Would Waiving COVID-19 Vaccines Patents Save Lives?

This blog discusses the rationale behind a COVID-19 patent waiver decision and contributes to the current debate by producing a balanced view on the benefits and drawbacks resulting from an intellectual property (IP) waiver, in the short- and the long run. Moreover, it offers recommendations and alternatives for expediting global access to COVID-19 vaccines without waiving their IP rights.

On the 5^th of May, 2021, the Biden-Harris administration, through Ambassador Tai, announced its support for waiving intellectual property rights (IPR) for COVID-19 vaccines, backing efforts proposed by India and South Africa. The stated aim of the Biden-Harris administration is to get as many safe and effective vaccines to as many people as fast as possible. With vaccines being deployed slowly in developing countries compared to advanced economies, and growing evidence of excess deaths in poorer populations, addressing unequal access to vaccines has now become the central global challenge in tackling the pandemic. The focus is on both how to increase supply quickly and redirecting the excess supply from high-income countries.

The reaction from countries to this is mixed. The EU has shown readiness to discuss the COVID-19 vaccine waiver, but Germany leads those against lifting IP protection. The WHO Director General recently stated “Whether it’s dose sharing, tech transfer or voluntary licensing, as the WHO’s own Covid-19 Technology Access Pool initiative encourages, or waiving intellectual property rights, as South Africa and India have suggested, we need to pull out all the stops”. The WTO Director-General has asked WTO members to urgently “negotiate a pragmatic and effective solution to their differences over the waiver”. What should be done? In this blog, we set out the arguments made for and against the waiver. We then discuss using voluntary licensing to achieve speedy access to COVID-19 vaccines globally.

Economists’ view of patents

By way of context, it is important to understand why we have patents.

In exchange for disclosing information in a patent, the owner gets exclusive use for a period of time. The intent is to allow innovators to get a return on their investment of effort and ingenuity in generating the patented knowledge. In the case of drugs and vaccines, R&D is expensive, and most efforts result in failure – products do not get to market. If suppliers could copy products without having to incur R&D costs, they could charge prices closer to manufacturing costs. In the short run, this would benefit patients, as prices would be lower. However, if R&D is not compensated, companies will not invest in R&D, and there will be no new drugs and vaccines generated with private sector risk capital. Once the patent has expired, others can make the product, and prices fall to manufacturing costs. There is a trade-off between the short run and the long run (or, in economics jargon, a ‘static’ and ‘dynamic’ trade-off). Evidence suggests that the dynamic gains are high, drugs and vaccines have helped to transform life expectancy.

Critics of patents pre-date COVID-19. They argue that prices are too high to deliver access, especially for poorer countries. There is, they argue, an alternative model for driving innovation in which either governments fund all innovation directly and receive products at manufacturing cost, making patents irrelevant; or governments offer prizes for developing needed new products. The key point is that paying for R&D expenditure is separated from the supply of products. But patents should not mean universally high prices. We should expect differential or tiered pricing. R&D costs are recovered from richer countries who pay higher prices, reflecting their citizens’ valuation of health. Poorer countries get prices close to or at manufacturing costs. Nonetheless, concerns that governments may not have enough bargaining power in health emergencies led to the 1994 WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and The WTO Doha Declaration on the TRIPS Agreement and Public Health, agreed by WTO members in 2001, which gives the right to grant compulsory licences in a national emergency including a public health crisis. However, there is a requirement to pay royalties.

The issue today is, should a waiver of patent rights replace the compulsory licensing provisions of the Doha Declaration?

