The year 2020 not only saw the world being brought to a standstill but also catapulted the process of vaccine development. In August of 2020, Sputnik V, got approved by Russia and became the first vaccine in the world to get a regulatory approval by any country.[i] Following it, USA’s ‘Operation Warp Speed’,[ii] gave the world two other vaccines- one developed by Pfizer and the other by Moderna, in December 2020.[iii] Simultaneously, Sinopharm and Oxford-AstraZeneca’s vaccine got regulatory approval in December 2020 in China and the United Kingdom, respectively.[iv] Thereafter in January, AstraZeneca partnered with the world’s largest vaccine manufacturing firm, Serum Institute of India (SII),[v] and thus, the major vaccine producers by the beginning of 2021 were UK, USA, India, China and Russia.
The eventual problem to arise was how to distribute the vaccines to the ‘Lower and Middle Income Countries’ (LMICs) which might not be able to afford them. This thought provoked Global Alliance for Vaccines and Immunisation (GAVI) to establish the COVAX facility,[vi] with the aim of procuring and exporting vaccines to the countries in need. The initial goal was to distribute 1.8 billion vaccines to 92 LMICs by the end of 2021 and deals were also made to that effect with candidates like Johnson & Johnson, AstraZeneca, GSK, SII and Pfizer, [vii] but not a lot has fructified. Due to the resurgence of a third wave of coronavirus in India, about 140 million doses, which were to be exported by SII to COVAX, will now be held back,[viii] following which the World Health Organisation (WHO) had to roll out a ‘call for action’ in May 2021, wanting the vaccine exporters to amplify their export as a shortfall of about 190 million vaccines was being faced by COVAX.[ix]
Contemplating a potential shortage of vaccines and the eventual ill effects of rise of different variants, India and South Africa had proposed a waiver, in October 2020, from certain provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) i.e. copyright, patents, industrial design and protection of undisclosed information.[x] The proposal, having initially met with a lot of criticism and naysaying from a host of countries, was revised later to include a waiver only for 3 years and is now undergoing negotiations.[xi] But the question is why, after 184,076,141 cases and 3,983,564 deaths worldwide, did the TRIPS waiver face obstacles? And why exactly are the pharmaceutical giants in a frenzy?
Vaccines and Intellectual Property
A lot of capital goes into the research and development of a vaccine and the same is then recovered by these manufacturers by maximizing its price, once the product is rolled out in the market. This is exactly why Covaxin, whose manufacturing cost is estimated to be about ₹40,[xii] is being sold at ₹1,415 in the market.[xiii] Likewise, Covishield, whose manufacturing cost is expected to be about ₹30,[xiv] is being sold at ₹780 in the market.[xv]
A patent provides a legal recognition to this right of the manufacturer and grants him a monopoly in the market, as no other manufacturer is allowed to produce a patented medicine without the permission of the patent holder.[xvi] It is also ethically justified to allow a person recover whatever he/she has spent on developing a product, therefore, intellectual property should be protected. But with patents, there entails a trade-off between dissemination of knowledge and an incentive to innovate which can have a catastrophic impact on LMICs which cannot afford patented vaccines. For example, pharmaceuticals took the Government of South Africa to court when it passed a law permitting inflow of generic medicine rather than buying expensive patented medicines from western manufacturers.[xvii] Many countries did not support South Africa’s act as it had an adverse impact on the pharmaceutical industry and could deter it from innovating in the future.[xviii]
Once the TRIPS waiver is passed, many generic medicine manufacturers will enter the arena and although a quintessential perfect-competition can only be found in textbooks, a situation very similar to perfect-competition market structure will be created since a homogenous product will be manufactured. For instance, India having a robust infrastructure of about 1400 WHO-GMP approved pharmaceutical Plants,[xix] and 253 European Directorate of Quality Medicines (EDQM),[xx] approved plants, will witness multiple generic-vaccines being produced. Thereby, multiple ‘generic brands’, from India and abroad, will start producing the same or similar type of vaccine and a situation very similar to perfect-competition will be created.
Graph depicting a monopoly and a perfect competition.[xxi]
As visible in these two graphs, the producer surplus i.e. profit is lost in a perfect competition as there are multiple sellers, having perfect knowledge of the product, selling a homogenous product and having no entry and exist barriers and therefore all sellers in a perfect competition are price takers and no seller can individually influence the price in the market. Whereas in a monopoly, a single seller is able to influence the price in the market and can therefore maximize his producer surplus and recover the costs incurred in research and development (R&D).
Also, in a monopoly, the demand and supply forces do not tend to be in equilibrium as the monopolists restrict the supply to surge the prices. This very practice creates inefficiency in market as the product is overpriced and accordingly a large part of the populace who cannot afford it will shift to an inferior or a near-substitute. Therefore, unlike a perfect-competition, a monopoly gives rise to a dead-weight loss and causes a market failure. It is thus desirable to have a perfect competition among the vaccine manufacturers than to let the monopolists charge exorbitant prices.
