Arriving at an equitable response to the pandemic

EconomicTimes, December 10, 2021

By Pradeep S. Mehta and Sneha Singh

World Trade Organisation (WTO) had been gearing up for its 12th Ministerial Conference (MC12) in Geneva end of November. In a cruel twist of fate, the outbreak of a particularly transmissible strain of the COVID-19 virus led to its postponement and put a dampener on WTO’s much awaited response to the COVID-19 pandemic. The hope was that the MC12 would follow the precedence set by the Ministerial Decision on public health in 2001 at Doha (Doha Declaration on TRIPS and Public Health).

The Doha Declaration on TRIPS and public health clarified pre-existing flexibilities in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). It also waived those obligations that prevented the export of life-saving drugs produced under compulsory licenses to countries without adequate manufacturing capacity.

Subsequently, in response to the devastating social and economic disruption caused by the COVID-19 pandemic, two different proposals have been advanced at the WTO. On the one hand, India and South Africa have proposed a three year long waiver of obligations related to patents, trade secrets, copyrights and industrial designs that apply to COVID-19 drugs, vaccines, diagnostics, and other technologies (TRIPS Waiver Proposal).

Opposing the TRIPS Waiver Proposal, the EU has instead suggested that there should be a suspension of only those specific procedural requirements that increase complexity and time while issuing compulsory licenses (EU proposal).

The lack of consensus rests upon whether or not intellectual property protection is perceived as a significant hurdle in scaling up manufacturing capacity and ensuring equitable access to COVID-19 vaccines, drugs and other technologies. The following facts require consideration.

Since the first emergency use authorisation by the WHO in December 2020, more than 8 billion doses of COVID-19 vaccines have been administered (last updated on December 8, 2021) and more than 24 billion doses are forecasted to be produced by mid-2022. Such capacity has been attained without a waiver of IP obligations, rather, the underlying IPRs have facilitated extensive licensing and manufacturing contracts even among direct competitors.

Notably, it is also true that the gross inequity in access to these vaccines is alarming – for every 100 people in high-income countries, 133 doses of COVID-19 vaccines have been administered in comparison to only four doses per 100 people in low income countries. Further, even as the forecasted figures comfortably cover the target of producing 11 billion doses to vaccinate 70% of the global population by mid-2022 (WHO Strategy to Achieve Global Covid-19 Vaccination) this calculation is threatened by the possibility of export controls, booster strategies in countries with already high vaccine coverage, and emerging variants reducing the efficacy of existing vaccines.

It is therefore in the interest of all to diversify manufacturers and supply chains and radically ramp up manufacturing capacity to address future jumps in demand. The prime question is whether a temporary IPR waiver would be indispensable for boosting potential manufacturing capacity in developing countries and LDCs to mitigate this gap at even faster rates or if existing mechanisms (which have proven to work, albeit with massive shortcomings) can be redirected, reworked and if needed, rebuilt to arrive at comparable results.

Let’s start with the TRIPS Waiver Proposal. Even if the proposal finds consensus, its eventual impact is subject to many caveats. First, a waiver at the WTO only means that countries are free to suspend WTO obligations, but they are by no means obligated to give direct effect to the waiver through domestic laws.

TRIPS only sets the minimum standards of IP protection and Members are free to go beyond them. Countries that IP holders are based in are least likely to suspend the domestic protection of IPRs, especially considering that a waiver of TRIPS obligations does not mean that other obligations under Regional Trade Agreements (RTAs) or Bilateral Investment Treaties or for that matter, domestic laws will cease to operate. If a set of WTO Members continue to protect and enforce IPR in their territories, even as they are restricted from initiating WTO disputes against developing nations and LDCs that suspend their TRIPS obligations, there will be a clear disincentive for IP holders to expand their presence beyond friendlier ecosystems and diversify their manufacturing base.

Second, a TRIPS waiver, even if successful in untangling complex patent networks, will remain ineffective in providing access to technologies, know-how, test data, and critical ingredients that are currently the key resource constraints in scaling up manufacturing capacity. This is also true for the EU proposal which focuses primarily on patent rights and does not address how compulsory licensing alone, without commensurate focus on the transfer of technologies will suffice. This is not to say that either proposal is moot. In fact, common ground between the two proposals means that at the least, consensus may be forged for a partial waiver of patent rights, the sheer possibility of which can persuade IP holders to be more accommodative towards issues of access and affordability through voluntary arrangements.

