Recently, the United States (U.S.) administration released a statement announcing their support to waive off intellectual property rights (IPRs) for Covid-19 vaccines. For long, key domestic political interests within the U.S. spearheaded by pharmaceutical transnational corporations have stood strongly for intellectual property protection on the Covid-19 vaccines stating that a waiver would not result in an increased supply of vaccines.[i] Other developed European countries have echoed the same thought.[ii] On the contrary, developing countries led by India and South Africa have appealed to the WTO to lift patent rights on the Covid-19 vaccines with the hope to join hands in the mass production of vaccines. The classic North-South divide and ambiguity surrounding the current debate can be attributed to the lack of understanding of the benefits that come with a patent waiver, which if adopted by the WTO, will mark an important milestone in fighting the Covid-19 pandemic.
The international standard for IPRs came into force in 1995 with the adoption of Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement under the auspices of the WTO. The agreement set minimum standards for member countries to protect intellectual property rights.[iii] It is well established that the TRIPS was a compromise between the developed and the developing countries, while the former was in favour of an overarching cross-border IPRs regime, in exchange, the latter settled for concessions received in textile and agriculture.[iv] The agreement was eventually amended in 2001 during the Doha Round to incorporate public health concerns of the developing and the least developed countries (LDCs). Two salient features of the TRIPS Agreement are of particular concern to us. One, TRIPS grants exclusive patent rights to innovation, including processes and products. Second, it offers flexibility in terms of compulsory licensing to allow governments to procure or produce generic drugs in case of “national emergencies” or “other circumstances of extreme urgency” without facing legal constraints.[v]LDCs are granted additional exemption on pharmaceutical products until 2033.[vi]
Prior to TRIPS, countries did not recognise patents on pharmaceutical products and could produce generic products through reverse engineering. It was also common for them to export generic drugs at a lower cost. After the TRIPS agreement, patent protection was granted for all inventions including vaccines produced by pharmaceutical companies, for a minimum period of 20 years.[vii] The patentees enjoy exclusive rights to manufacture or sell their product without fear of infringement. In this respect, strong enforcement of TRIPS, in a free market economy, ensures that inventions are rewarded and there is an incentive structure in place to promote investment in underfunded areas such as research and development (R&D).
In practice, however, the existence of a perfectly competitive free market economy is a myth.
It is true that R&D can be a long and painstaking process for inventors, oftentimes involving high-stake private investment and unforeseen competition. However, transnational pharmaceutical industries based in research-intensive economies have long benefitted from state support, a perspective often discounted in debates concerning IPRs. Take the example of Oxford/ AstraZeneca Covid-19 vaccine, 97% of which was financed through public funds including funding from the U.K. government, the European Commission, and other scientific institutes based in the U.K. and the U.S., to name a few.[viii] Not only did it benefit from public financing, but it also had certainty in terms of guaranteed buyers through government procurement of its products. It should be noted that in such a case, the cost of R&D is not entirely borne by the innovators. Hence, applying the same logic of patent rights to buy-off the innovators can be misleading.
As mentioned earlier, TRIPS also provides flexibility to governments to pursue compulsory licensing in exceptional circumstances. In case of a health emergency, governments can even circumvent the process of negotiating with patent holders. Despite this flexibility offered, the process is not as straightforward. First, the ability to produce sophisticated research-intensive products such as the Covid-19 vaccine is limited in the developing world. Infact, most LDCs neither possess the capabilities nor the technical knowledge to pursue such production. Second, even when countries have the infrastructure in place, they have to factor in retaliatory consequences from international companies,[ix] further limiting the use of the TRIPS provisions.
Even though the amendment allows for the export of generic drugs to countries with limited production capability, they are subjected to additional conditionalities. The importing county is obliged to inform TRIPS council about the state of the county’s production capacity and also present them with details about the quantity of the product required to meet their domestic demand. On the other hand, the exporting country has to oblige by the specific standards set with respect to labelling and marking of the product. This is done in order to distinguish the generic drugs from the original patented product. This added cost acts as a disincentive, making it unattractive for companies to export to poor countries with a small market. Thus, developing countries are not always in the best position to make use of the flexibility offered by the regime. Furthermore, the complexities involved makes it harder for developing countries to form regional coalitions to facilitate cooperation, enhance production or ensure equitable distribution of the Covid-19 vaccine, which are deemed essential at present to fight the global pandemic.
It should be acknowledged that technology and knowledge transfer is key to enabling vaccine production in the developing world and waiving patient protection is a step forward in that direction.
While it is true that giving licenses does not mean that countries will have the technological know-hows of vaccine production, the arguments underestimate the developing countries’ ability to decode and learn from the experiences of successful processes. Having said that, in order to reap the true benefits of a patent waiver, a coordinated North-South effort in transfer of knowledge and technology will be key. With a large majority of the global North now vaccinated, decisions around knowledge sharing should not only be seen as a moral obligation but also a strategic one because as the saying goes — “No one is safe, until everyone is safe.”
[ix]Robinson, M., and X. Zhang. The world medicines situation report. WHO/EMP/MIE/2.3. Traditional Medicines: Global Situation, Issues and Challenges. Geneva, Switzerland: World Health Organization, 2011.
Shraddha Gautam is an international macroeconomics and development specialist with expertise in fiscal policy, international trade, and investment. She holds a masters’ degree in International Political Economy from the London School of Economics and Political Science (LSE) and an undergraduate degree in Economics (Hons.) from the University of Delhi. She is currently working with the UN Economic and Social Commission for Asia and the Pacific (ESCAP), contributing to their flagship survey report on Building Forward Fairer– Economic Policies for an Inclusive Recovery and Development. She is a former Fellow of Nepal Economic Forum (NEF), 2017-2018.