What to Know About An Intellectual Property Rights Waiver For Covid Vaccines

Both arguments, the history, and context presented on the topic of a proposed intellectual property rights waivers.

May 09, 2021

A new article, Producing a Vaccine Requires More Than a Patent, discussing this published by Foreign Affairs adds valuable commentary.

Biden’s Big (kind of ) Pivot: Yes to Vaccine Patent Waivers

The situation is clouded by partisan sentiments more interested in proving each other wrong than finding the best solution. Here’s what you should know.

GOAL: The Biden administration hopes to expedite vaccine doses available in poorer countries, but this is not something the US can decide alone. We require a World Trade Organization consensus, something EU nations have shown some disfavor toward. Until a proposal exists, we cannot assess the details of any possible agreement.

PEER COUNTRIES AND INDUSTRY SAYS

“In closed-door talks at the WTO in recent months, Australia, Britain, Canada, the European Union, Japan, Norway, Singapore, and the United States opposed the waiver idea, according to a Geneva-based trade official who was not authorized to discuss the matter and spoke on condition of anonymity. Some 80 countries, mainly developing ones, have supported the proposal, the official said. China and Russia — two other major COVID-19 vaccine makers — didn’t express a position but were open to further discussion, the official said,” per AP.
Moderna has indicated it has no interest in pursuing patent infringement for the duration of the pandemic.
- There are three companies for which the intellectual property rights could be waived, however. The other two companies have not made their stances known.
- Also, refusing to enforce patents does not mean that someone can make it. The patents do not necessarily disclose everything needed to make the vaccine.
The Pharmaceutical Research and Manufacturers of America stated: “This decision will sow confusion between public and private partners, further weaken already strained supply chains and foster the proliferation of counterfeit vaccines.”

COMMENTARY ON PEERS AND INDUSTRY: The statement from PRMA does not clarify how its prognostications would come to pass nor how it knows this. The claim is too vague to assess, neither demonstrable nor disprovable. Put another way, it’s meaningless.

SUPPORTERS SAY

Led by India and South Africa, dozens of developing countries argue the move would allow them to produce their own generic vaccines. Some countries have the needed facilities but lack the required waiver to avoid a patent suit.

A waiver “could change the game for Africa,” tweeted WHO Africa chief Matshidiso Moeti.

Countries in Africa and some in South America and Asia cannot currently manufacture vaccines in-country. They must wait for developed countries first to vaccinate their populations before they send doses to poorer countries.
- Current best estimates indicate that it may take us to 2024 before the world is fully vaccinated.

The US interest in getting poorer countries vaccinated is not purely selfless.

Unvaccinated countries will continue to spread the virus rapidly. When a virus is spreading, it is also mutating, meaning this is likely to increase the rate at which we see mutations, any of which might outmaneuver the vaccines everywhere.
The burden of a persistent outbreak somewhere like India could easily affect the US.
- 40-50% of the generic drug market in the US is made in, India. We are not self-sufficient and would do well to remember our vulnerabilities.

Supporters also argue that the industry has already raked in billions off the vaccine. The NIH partially funded the research, meaning these companies did not develop it without significant government investment.

Consequently, those arguing in favor of IP protection may, in a way, be supporting the federal government having a say in the product it paid to create

SUPPORTER COMMENTARY: A waiver is unlikely to have an immediate impact on the vaccine delivery timeline by the current administration’s admission.

Specifics of the waiver still need to be negotiated, and the administration also leaves open the possibility that deliberation might fail--something likely to be contingent on the terms.

These terms would need to be accepted by other countries to get a WTO consensus. Without the other countries' cooperation, the issue is moot.

The low probability of helping in the short term coupled with the predictable roadblocks to realizing a waiver raises another possibility. Agreeing to the waiver would appease those who lobbied the White House. The White House could fairly confidently signal acceptance of the idea while knowing the obstacles to actualization were insurmountable.

The stances of several countries that opposed the waiver were already well known (EU, U.K., Switzerland, Japan, Norway, Canada, Australia, and Brazil) when the Biden administration reversed its stance.
Agreeing to waive the IP rights appeases the more extreme factions within the current Democratic party without following through while still leaving them “in debt” to the White House.
The progressive wing of the political left has grown increasingly impatient with Biden. At times they seem as eager to oust him as Trumpian conservatives.
- See: Here Are All The Ways Biden Pissed Off Progressives This Week

The public comment on the waiver, and especially rebuttals, seemed to imply the specifics were a done deal, but the White House comment suggests that the waiver may not happen if an agreement cannot be reached.

OPPONENTS SAY

Waivers won’t increase production in the near future and would instead deter future innovation, trigger a scramble for limited raw ingredients, and lead to counterfeit or low-quality shots.

Some have raised concerns about dissuading companies from developing vaccines in future outbreaks or driving companies out of the US, per the Wall Street Journal and the Washington Post.
Naysayers argue that countries should share doses they have and focus on fixing supply chain issues.
- Thus, they claim it would get the vaccines to poorer regions of the world faster and guarantee the quality, although this almost certainly ensures a longer wait.

OPPOSITION COMMENTARY: That vaccines might get to poorer regions sooner if we fix the supply chain issues in the US may be valid, but more leg work needs to be done before this can be put forth as a serious counter-proposal.

Proponents should further examine the idea to understand whether it sufficiently expedites the vaccine’s arrival.
- If the timeline is comparable to that which waiving the IP rights brings, this is the most potent counter to those in favor of a waiver.