Thus, if the patents are waived, many generic medicine manufacturers will start producing the vaccine, the market will enter into a perfect competition and the patent-holders will lose their surplus and thereby lose their entire R&D costs. This is the very reason why pharmaceutical giants like Pfizer,[xxii] are against the TRIPS waiver proposed by India and South Africa.
Resolving the conundrum
The question that poses itself is- Whether ‘Intellectual Property Rights’ can supersede a public health emergency? And whether the vaccine manufacturers are actually having a ton of funds at stake?
The International Covenant on Economic, Social and Cultural Rights, 1966 (ICESCR) puts an obligation on the countries to recognise the ‘right to health’ of individuals to the highest attainable standard.[xxiii] The Covenant also stipulates that any steps taken, necessary, to avoid, treat and control an epidemic shall be considered within its ambit.[xxiv] Therefore, the TRIPS waiver is warranted by law as it is a necessary step taken by countries to increase accessibility of vaccines to treat and control the widespread epidemic. Moreover, the rights held by a patent holder are not absolute as Article 31 of the TRIPS agreement stipulates that any member state can put a patented object to some use without the permission of the patent holder in a case of extreme urgency. Thus, in situations of extreme urgency as the current pandemic, the TRIPS waiver is legally bound to succeed and any obstruction posed to it shall only add to the havoc being wrecked by novel variants of the virus.
Another interesting aspect is that there is not as much money at stake as is being claimed by vaccine manufacturers. The American giant, Moderna received a funding of about $2.15 billion from the US Government as R&D and supply funding.[xxv] Likewise, BioNTech, the partner of Pfizer, received $445 million in government funding from Germany and secured a deal in the USA of about $2 billion for 100 million doses.[xxvi] Even AstraZeneca has received, in addition to a $1 billion funding from the US Government,[xxvii] a £65.5 million funding from the UK Government.[xxviii] Therefore, the claim that a TRIPS waiver will disincentivise any further ‘Research and Development’ is a half-baked story as candidates have already received adequate or equivalent funding to accelerate their research.
Moreover, although the Indian Government had not paid any amount for research to SII and BharatBiotech, it has pledged to grant an advance of ₹3,000 and ₹1,500 crores, respectively, to ramp up their vaccine production,[xxix] which is adequately covering the expenditure of ₹350 crores, as being claimed to have been spent by BharatBiotech on human trials.[xxx] Therefore, the Indian players too have their ‘research costs’ covered and there is absolutely no reason why they should oppose the proposal.
Both the claims that TRIPS waiver will violate the provisions of TRIPS agreement and that it will create a dangerous precedent which would deter any pharmaceutical company from undertaking the risk of investing millions in R&D, are being masqueraded as truth by the pharmaceutical giants to fill their coffers.
However, the TRIPS waiver would not be a panacea for this pandemic as it would only assure entry of generic manufacturers and not solve the problem of shortage of vaccines, with immediate effect and/or lack of cold storage in LMICs. There are some issues which can arise with the entry of generic manufacturers like rise of counterfeit and sub-standard vaccines which requires to be taken a note of.
The author believes that till the time the waiver is passed and different players start producing vaccines, High Income Countries with excess of vaccine doses should divert the same to COVAX and contribute to ending the proliferation of the virus. Subsequently, deploying UN medical officers in LMICs to supervise vaccination drives and curb any wastage thereof would be the most efficient way to tackle the pandemic.
[i] Anulekha Ray, WORLD’S ‘FIRST’ COVID-19 VACCINE SPUTNIK V OUT IN RUSSIA: HOW IT WORKS AND WHO WILL GET IT?, https://www.livemint.com/news/india/world-s-first-covid-19-vaccine-out-in-russia-how-it-works-and-who-will-get-it-11597143985840.html (Last visited on July 6, 2021).
[ii] OPERATION WARP SPEED, https://www.defense.gov/Explore/Spotlight/Coronavirus/Operation-Warp-Speed/ (Last visited on June 25, 2021).
[iv] BBC, COVID-19: CHINA APPROVES SINOPHARM VACCINE FOR GENERAL USE, https://www.bbc.com/news/world-asia-china-55498197 (Last visited on June 29, 2021); Adrian Kemp, ASTRAZENECA’S COVID-19 VACCINE AUTHORISED FOR EMERGENCY SUPPLY IN THE UK, https://www.astrazeneca.com/media-centre/press-releases/2020/astrazenecas-covid-19-vaccine-authorised-in-uk.html (Last visited on June 29, 2021).
[v] Serum Institute of India obtains emergency use authorisation in India for AstraZeneca’s COVID-19 vaccine, https://www.astrazeneca.com/media-centre/press-releases/2021/serum-institute-of-india-obtains-emergency-use-authorisation-in-india-for-astrazenecas-covid-19-vaccine.html (Last visited on June 29, 2021).
[vii] COVAX Announces additional deals to access promising COVID-19 vaccine candidates; plans global rollout starting Q1 2021, https://www.who.int/news/item/18-12-2020-covax-announces-additional-deals-to-access-promising-covid-19-vaccine-candidates-plans-global-rollout-starting-q1-2021 (Last visited on July 3, 2021).