In the meanwhile, there also exists room for an alternative consensus between the two opposing blocs to ensure first, the timely production and availability of safe, effective, and adaptable pharmaceuticals and biologicals; and second, their affordability to developing countries and LDCs. To reach such a judicious response, synergistic cooperation must be forged between Intergovernmental Organisations, governments, IP holders, businesses and civil society at every possible opportunity for collaboration.

The Deficiencies in the Two Proposals

1. Patents (alone) are not enough

The TRIPS Waiver Proposal could theoretically expedite vaccine manufacturing by eliminating the time and effort spent by manufacturers (even the companies currently manufacturing COVID-19 vaccines) in surveying the network of patents applicable to a particular vaccine/technology and negotiating for multiple licenses – all the while remaining open to the risk of litigation for patent infringement. The waiver can grant immunity from legal action to manufacturers in developing countries and LDCs when producing patent protected COVID-19 vaccines, therapeutics, and diagnostics.

However, when dealing with vaccines specifically, removing patents from the equation only amounts to a partial solution because building manufacturing capacity would require the extensive transfer of technologies (ToT), do-how and know-how. Case in point, the bench to bedside process for an mRNA vaccine can involve over
fifty thousand steps, highlighting the extreme difficulty in reverse-engineering biologics. The TRIPS Waiver Proposal attempts to resolve this by covering trade secrets within its ambit, but this creates more problems than it solves.

2. Transfer of technologies should be incentivised, not forced

Waiving obligations related to the protection of trade secrets means that states which wish to can forcibly mandate a transfer of technological know-how without violating their international commitments. Such Forced Technological Transfers (FTT) are fraught with political and economic risks (even a multilateral waiver does not mitigate these risks because, in three years, the primary users of the waiver would be select countries with existing vaccine manufacturing capacity); difficult to enforce due to constraints in the availability of highly skilled human resources, technology absorption capabilities and the extent of cooperation provided by the original creators/IP holders; and ultimately, counter-productive in the long term for countries desirous of creating ecosystems that encourage investment and innovation. The realisation of such impediments resulted in Brazil considering but ultimately dropping the contentious clause on mandatory technology transfer in its recently amended compulsory licensing law.

In any case, vaccine production especially (as
compared to generic drug making) requires intensive collaboration between manufacturers and regulatory authorities. Thus, achieving scale with speed and quality requires immense trust and coordination between vaccine developers/IP holders, licensed manufacturers and regulatory authorities. An FTT will only antagonise such a partnership and may pose significant hazards to public health and safety, especially in the face of pervasive vaccine hesitancy.

Further, an IPR waiver means that the holders of trade secrets may have no legal recourse against industrial espionage. Unlike patents, a government grants no monopoly to the holder of a trade secret; thus, a third party can arrive independently at the same process and utilise it without legal ramifications. In other words, once a trade secret is out – whether through an FTT or industrial espionage, there is no way to put the proverbial genie back in the bottle and the waiver loses its “temporary” characteristic.

Governments need to realise that the negative externalities of a temporary waiver on present and future innovation may not be entirely reversible – even if brought by consensus and understood to be a one-off measure. This holds especially in the case of FTTs. We are already discussing the modification of vaccines to tackle new variants. What will be the impact of removing commercial incentives from revolutionary technologies like synthetic mRNA in the middle of an unprecedented and uncertain pandemic? Further, the application of frontier medical technologies like mRNA goes far beyond mitigating the current pandemic and encompasses the future of vaccines and genetic medicine against non-infectious diseases like cancer and Alzheimer’s.

It is true that major public investments and pre-market commitments had de-risked the development and production of COVID-19 vaccines substantially. However, considering them to be public goods only strengthens the moral claim to a TRIPS waiver or a legal claim when utilising TRIPS flexibilities. It does not mitigate the aforementioned on ground of complexities in implementing the waiver. Moreover, it should also be borne in mind that the underlying technology platform in the mRNA vaccines has taken decades of public and private collaboration, which in turn has allowed the most recent public investment in late-stage development and early manufacturing to result in unprecedented returns. Beyond emergencies, can public financing continue to match private investment in terms of both quantum and risk-taking appetite for future developments in biopharmaceuticals?