Pharmaceutical companies are unable to profit anywhere else in the world as they do in the US. The percentage of a company’s portfolio that could be useful in a pandemic that might have IP rights waived--that is, once the cost is recovered or modest profit is made--is negligible; what isn’t negligible matters too: Taxes.

Corporate taxes in the US are far below our most similar peers. It’s also why companies leaving for greener pastures is unlikely. The expense versus the payoff says no one is leaving. More on this below.

No other country offers them anywhere near the profit potential as the US. One could quite confidently call their bluff here.

Americans pay 3x the price for a drug on average compared to all other developed and some developing nations.
Before taking this threat seriously, one should ask where precisely any companies hope to go because they’ll be looking at a market with 1/3 the retail price.

Even if companies only broke even on these vaccines, which they only partially funded, the positive press alone has benefited them.

That said, they have made billions in profit (Nearly $2 billion for Moderna; $3.5 billion for Pfizer) too. Neither company could have made the billions they have so far without significant favor or investment from the federal government.

Pfizer requested the Biden administration to use the Defense Production Act to help it cut the line for in-demand materials necessary for manufacturing. This also may have prevented those selling the on-demand materials from charging Pfizer more.
Any assessment must consider the tremendous investment, $18 billion from the federal government via Operation Warp Speed, to aid in developing vaccines.
Basic research conducted by the National Institutes of Health (NIH), the Defense Department, and federally funded academic laboratories has been the essential ingredient in the rapid development of vaccines in response to COVID-19.
- Neither Pfizer nor Moderna vaccines were possible without the NIH sharing its research.
- That’s in addition to the significant partial investment from the NIH and the Biomedical Advanced Research and Development Authority (BARDA)—which have both invested heavily in the vaccine’s development.

The NIH funded the development of mRNA vaccine research with Moderna. All of this was under development before the pandemic, so much so that the intellectual property is jointly owned with the NIH in writing.
- Those arguing in favor of protecting the rights to intellectual property are, in some way, supporting the waiver as the federal government is an owner of the Moderna vaccine.

HISTORY

In the 1990s, waiving drug patents stopped a different pandemic without the catastrophic consequences currently being prophesied in bombastic op-eds.

In a Foreign Policy article by Laurie Garrett, Garrett details the reasonable concerns, of which there are many, but she does not include concerns about the pharmaceutical companies among them.

“Far from bringing chaos to the pharmaceutical industry and stifling innovation, the Clinton Foundation’s maneuver around the strict enforcement of intellectual property laws ushered in a dramatic era of HIV drug invention that improved the antiviral power of treatment, lowered drug side effects, developed new drug forms that are now taken to prevent infection, increased options for pediatric care, and greatly improved the methods for which HIV positive individuals could take their life-sparing treatments.

Despite the loss of guaranteed patent protection and pressure to transfer technology to, primarily, Indian pharmaceutical companies, wealthy nations’ drug companies have profited and continue to innovate on the HIV/AIDS front.”

Profit continued to be made, and innovation in the realm of HIV drugs continues today. WTO members also agreed to waive patent rights so poorer nations could get generic treatments for malaria and tuberculosis in 2001, in addition to HIV medications.

Profits for all parties involved in the WTO waiver of 2001 make claims of catastrophe less credulous.

In no case did the waivers result in:

companies vacating the US,
failing to recover investments or
subsequent stalling of innovation.

Those arguing against the waiver have a stronger argument about raw material shorting, which could drive up the price, or the fact that the gains may not be much better than if we improve the supply chain issues in the US.

Addressing supply chain issues rather than intervening in the patents would ensure vaccines are made because some countries lack the facilities needed for production. In those cases, a waiver offers little help.

Keeping production in the US could be argued as a check on the quality. Still, we could just as quickly say that the US has problems with the quality too after an inspection in 2020 that reported severe violations in a vaccine production facility that went unattended until A year later in 2021.

That failure cost the US millions of doses of vaccines.
- With losses like that, it’s harder to argue we should keep production in the US for the good of developing countries.

Neither Camp Makes a Complete Argument

Currently, it seems a narrowly tailored waiver that allowed poorer countries to make vaccines for their citizens alone might offer a middle ground.

This still leaves raw materials supply-chain concerns.
- It also might not cause supply chain issues because the developed world will conclude mass vaccinations in 2021.
Without such a waiver, the rest of the world may be fully vaccinated in 2024, a situation that could threaten the US in more ways than one.

The Biden administration still leaves the possibility that negotiation may lead to no deal, and what precisely the waiver includes remains unclear. Any viable agreement must persuade the opposition, including Angela Merkel--a noted scientist in her own right and leader of Germany.

The benefits from a waiver would take months, at the very least putting the results in 2022. That might still be worthwhile, but the developed world must address the present crisis as well.

Especially if no waiver is granted, the developed world must develop an alternate plan for addressing the threat.

One cannot fully assess the waiver until one exists.

The opposition’s catastrophic and vague warnings of a future devoid of innovation and companies fleeing the United States seem less an actual threat and possibly political theatre. It’s a tactic that has worked in other situations in everything from health insurance to immigration. That these companies are unaware of the realities facing pharmaceutical companies seems unlikely.

The threat of industry revolt against the federal government need not exist so long as the public believes that it does. Should the catastrophic future concern people enough, Americans may strongly object to it.
This seems the only plausible explanation in view of the situation pharmaceutical companies would face in any other country, granted there may be aspects of this situation that have escaped this reviewer.

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