[viii] Neha Arora et. al.,India unlikely to resume sizeable COVID-19 vaccines exports until September, https://www.reuters.com/world/india/exclusive-india-unlikely-resume-sizable-covid-19-vaccine-exports-until-october-2021-05-18/ (Last visited on July 3, 2021).
[ix] WHO, COVAX Joint Statement: Call to action to equip COVAX to deliver 2 billion doses in 2021, https://www.who.int/news/item/27-05-2021-covax-joint-statement-call-to-action-to-equip-covax-to-deliver-2-billion-doses-in-2021 (Last visited on July 3, 2021).
[x] Waiver From Certain Provisions Of The Trips Agreement For The Prevention, Containment And Treatment Of Covid-19, available at https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W669.pdf&Open=True (Last visited on July 4, 2021).
[xi] The Hindu, India, South Africa’s patent waiver proposal in WTO achieved tremendous mileage, progression: Commerce Secretary, https://www.thehindu.com/news/national/india-south-africas-patent-waiver-proposal-in-wto-achieved-tremendous-mileage-progression-commerce-secretary/article34778668.ece (Last visited on July 4, 2021).
[xii] Vishwanath Pilla, India’s COVID-19 vaccination drive: Shortage, pricing, and missing May 1 deadline, https://www.moneycontrol.com/news/business/companies/indias-covid-19-vaccination-drive-shortage-pricing-and-missing-may-1-deadline-6841391.html (Last visited on July 14, 2021).
[xiii] Govt caps vaccine MRP for pvt hospitals: Covishield at Rs 780, Covaxin Rs 1,410, and Sputnik V Rs 1,145, https://www.indiatvnews.com/news/india/maximum-price-of-covishield-and-covaxin-for-private-hospitals-fixed-710243 (Last Visited on July 14, 2021).
[xiv] Supra at n 12.
[xv] Supra at n 13.
[xvi] Article 28, TRIPS Agreement.
[xvii] Rachel L. Swarns, Aids Drug Battle Deepens In Africa, https://www.nytimes.com/2001/03/08/world/aids-drug-battle-deepens-in-africa.html (Last visited on July 4, 2021).
[xviii] South Africa vs. the Drug Giants : A Challenge to Affordable Medicines, https://oxfamilibrary.openrepository.com/bitstream/handle/10546/620381/bn-access-to-medicines-south-africa-010201-en.pdf (Last visited on July 4, 2021).
[xix] The Minister of Chemicals & Fertilizers Shri Sadananda Gowda says that the Indian healthcare sector, is expected to record a threefold rise, at a CAGR of 22 per cent during 2016-2022, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1585342 (Last visited on July 14, 2021).
[xxii] Albert Bourla, An Open Letter From Pfizer Chairman And Ceo To Colleagues, https://www.pfizer.com/news/hot-topics/why_pfizer_opposes_the_trips_intellectual_property_waiver_for_covid_19_vaccines (Last visited on July 4, 2021).
[xxiii] Article 12, ICESCR, https://www.ohchr.org/en/professionalinterest/pages/cescr.aspx (Last visited on 5th July, 2021).
[xxiv] Article 12(2), ICESCR, https://www.ohchr.org/en/professionalinterest/pages/cescr.aspx (Last visited on July 5, 2021).
[xxv] Eric Sagonowsky, After nearly $1B in research funding, Moderna takes $1.5B coronavirus vaccine order from U.S., https://www.fiercepharma.com/pharma/after-nearly-1b-research-funding-moderna-takes-1-5b-coronavirus-vaccine-order-from-u-s (Last visited on July 5, 2021).
[xxvi] Riley Griffin & Drew Armstrong, Pfizer Vaccine’s Funding Came From Berlin, Not Washington, https://www.bloomberg.com/news/articles/2020-11-09/pfizer-vaccine-s-funding-came-from-berlin-not-washington (Last visited on July 5, 2021).
[xxvii] Vicky Mckeever, AstraZeneca receives $1 billion in U.S. funding for Oxford University coronavirus vaccine, https://www.cnbc.com/2020/05/21/coronavirus-us-gives-astrazenena-1-billion-for-oxford-vaccine.html (Last visited on July 6, 2021).
[xxviii] Funding and manufacturing boost for UK vaccine programme, https://www.ox.ac.uk/news/2020-05-18-funding-and-manufacturing-boost-uk-vaccine-programme (Last visited July 6, 2021).
[xxix] Rahul Srivastav, Centre approves Rs 3000 cr funds for Serum Institute, Rs 1500 cr for Bharat Biotech to ramp up vaccine production, https://www.indiatoday.in/coronavirus-outbreak/vaccine-updates/story/centre-to-extend-rs-3000-crore-credit-to-serum-institute-rs-1500-crore-to-bharat-biotech-1792691-2021-04-19 (Last visited on July 6, 2021).
[xxx] Neetu Chandra Sharma, Bharat Biotech wants maximum price of covaxin to recover costs, https://www.livemint.com/companies/news/bharat-biotech-wants-maximum-price-of-covaxin-to-recover-costs-11618936384444.html (Last visited on July 6, 2021).