorable agreements on pricing and other issues with
vaccine manufacturers to ensure sufficient supply for the entire EU.

However, negotiating these agreements was not easy, as there was a strong global demand for vaccines and
many countries, including the United States and Britain, took a nationalistic approach to negotiating supply
agreements. The European Commission also faced production and delivery delays from vaccine
manufacturers, which resulted in relatively slow vaccine rollout compared to other countries.

1. The Interests related to achieving the goals of each party

Because this is a global public health case, there are many interests at stake in this negotiation between
the European Union and pharmaceutical companies. In a short amount of time, governments had to make
decisions.

The EU's strategy in the negotiation in June 2020 was threefold: to obtain a favorable price for Covid-19
vaccines, to ensure a steady supply, and to guarantee equitable distribution among the countries of European
Union. Countries also sought to secure agreements that would consider production capacity and speed of
distribution of the vaccines.

Initially, the interest for the member countries to join forces under the European Union label to purchase
Covid-19 vaccines from pharmaceutical laboratories is to avoid the major legal and practical difficulties
encountered by each State in purchasing this type of goods or services in an emergency. The centralized
negotiation procedures were intended to achieve maximum benefits in terms of economies of scale and risk
sharing between each EU country.

In this kind of situation, of global health emergency, the market is extremely competitive, and the States
are mostly dependent on pharmaceutical companies.

Vaccine manufacturers' interests in the negotiations were to maximize revenue and profitability, ensure
coverage of research and development costs, and maintain their reputation as reliable and ethical suppliers.
They also sought to secure agreements that would allow them to efficiently manage their production and
distribution capacity.

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Acting in the interest of scientific research and medicine is also what motivates these companies. Although
there are financial exchanges behind the process, providing this service to the population is a duty. The
interest of laboratories is also to preserve their image. They must produce a vaccine in a short period of
time and one can imagine that fewer tests are carried out before they are put on the market. If there are side
effects, and even if they manage to get out of responsibility for this vaccine by contract, their image may
still be tainted.

Finding the main interests of the parties in this case is rather simple but finding the target points of two
parties is more difficult to identify because of the non-transparency of information during the negotiation
and still today. These are negotiations that take place between anonymous representatives of the European
Commission and the executives and salespeople of the big pharmaceutical companies who try to keep this
information confidential. In any case, the interests and target points are closely linked.

2. The Reservation Points

Regarding the reservation points. They represented the lower limits that European Union countries were
prepared to accept in the negotiations. This included considerations such as the maximum acceptable price
for vaccines. The maximum price accepted by the state remains confidential. The maximum acceptable
duration for the delivery of the vaccines and the storage conditions, for example the storage temperature -
70 degrees Celsius for Pfizer-BioNTech and -20 degrees Celsius for Moderna.

Regarding reservation points for vaccine manufacturers, for instance, Pfizer-BioNTech and Moderna, this
represented the lower limits they were willing to accept in the negotiations. This included considerations
such as the minimum acceptable price for the vaccines, €15.50 for Pfizer-BioNTech which is the final price
per dose of vaccine and €19 per dose for Moderna, the minimum acceptable duration for delivery of the
vaccines, and the liability conditions in case of adverse side effects.

3. The BATNAs

The BATNA, or Best Alternative To a Negotiated Agreement, is a concept in negotiation strategy that
represents the best possible outcome a party can achieve if the current negotiation fails, and no agreement
is reached. It serves as a benchmark to compare the proposed terms in a negotiation and helps determine
the acceptable range for a deal.

- For the European Union:

The EU's BATNA could be to look to other vaccine manufacturers, such as AstraZeneca, Johnson &
Johnson, or other vaccines in development. The EU would seek competitive prices and favorable terms
while ensuring the availability and rapid distribution of vaccines for its citizens. However, the efficacy and
safety of alternatives could be an important factor to consider.

- For Pfizer-BioNTech and Moderna:

The BATNA for Pfizer-BioNTech and Moderna could be to sell their vaccines to other countries or
international organizations, such as the World Health Organization (WHO) or the COVAX program, which
aims to ensure equitable access to vaccines for low- and middle-income countries. They could also explore
partnerships with national governments or other private sector actors.

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 4. The ZOPA

The ZOPA, or Zone of Possible Agreement, is a term used in negotiation to describe the range in which
a deal or agreement can be reached that is acceptable to both parties. It represents the overlap between the
minimum requirements or expectations of each party involved in the negotiation.

The concept of ZOPA is based on each party having a walk-away point, also known as a reservation point.
This point is the minimum or maximum value that a party is willing to accept in the negotiation. If there is
a range of values where both parties' walk-away points overlap, a ZOPA exists, and an agreement can be
reached within that range.

In the context of the negotiations between the European Union (EU) and Pfizer and Moderna on vaccine
prices, it is difficult to determine the exact ZOPA, as details of the negotiations and agreements were often
confidential. However, it can be assumed that the ZOPA covered key areas such as price per dose, volume
of doses ordered, delivery times, liability and other contractual terms.

The EU was seeking reasonable prices for vaccines, sufficient supply for its member states, and rapid and
fair distribution. Vaccine manufacturers, such as Pfizer and Moderna, sought to cover their production and
distribution costs, make a profit and protect their intellectual property and liability in case of incidents.

5. The communication styles

It is difficult to determine the exact type of communication used in the negotiations between the EU
and the pharmaceutical companies for the first doses of Covid-19 vaccines, as this depends on the
individuals involved in the negotiations, as well as the specific phase of the negotiation. Furthermore, the
negotiations have not been made public in full. However, it is evident that all four types of communication
were used at the appropriate time in the negotiations.