Most importantly, how long can we wait to reach a consensus in multilateral negotiation on a rather wide range of IPs? These are some questions that must be posed even as we attempt to mitigate dispiriting levels of vaccine inequity.

The Way Forward
As mentioned, a synergy between governments, regulators, businesses and civil society can be formed if each stakeholder remembers that the losses brought by confrontation are more than the expected gains. Voluntary cooperation based on consent and mutual trust then becomes the foundation on which we can build an equitable, and most importantly, a timely response to the pandemic. An argument against utilising voluntary deals is that these represent the status quo and harken to a business as usual approach which the world can no longer afford. The fact that mechanisms such as the WHO’s COVID-19 Access Pool (C-TAP) that facilitate diversified manufacturing through voluntary, non-exclusive and transparent licenses, remained unutilised till recently, has been considered as a failure of such routes.

The shortcomings of an incentive-based system must be addressed without throwing the baby out with the bathwater. If the initial reliance on voluntary licensing has been low due to limitations in available avenues for cooperation, technical resources at the disposal of IP holders and the very resource material and components required for manufacture, then attention must be paid to resolving these constraints. A year’s learning curve has given way to massive gains in efficiency and output. To ensure that this momentum catches on, various measures can be pursued to ensure equitable access to COVID-19 vaccines and drugs.

For one, governments dropped the baton when they didn’t make their funding to pharmaceutical companies conditional upon a commitment to voluntarily license and transfer technologies related to vaccines. Now, fueling concerns of exacerbating vaccine inequity is the question of booster shots. Each booster shot is a tradeoff between inoculating the most vulnerable in developing countries and LDCs for the first time, and increasing the level and efficacy of existing immunity in developed nations. Thus, any move towards
future investment in private companies (for boosters or otherwise) should be made contingent upon sharing relevant IP, technologies and know how. Governments can employ other levers. For instance, the US Defense Production Act can be used to condition future procurement deals upon pharmaceutical companies seeking more opportunities to license and transfer technology. Further, the US National Institute of Health holds key patents of components used in the Moderna mRNA vaccine and can insist upon their transfer.

This is where multi-track diplomacy will play a role. Countries must use bilateral, regional, and multilateral channels to ensure that developed countries take immediate and concrete steps to incentivise/persuade vaccine producers to voluntarily license technologies to suitable partners in developing countries and LDCs.

Multiple models of such collaboration exist. The goal is to emulate or surpass them. The arrangement between the UK’s AstraZeneca and the Serum Institute of India is an excellent example of what can be achieved through coherence between market mechanisms and regulatory imperatives. Upcoming voluntary licensing arrangements in Rwanda, Senegal, and South Africa are also encouraging. Notably, the sharing of information and know-how through the C-TAP system would be more efficient as compared to individual licensing arrangements between various developers and manufacturers. Such mechanisms are already showing results. Voluntary and non-exclusive arrangements have materialised for the dissemination of
serological testing technology and the production of Paxlovid, an oral drug treatment for COVID-19, via the Medicines Patent Pool (MPP), a United Nations-backed public health organisation. In turn, instead of seeking a waiver of IP-related rights, developing countries should maintain a predictable and transparent regulatory ecosystem. After all, voluntary technological transfers are contingent upon the effective protection of trade secrets.

Especially for LDCs, time and political capital at the WTO will be better spent by redirecting the existing mechanism under Art 66.2 of TRIPS to address their needs during a pandemic. Under Art 66.2, developed country Members are legally obligated to provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to LDC Members. Appropriate incentives could range from production and capacity subsidies, concessional loans and volume guarantees (by developed countries on behalf of LDCs) to more aggressive measures like a direct governmental intervention to finalise partnerships.

