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The Biden administration supports waiving patents on coronavirus vaccines. Big Pharma won’t be happy.

Developed countries are joining developing countries to put pharmaceutical companies in a tough position

- May 5, 2021

On Wednesday afternoon, the Biden administration announced that it supported a waiver for patents on vaccines protecting against the coronavirus. The United States had previously opposed a proposal by India and South Africa to waive global trade rules on intellectual property. This shift sounds technical — but it will have big political consequences. It will affect not only the trajectory of the coronavirus pandemic but also the future of global health cooperation. Here’s what you need to know.

Existing institutions are supposed to protect global health

Countries have a straightforward reason they want to fight infectious diseases at the global level. Protection against contagious disease is a public good, which everyone benefits from. Preventing cases in one country will make it less likely that the disease spreads to others. This is why there is a global cooperative response to pandemics like the coronavirus, which involves sharing biological samples, building collective knowledge about which policy measures work, and developing lifesaving drugs and vaccines.

But developing drugs and vaccines raises complex IP (intellectual property) questions. Manufacturers spend a lot of time and money developing new drugs. One study estimated that, accounting for the costs of failure, it takes approximately $2.6 billion to develop a single new prescription drug. Manufacturers are not the only important players. Vaccine development often requires sharing of biological samples between countries. Furthermore, many pharmaceuticals are developed with public funding. For example, Operation Warp Speed provided $18 billion of U.S. taxpayer money to help support the creation of an effective vaccine.

The key question is who controls the IP and to what end. Manufacturers want strong IP to recoup their costs and make profits. But limiting access to lifesaving drugs hinders disease control efforts and increases loss of life. And international cooperation in sharing biological samples may depend on the expectation that the drugs developed with those samples be shared internationally, too.

Here’s what explains the controversy over patent rights

Patent rights are a form of IP, and have become increasingly standardized over the past few decades, thanks to international agreements, most importantly including the Doha Declaration on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and Public Health at the World Trade Organization (WTO). At the insistence of rich countries, these rules set out minimal standards for the protection of IP rights in different sectors, including patent rights on drugs. However, governments have the power under TRIPS to issue “compulsory licenses” for pharmaceuticals, authorizing a domestic company to produce a generic version of a drug to be used domestically in response to a national health emergency, or turning to pharmaceutical companies elsewhere if they aren’t able to make it at home. Developing countries have used compulsory licenses to produce drugs or bargain down pharmaceutical manufacturers. For example, in a highly publicized case, the Brazilian government used compulsory licenses to bargain down the cost of HIV/AIDS drugs to 90 percent less than the market price.

This is why the current conflict has emerged. A handful of vaccines are now available to protect against the coronavirus, but they are in short supply worldwide, because of limited production capacities and preorders from countries such as the United States. Many countries want to use compulsory licensing to get vaccines sooner. A proposal by India and South Africa to waive some trade rules would prioritize sharing information and enable WTO members to temporarily produce and export vaccines without requiring individual compulsory licenses, as well as protecting members from WTO legal actions against compulsory licenses.

Up to now, the United States, European Union and pharmaceutical companies have strongly resisted the proposed waiver. Waiver skeptics argue that looser IP rules won’t help much because it is technically extremely difficult to produce mRNA vaccines in particular, and that a waiver would make pharmaceutical firms less likely to want to develop new vaccines in the future.

Such arguments don’t consider that without the waiver countries might demand compulsory licensing anyway, or that refusal could endanger future vaccine production in other ways. Countries might refuse to share biological samples of new variants if they don’t believe that they will have timely access to the vaccines produced with these samples. In 2007, Indonesian health officials claimed that samples of a dangerous bird flu were intellectual property, and stopped sharing them with research centers in the United States, Japan, Australia and Britain. The vaccines and treatments developed by these centers were too expensive for developing countries to afford and unavailable because of preorders by developed countries.

The outcome will be politically complicated

U.S. support makes the waiver much more likely. This would put pharmaceutical companies in an awkward position. They might try to forestall state action by licensing their products to other pharmaceutical companies. For example, Gilead, the maker of remdesivir, a pharmaceutical drug used to treat covid-19, extended voluntary licenses to several European pharmaceutical companies in 2020 to prevent countries from issuing compulsory licenses.

Their bigger problem is that, even without the waiver, compulsory licensing is no longer just a tool for developing countries, which often don’t have the manufacturing capacity to produce large quantities. During the coronavirus crisis, middle- and high-income countries such as Canada, Chile, France, Germany and Israel have all enacted legislation to facilitate compulsory licenses. These countries might not only produce for themselves but for developing countries too, transforming compulsory licenses from a bargaining tool to a practical means to produce pharmaceuticals at scale.

This helps explain why the politics around the WTO waiver and compulsory licensing of vaccine IP are so intense. They will probably have long-term consequences for the relationship between states — including high-income states — and pharmaceutical companies.

Before covid-19, the international community provided legal and institutional tools to facilitate the sharing of health information. These tools were seen primarily as helping developing countries. A waiver would be a historical change in IP governance for international health cooperation, changing how these tools are used and by whom. The consequences of these changes are likely to last long beyond the current pandemic.

Carie Steele is an assistant professor of political science at Northern Arizona University.