In the negotiations with the pharmaceutical companies, the EU probably used analytical communication to
discuss technical and scientific aspects related to the vaccines, such as the results of clinical trials of the
vaccines, regulatory requirements, production capacities, costs and delivery schedules. This type of
communication involves the use of factual data and information to make decisions.

The negotiations are also likely to have involved driving communication to express the EU's requirements
and expectations. Direct communication involves the use of an assertive and authoritative approach to
influence the other party's decisions. Driving communication has been used extensively to pressure
pharmaceutical companies to accept more favorable terms for the EU, such as lower prices or faster delivery
schedules.

It is also likely that the EU negotiations had an expressive dimension to express feelings such as concern
about the pandemic, the importance of ensuring equitable access to vaccines for all member countries, as
well as to express gratitude for the cooperation of pharmaceutical companies. Indeed, expressive
communication involves the use of emotions and feelings to influence the other party's decisions.

Finally, it is probably the case that the EU used amiable communication to maintain a constructive working
relationship with the pharmaceutical companies throughout the negotiations and also to find mutually
beneficial solutions and to encourage continued collaboration in the production and distribution of Covid-

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19 vaccines. Friendly communication involves using a pleasant and cooperative approach to build positive
relationships between the parties.

6. The management conflict strategies

In this negotiation example, there are several different conflict management strategies that were used
during the negotiation process.

One of the strategies that was used was collaboration. The government worked closely with different
stakeholders, including medical experts, to develop effective COVID-19 control measures. By working
collaboratively, the government was able to ensure that the views and concerns of all stakeholders were
taken into account, which helped to build consensus around the proposed measures.

Another strategy that was used was compromise. The government recognized that different stakeholders
had different needs and concerns, and so they were willing to make concessions in order to reach an
agreement. For example, when negotiating the closure of schools, the government agreed to provide
financial assistance to parents who needed to take time off work to care for their children.

A third strategy that was used was assertiveness. The government was clear in their communication about
the need for COVID-19 control measures, and they were firm in their position when negotiating with
different stakeholders. This helped to ensure that the government's priorities were taken into account during
the negotiation process.

Overall, the negotiation process in Hong Kong during the COVID-19 pandemic was characterized by a
combination of collaboration, compromise, and assertiveness. These conflict management strategies were
essential in helping to build consensus around the proposed control measures, and ultimately in managing
the pandemic effectively.

7. Trust, Ethics

Concerning the negotiations between EU negotiators and pharmaceutical companies may include
discussions on trust and ethics, in particular the commitments made by pharmaceutical companies to ensure
the safety and efficacy of their vaccines. Given the urgency of the COVID-19 pandemic, it is important that
pharmaceutical companies demonstrate transparency and accountability in their negotiations with the EU,
providing clear and comprehensive information on their clinical trial data, production and distribution
strategies, and the terms of their collaboration agreement with the EU.

EU negotiators can also seek to ensure that pharmaceutical companies comply with ethical standards in
vaccine research and development. This led to discussions on how clinical trials are conducted, the safety
and protection of participants, and the involvement of local communities in research and development
processes.

In addition, negotiations may also cover vaccine prices, as well as the accessibility and equitable
distribution of vaccines in EU countries and around the world. EU negotiators can seek to ensure that
vaccines are affordable and accessible to all, especially in the poorest countries. But also ensure the
equitable distribution of vaccines between different countries and populations. This results in the
establishment of funding and distribution mechanisms to enable the poorest countries to access vaccines.

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 8. The preparation steps

Negotiations between the European Union and pharmaceutical companies for the first doses of COVID-
19 vaccines. The first step is identifying the Need in which the EU identified the need for vaccines to
combat the Covid-19 pandemic. The second step is funding for Research and Development where the EU
contributed money to the study and creation of Covid-19 vaccines. The third step is creating a Regulatory
Framework to guarantee that any vaccinations authorized for use were secure and efficient, the EU built a
regulatory framework. The fourth step is creating a Purchase Strategy to guarantee vaccine doses for its
member states, the EU created a procurement strategy. Then, there are the contract negotiations in which
the EU arranged agreements with pharmaceutical firms to purchase Covid-19 vaccination doses. And
finally, the last step is creating Strategies for Distribution where the EU created strategies for distributing
vaccinations to its member states.

In general, establishing a regulatory framework, creating a procurement strategy, negotiating contracts with
pharmaceutical companies, and creating distribution plans were all part of the stage of preparation for
negotiations between the EU and pharmaceutical companies for Covid-19 vaccines. This stage also
involved ensuring that there was a clear need for vaccines.

Conclusion

The European Commission has entered into several supply agreements with various vaccine
manufacturers, thereby ensuring adequate supplies for EU Member States. The agreements are with
manufacturers such as Pfizer-BioNTech, Moderna, AstraZeneca, and Johnson & Johnson, as well as with
other lesser-known vaccine manufacturers.

Under the terms of these agreements, the vaccine manufacturers have committed to supplying doses of
vaccine to the EU within specified time frames. The EU agreed to purchase a certain number of vaccine
doses at a price agreed with each manufacturer. The agreements also covered other issues such as liability
for adverse vaccine events.

However, some of the agreements have been challenged by production and delivery delays on the part of
vaccine manufacturers. There have been significant delays in deliveries from AstraZeneca in particular,
which has led to criticism from EU member states and delayed the rollout of vaccines in some countries.

Despite these difficulties, the supply agreements reached by the European Commission have been crucial
in securing vaccine supplies for the entire EU. They have ensured that EU Member States have access to
safe and effective vaccines to protect their populations against COVID-19.

On the other hand, the negotiation process has highlighted the need for the EU to better coordinate its health
policy and to strengthen its capacity to deal with global health crises in the future.

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