The WTO TRIPS Council can utilise the existing experience of the WTO Working Group on Transfer of Technology and the WHO, WTO and WIPO joint initiative on Intensified Cooperation in Support of Access to Medical Technologies to extract the best practices in the domain while avoiding pitfalls that may
delay or restrict the benefits of such licensing/transfer. The Council should take the initiative to serve as a platform that brings governments, IP holders, prospective manufacturers along with institutions such as the WHO, the WIPO, Coalition for Epidemic Preparedness Innovations (CEPI), Médecins Sans Frontières (MSF) and Gavi, the Vaccine Alliance as well as professional institutions such as the International Society of Pharmaceutical Engineering (ISPE) together to iron out details like the exact scope of ToT; the duration of such an arrangement; and standards for measuring the progress of such transfer, among other issues. This can be an opportunity for the WTO to try its hand at polylateralism and adopt a multistakeholder, result oriented approach for resolving deadlocks. A similar mechanism albeit without any existing legal compulsion can be extended to developing countries as well.

Why do developed nations have to carry the most weight? An FTT or compulsory license cannot take place without the presence of IP holders in developing countries and LDCs – as of now, such engagement (through patent approvals or licensing) is negligible. Consequently, resorting to IPR waivers by developing countries/LDCs could risk the withdrawal of IP holding manufacturers from existing and prospective manufacturing bases/markets. An incentive/nudging mechanism pushed by developed nations, however, will place the ball in the right court.

Second, a mechanism based on competition law principles needs to be evolved to address criticisms directed at the lack of transparency and the use of restrictive clauses in voluntary licenses and production contracts. In the short term, regulators must cooperate across borders to facilitate the dissemination of information and best practices to arrive at non-exclusive and transparent voluntary licenses. In the long haul, a global competition framework can prevent regulatory arbitrage by IP owners. The trilateral initiatives of the WHO, the WTO and the WIPO can be boosted by a pillar dedicated to competition. The institutional experience of the UNCTAD Branch on Competition Law and Consumer Policy can be the starting point. A new framework could try to adapt the present practice of Standard Essential Patents in the software industry to the needs of the health industry. This could ensure that patents related to frontier mRNA technology in particular, and other medical technologies that are indispensable during public health emergencies are licensed at fair, reasonable and non-discriminatory terms (FRAND).

Third, IP holders must be ready to adjust to reasonable price controls or tiered pricing to accommodate concerns of affordability. This aligns with the Doha Declaration on TRIPS, 2001 which specifically recognises that even though IP protection is important for innovation, concerns about its effects on prices must also be addressed. Perhaps a compromise can be reflected in a consensus-based decision at the WTO which elaborates on the manner and the extent to which Members may exercise price controls post-production, without inviting legal consequences (or behind the scenes intimidation).

Fourth, massive investment in reducing risks associated with expanding production capacity for components and final products along with training of staff is required to ensure that absorption of technology is possible in countries with nil or low capabilities. Jayashree Watal, former Counsellor in the Intellectual Property, Government Procurement and Competition Division of the WTO considers that an International Pandemic Fund facilitating the flow of funds and expertise can materialise if willing countries decide to get together. Unlike WTO’s consensus based mechanism, this ad hoc but lighter coalition could arrive at swifter decisions. Chad P Bown (Peterson Institute for International Economics, USA) and Thomas J Bollyky (Council on Foreign Relations, USA) propose a COVID-19 Vaccine Investment and Trade Agreement (CVITA) which would draw lessons from the public-private initiative of Operation Warp Speed and allow for coordination in investments and subsidisation across the supply chains and institute a real time market information system for the availability of vaccine inputs and final products.

Fifth, instead of hoarding vaccines, countries with adequate vaccine coverage must urgently emulate Switzerland in
swapping the slots of their vaccine orders to allow manufacturers to prioritise COVAX purchase agreements for developing countries and LDCs.

Sixth, countries must endeavour to keep supply chains undisrupted and guard against trade restrictive policies like export bans of critical ingredients or final products. The WTO has worked extensively to highlight these
bottlenecks and such information must guide the trade measures taken by its Members. In the future, codification of relevant norms can take place by continuing discussions on the new Trade and Health Initiative (THI) proposed by a few WTO Members. THI covers export restrictions, customs services and technical regulations, tariffs, transparency and review mechanisms. Apart from multilateral rules to deal with trade during crises, countries should also revise provisions in RTAs that would enable them to meet the same regulatory objectives.

Seventh, developing countries may continue to push for common ground between the TRIPS Waiver Proposal and the EU Proposal. This would materialise in a suspension of procedural requirements that lead to caveats and coercions when issuing compulsory licenses. Once again, the utility of such measures would probably be limited to therapeutics or diagnostics with simpler technological know-how.