The case put forward for waiving COVID-19 vaccines IP

COVID-19 is a global crisis that only a global response can tackle. Vaccines are the best tool to stop the pandemic. Patents prevent others from manufacturing, selling and distributing these vaccines to all parts of the world. With advanced economies purchasing the first supplies of approved vaccines, the constrained manufacturing capacity of the patent holders has not been enough to cover global demand. Waiving the IP of COVID-19 vaccines promises to give other manufacturers the know-how and the legal right to produce more vaccines. Moreover:

• Much of the R&D has been funded by governments, either directly or by commitments to buy at quantity if the product gets licensed, in both cases reducing private sector risk;
• Indeed, some of the patents belong to governments in any case, although the situation is complex;
• Using the existing TRIPS compulsory licensing clauses is too limited in scope and time-consuming to use;
• There are vaccine manufacturers who could help scale up supplies to match the global demand. Several companies, notably Teva, (Israel) Incepta Vaccine (Bangladesh), and Biolyse Pharma (Canada) have tried but failed to get voluntary licensing deals;
• Global/local manufacturers will only face manufacturing costs; hence they could produce at low cost and sell vaccines where needed at affordable prices. Those located strategically closer to the world’s poorest regions could provide them at a cheaper distribution cost.

The case put forward against waiving COVID-19 vaccines IP

The arguments against waiving COVID-19 vaccines IP revolve around two key points:

• First, lifting the patents will not yield more supply in 2021. R&D-based vaccine makers are making agreements to increase supply, with nearly 300 manufacturing and production agreements for COVID-19 vaccines made public, of which over two-thirds involved technology transfer. Capacity is expanding. Pre COVID-19 total global vaccine output was around 5 billion doses per annum. The capacity to make COVID-19 vaccines alone is expected to exceed 10 billion doses per annum by the end of 2021. The immediate constraints on increasing COVID-19 vaccines’ production “are physical ones, supply chains and engineering ones, not legal.” There are bottlenecks to the production of COVID-19 vaccines, whether mRNA, adenovirus, or protein subunit that are unrelated to IP. Specific raw materials and specialised equipment are scarce, and quality is key, with major problems at one manufacturer (Emergent BioSolutions) in the US. Finding scientists and engineers qualified to produce vaccines for COVID-19 is challenging, and even fewer of them are able to train others. Technology transfer takes time.
• Second, it will disincentivise future R&D and affect the rate of innovation in the short and the long run. There are 100 candidates in clinical development whose progress to authorisation could help tackle scarcity of supply and increase competition. However, the IP waiver may dissuade some of them from investing further. The longer-term dynamic negative impact on future innovation is related to compensation for risk. The threat of losing the patent for an innovative product when deemed essential to fight a health emergency creates an added risk for investors. Unfortunately, the threat of patent waiver is more likely to occur in areas of high global unmet need, e.g., Anti-Microbial Resistance or viruses which have higher chances of becoming global public health threats. There might be no way of substituting for private at-risk investment. Investing taxpayer money in high-risk, lengthy ventures may not be considered moral or timely. Prizes will only offer a viable alternative if they are large and pre-set, offering rewards of a size similar to patents.

Of course, R&D-based companies want to protect the IP and knowledge around new platform technologies from which they hope to make future non-COVID-19 vaccines. They also want to ensure that anyone making their vaccine meets production quality standards, avoiding the risk of bad doses getting to the public, with major reputational damage to them and the whole global vaccination programme. However, they are not in the business of building factories that supply at scale at cost. Generic/biosimilar manufacturers are – in principle – better placed to do this. Licensing to meet pandemic demand to manufacturers who have or can acquire the necessary skills and production capability, therefore, should be a win-win situation.

Can more be done?

Could the manufacturing and supply of vaccines be scaled up so that global access is expedited without waiving the IP of vaccines?

The answer is yes – both by subcontracting manufacturing and by voluntary licencing to manufacturers strategically placed/equipped both to manufacture and to distribute vaccines where the need is highest.

A recent Duke Report outlined several practical steps for the US and other high-income countries to increase vaccine supplies to MLICs, beginning with ensuring the Gavi COVAX AMC is fully funded, and donating some of their vaccine supplies to it. We would argue that surplus supplies need to go to COVAX and the COVAX AMC to be allocated equitably, rather than be used as foreign policy tools as China and Russia are doing. Duke notes recent discussions led by Chatham House with COVAX, IFPMA, BIO and the DCVMN to increase manufacturing supply capacity, building on a report by leaders of these bodies setting out the challenges. Public-private partnerships between Governments, multilateral organisations, donors and private firms, including patent holders and other potential partners, can be instrumental in increasing manufacturing capacity. Push and pull investments can expand the manufacturing capacity of vaccines, inputs, equipment, and supply chains. Different vaccine technologies have different supply constraints. Public sector expertise can help innovators tackle these and enable new partners to build or adapt manufacturing plant requires that they have secure orders.

