“A real risk that obtaining a compulsory license poses is that of alienating pharmaceutical companies. Their retaliation can severely harm the indigenous industry in the developing country by destroying jobs and potential investment.”
While coronavirus spent the majority of 2020 wreaking havoc on earth, pharmaceutical companies have been busy at work trying to invent a vaccine to combat it. Several companies, such as Pfizer, Moderna and AstraZeneca, have competed neck and neck to be the first to deliver a cure to the world. Renowned pharmaceutical companies have been successful in developing the vaccine, which will be protected under the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS).
Fearing that IP rights might hinder timely provisioning of medical products to patients, India and South Africa put forth a proposal before the World Trade Organization (WTO) (under Article IX:3 and IX:4 of the WTO Agreement) asking for a temporary waiver of patent obligations under the TRIPS Agreement for the COVID-19 vaccines so that countries can ensure their citizens access to the vaccines in a timely manner by producing generic versions of these treatments and vaccines. However, richer, developed, and more powerful countries and organizations like the United States, EU, the UK and Canada strongly opposed this proposal, potentially putting the vaccine out of the poor person’s reach. Usually, pharmaceutical companies recoup their R&D costs by setting high prices for medication and having water-tight patents, but, in the present case, this argument falls short as most of the vaccines were entirely funded either by governments, through tax-payer money or by crowdfunding.
Compulsory Licensing Won’t Suffice
Another reason cited for opposing the proposal was that the TRIPS Agreement already has flexibility protocols to combat public health emergencies, such as compulsory licensing. Compulsory licensing ensures the use of a patent without authorization from the patent holder in cases of national emergency and for public non-commercial use, thus allowing governments to make generic versions of medications without the patent holder’s consent. However, while the developing countries tout compulsory licensing as the solution to the problem of procurement, this solution will be an ineffective one for more than one reason.
TRIPS allows for “adequate remuneration” to be paid to the patent holder in accordance with the economic value of the authorization. However, TRIPS does not provide the exact definition of what is “adequate” and how to compute the “economic value” of the authorization. Not only this, manufacturers can only produce predefined quantities in each compulsory license, limiting large-scale production and mass-inoculation. The ability of the patent holders and their governments to fix a high remuneration based on the high economic value of the COVID-19 vaccine could widen the gap between the least developed nations and their ability to access the vaccines. World Bank Chief Economist Joseph Stiglitz rightly described TRIPS as “a death warrant for thousands of people in the poorest countries of the world.”
Another shortcoming of compulsory licensing is its complex and time-consuming procedure. In the past, it has taken a few years for the medication to reach the population of the licensee. It took upwards of four years for the generic AIDS medication to reach Rwanda. Two of the four years were spent by the manufacturer and the patent- holder settling the terms of their contract, such as remuneration. Procedures such as a mandatory judicial review or independent review pose hurdles in expeditious procurement of vaccines. With no end to COVID-19 in sight, pharmaceutical companies like AstraZeneca promise that they will supply the drugs at non-profit prices through the duration of the pandemic. However, a report reveals that AstraZeneca can start asking for a profit by July 2021. The current trend in the pharmaceutical industry is leniency and pharmaceutical companies are not looking to make high-margin profits, but they might soon, after a short bout of altruism.
A real risk that obtaining a compulsory license poses is that of alienating pharmaceutical companies. Their retaliation can severely harm the indigenous industry in the developing country by destroying jobs and potential investment. Thailand paid the price for compulsorily licensing Abbott’s HIV drug, after which Abbott stated it would withdraw and stop selling several drugs in Thailand. Apart from facing retaliation from pharmaceutical companies, developing nations also live in constant fear of retaliation from developed countries authorizing the license. Developed nations such as the United States are known to impose trade sanctions in such situations, which eliminates the benefits gained from cheaper medication.
Under the current patent regime, all WTO member states who want access to the vaccine would have to get a compulsory license to produce, or if they don’t have the adequate infrastructure, import, as envisaged by the Paragraph 6 System of the Doha Declaration. While on the face of it, compulsory license seems like a win-win situation, in practice it would be a logistical nightmare and impractical to implement given the present life-endangering time constraints. For compulsory licensing to work in the current situation, a differential pricing model would have to be adopted, where the least developed countries, middle income developing countries and developed countries would pay the royalty in line with their national median urban income. Even if a model such as this is successfully adopted, the problem of quantum still remains. Companies such as Pfizer and AstraZeneca revealed that they would not be able to meet the number of vaccines that they had earlier promised. With developed nations such as Canada pre-ordering the vaccines for ten times their population, will there be enough vaccines for economically weaker and less powerful nations in time?
Waiver is Necessary
India and South Africa have proposed to temporarily waive Sections 1, 4, 5 and 7 of Part II of the TRIPS Agreement related to copyright, patent, trade secrets, protection of undisclosed information and industrial designs until a majority of the population has been inoculated and developed immunity. This waiver may seem ludicrous to pharmaceuticals and developed countries, but upon deeper analysis, it is what the world needs in the midst of a pandemic. According to Oxfam, rich countries comprising 13% of the world’s population have bought more than half of the future supply of the top vaccines. This means that nations with higher resources will be at the very top and those with fewer resources and power will struggle to procure the vaccines. The waiver will put everyone on the same footing as far as accessibility is concerned. It will allow countries to procure the vaccine expeditiously by either producing it themselves, if they have the infrastructure, which a country like India does, or in the alternative, make provisions for the import of the vaccine.
Weighing What’s Right
Even though balancing opposing goals and interests is tough, considering “exceptional circumstances” such as these, the WTO must weigh all viable options put forth before it i.e. compulsory licensing and temporary waiving. With each day that passes, several thousand lives are lost and the big question that the WTO must answer is whether the right to healthcare and right to life are less important than protecting intellectual property in a free market global economy.
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