In sum, a renewed attempt at voluntary cooperation at the level of firms and nations would be our best shot to address inequity in vaccine development and production. However, if despite the de-risking of expansion in capacity building and assurances to uphold a transparent and stable regulatory ecosystem, pharmaceutical companies steadfastly ignore calls to voluntarily licence their IP and technologies, then other measures will have to be considered.

One option is for the developed nations to directly buy out technologies, do how and know-how for their transfer to developing countries and LDCs on easy terms. Another choice is to push for a limited patent waiver at the WTO and fill the gaps through government driven initiatives to share technology, do how and know how. India could take the lead by making IP and technologies associated with its indigenously developed COVAXIN, available to C-TAP.

South-South cooperation to expedite sharing of skills, test data, know-how, do how and technologies can usher in an inclusive vaccine development model.

The Best Alternatives to a Negotiated Agreement (BATNAs)
Every negotiator enters the room with BATNAs in mind. In the absence of any appropriate response at the WTO, Members could still “waive” their TRIPS obligations (ideally only patent related) without having to rely on a consensus based decision by adopting amendments to domestic laws. There are two foreseeable paths to justify this under TRIPS. First, under Art 73, an “emergency in international relations” permits Members to take “any measures necessary” to safeguard essential security interests. Arguably, the nature and effects of the COVID-19 pandemic could satisfy this security exception, as reasoned by a legal scholar, Frederick Abbott.

Second, Members could rely on the WTO Panel and Appellate Body Reports in the Australia-Plain Packaging dispute. The reports have
strengthened the role that Art 08 of TRIPS can play in enhancing the use of flexibilities, especially in the context of public health and practices that adversely affect the international transfer of technology.

However, even as the best alternatives, these approaches may still invite legal challenges at the WTO. Of course, whether such a challenge materialises will be affected by the charged discourse against TRIPS acting as an impediment to public health. There are high chances that this shifting of the ‘Overton Window’ can offer WTO Members more regulatory space to utilise TRIPS flexibilities.

Conclusion

Countries need to evaluate trade-offs of the three approaches below against their regulatory imperatives and consider which option suits their short and long term objectives. Two points deserve reiteration because of their relevance to all three options. First, the sheer possibility of a comprehensive waiver of IP rights (with or without consensus at the WTO) can drive IP holders to increasingly opt for voluntary licensing at fairer terms. Second, the judicious use of TRIPS flexibilities should take place regardless of which approach a country decides to prioritise.

1. Voluntary Cooperation without a waiver

  • Keeping in mind the nature of vaccine production that places utmost importance upon cooperation between multiple stakeholders, policymakers should devise mechanisms that increase the prospects of voluntary licensing and transfer of technologies.
  • In absence of sufficient cooperation, the use of TRIPS flexibilities like compulsory licensing would be best suited for drugs, diagnostics, therapeutics and even vaccine components which do not require the significant transfer of know how. The possibility of compulsory licensing sufficing for vaccine production, however, remains low.
  • Policymakers should consider options outside the WTO where like minded countries could come to a consensus and respond swiftly. Similarly, equal focus must be given to investment, trade, and competition law based measures.

2. Partial or complete waiver at the WTO

  • A temporary waiver of patent rights would result in outcomes similar to those attained through compulsory licensing but without the complexities of the process.
  • A complete waiver can additionally allow select countries with enough leverage (such as market access) and existing manufacturing capacity to employ FTTs. As discussed, the implications of FTTs and the lack of protection of trade secrets could be detrimental to the long term objectives of promoting innovation.
  • A waiver may disincentivise the IP holders from expanding their presence in other jurisdictions, in turn impacting the feasibility of using flexibilities like compulsory licensing or forcing the transfer of technologies in developing countries and LDCs.

3. Partial or complete waiver without WTO Consensus

  • Such an approach would be difficult to justify under WTO law. The risks, however, can be mitigated by similar and simultaneous action by a large number of WTO members, and the continuation of activist pressure to suspend TRIPS obligations.
  • Domestic suspension of IPR protection would still face the same key disadvantages posed by a waiver brought through WTO consensus – no cooperation from IP holders, leading to costly delays and health hazards.

 

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