Finally, another way to effectively increase supply is to intensify public and private joint efforts to advance the 100 products in the clinical pipeline. We have previously discussed ways in which innovation can be incentivised.

In conclusion, more needs to be done by both industry and governments to increase the availability of vaccines to LMIC populations. The waiver proposal attracts strong arguments both for and against. The Economist has criticised the proposal as “at best an empty gesture and at worst a cynical one.” Our view is that it is a distraction in the short run and also threatens the long run ability of the world to respond to future pandemic challenges.

This does not mean the current situation is acceptable. It is not.

With estimates as high as 10 million COVID-19 related deaths and a global population approaching 8 billion people, with most vaccines requiring two doses, as well as the likely need for annual “booster” jabs, more capacity is needed. HIC governments and the pharmaceutical industry need to work together to increase voluntary licensing and technology transfer now. Future pandemic preparedness measures need to build in voluntary licensing and technology transfer as an integral requirement of R&D and manufacturing support and of purchasing commitments. The recent WHO Independent Panel Report recommends that “technology transfer and commitment to voluntary licensing are included in all agreements where public funding is invested in research and development.” The spectacular success of the biopharmaceutical industry – with the active financial and organisational support of governments – in delivering six vaccines approved by stringent regulatory authorities within one year of the publication of the genome of the virus, together with the tripling of total global vaccine capacity is extraordinary, but sadly not enough. Too many people are still dying from a disease that we now know how to tackle.

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Related Research

Towse, A., Chalkidou, K., Firth, I., Kettler, H. and Silverman, R., 2021. How Should the World Pay for a Coronavirus Disease (COVID-19) Vaccine? Value in Health, 24(5), pp.625–631. 10.1016/j.jval.2020.12.008.

Berdud, M., Jofre-Bonet, M. and Rodes Sanchez, M., 2021. Key Learnings From COVID-19: The Importance of Portfolio Management and How to Procure, Pay For, Distribute, and Use Vaccines During a Pandemic. Available at: https://www.ohe.org/news/key-learnings-covid-19-importance-portfolio-management-and-how-procure-pay-distribute-and-use [Accessed 17 May 2021].

Steuten, L., Bell, E. and Neri, M., 2020. The Broader Value of Existing Vaccines in the Fight Against COVID-19: Beware of Tunnel Vision. Available at: https://www.ohe.org/news/broader-value-existing-vaccines-fight-against-covid-19-beware-tunnel-vision [Accessed 17 May 2021].

Kourouklis, D., 2021. Public subsidies for R&D and public sector pharmaceutical innovation. Applied Economics, pp.1–19. 10.1080/00036846.2021.1885614.

Berdud, M., Drummond, M. and Towse, A., 2020. Establishing a reasonable price for an orphan drug. Cost Effectiveness and Resource Allocation, 18(1), p.31. 10.1186/s12962-020-00223-x.

Brassel, S. and Cookson, G., 2020. Delivering the 2.4 Percent: Unlocking UK Pharma R&D Investment through Evidence-Based Policies. [online] Available at: https://www.ohe.org/publications/delivering-24-percent-unlocking-uk-pharma-rd-investment-through-evidence-based-policies [Accessed 3 Mar. 2021].

Danzon, P., Towse, A. and Mestre‐Ferrandiz, J., 2015. Value-Based Differential Pricing: Efficient Prices for Drugs in a Global Context. Health Economics, 24(3), pp.294–301. https://doi.org/10.1002/hec.3021.

Mestre-Ferrandiz, J., Sussex, J. and Towse, A., 2012. The R&D Cost of a New Medicine. [online] Office of Health Economics. Available at: https://ideas.repec.org/b/ohe/monogr/000135.html [Accessed 27 Feb. 2021].

Towse, A. and Sharma, P., 2011. Incentives for R&D for New Antimicrobial Drugs. International Journal of the Economics of Business, 18(2), pp.331–350. 10.1080/13571516.2011.584434.