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This post is authored by Esha Goyal, a fourth-year student of B.A. LL.B. (Hons.) at National Law School of India University, Bangalore.
1. INTRODUCTION
On May 21, 2021, in the wake of the concerted global effort to tackle the COVID-19 pandemic, a group of developing and least developed countries - led by South Africa and India - proposed revised waivers from the patent requirements in the World Trade Organisation ("WTO") Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement") to increase vaccine production and ensure equitable supply. These measures have been met with stiff resistance from developed countries, especially within the European Union ("EU"). Till the end of August, no progress has been made despite continued discussions and the matter is next due in the WTO sometime this month in September. This blogpost aims to examine the legal validity and broader consequences of this proposed TRIPS waiver.
2. THE LEGAL FRAMEWORK FOR THE WAIVER
The WTO Agreement itself envisages a provision for waiver of obligations under Article IX.3. Since the proposed waivers are concerned with intellectual property obligations, the request for the same has to be submitted before the TRIPS Council. Further, Article IX.4 states that any waiver granted by the Ministerial Conference of the WTO has to state the ‘exceptional reasons’ which justified such a waiver. However, what constitutes ‘exceptional circumstances’ has not been defined in the agreement, leaving its interpretation open based on context and necessity. In the current scenario, the global outbreak of COVID-19 which had caused millions of deaths constitutes an ‘exceptional reason’ for lifting patent restrictions on COVID-19 vaccines.
Further, Article 66.2 of the TRIPS Agreement itself places an obligation upon developed countries to encourage and support a transfer of technology to the Least Developed Countries. The proposed waivers also aim to achieve this by allowing the unused vaccine production capacity in developing and least developed countries to be used for the production of Covid-19 vaccines without the chilling effects of global patent laws. Thus, it is submitted that the proposed waivers are legally valid within the WTO and TRIPS framework. In addition, similar waivers have been granted before on the grounds of public health. For instance, the 2001 Doha Declaration on TRIPS and Public Health recognised the problems with patent-protecting generic drugs, and this was remedied in 2003 by waiving the obligations under 31(f) and 31(h) of the Agreement temporarily. Finally, in 2005, Article 31bis was added to make the 2003 decision permanent with effect from 2017. Hence, the proposed waiver is not an unprecedented demand.
3. DISINCENTIVISING INNOVATION: UNDERSTANDING THE IMPACT OF THE WAIVER ON THE GLOBAL PHARMACEUTICAL INDUSTRY
One of the arguments against the proposed waivers is that the TRIPS Agreement already contains flexibilities in the form of compulsory licensing of patents by the government even for export purposes under Article 31bis. However, it does not solve the problem of affordable access to necessary drugs since the procedure itself is extremely cumbersome and generally, not worthwhile for the manufacturer. The pharmaceutical manufacturer has to undertake the process of getting a license, diligently ensuring that all the exported drugs end up only in the destination country, and that the medicines were differentially packed as required. However, in most cases, the importing countries would be too small to provide any economic return, let alone the advantages of economies of scale. Thus, since existing flexibilities are not sufficient, this paper argues that the waivers should be allowed and present no real threat to the incentive for pharmaceutical innovation.
TRIPS is based on the ‘incentive to invent’ theory where a patent creates a legal monopoly and allows the patent holder to reap immense benefits and artificially restrict the production of the patented item. In the context of COVID-19 vaccines, patents serve to limit vaccine manufacturers to those who have been licensed by the patent holders to the exclusion of everyone else, leading firstly to the inequitable supply of vaccines to more lucrative markets and secondly to unused manufacturing capacity. One major argument against the proposed waiver is that removing patent barriers for COVID-19 vaccines would disincentivise the pharmaceutical industry from developing and rapidly bringing in medicines for future global health crises since they would not get a return on their investment in research and development. This argument is flawed for three main reasons which have been discussed below.
Firstly, specifically in the context of COVID-19, studies have shown that several vaccines were developed at public institutions and universities and their development was almost completely subsidised by public funding mechanisms. Further, even though the cost of the development of vaccines was heavily borne by governments, States are not charging any royalties on the same. The entire profit from vaccination, estimated to be several billion dollars per year for each manufacturer, vests entirely with the company itself right now. Thus, the ‘inventive to innovate’ argument fails here because even if the waiver is allowed and other manufacturers are permitted to replicate these vaccines, the initial manufacturers have already recouped their investment and made immense profits.
Secondly, leaving vaccine supply and distribution completely to the ‘free market’ poses another set of problems wherein public health is not prioritised as much as pharmaceutical profits. This will result in the production of more expensive booster doses for higher income and developed countries over the required first and second immunity shots for lower-income and developing countries, further straining the limited manufacturing capacity and making it harder for lower-income populations to be vaccinated. However, a ‘free’ neoliberal market cannot be allowed to exist for COVID-19 vaccines because the present situation is not a normal incentive situation, but is a global public health emergency. All states which are members of WTO and TRIPS have an obligation to their populations which must override short-term monetary gains by a few politically powerful corporations in highly developed nations. Since international vaccine alliances like COVAX are failing to meet their goals, a waiver of patents for the COVID-19 vaccine will ensure equitable distribution by allowing countries like India with a large scale manufacturing capacity to cheaply produce and distribute the vaccine to many countries with insufficient or inadequate manufacturing capacity which cannot make enough vaccines to support themselves, nor afford to buy the licensed versions at the market price, instead of being bound by the terms of the license which limit production quantities and sale prices. Further, it would only affect the ‘free market’ and firm profits for three years, if the pandemic continues till then. A short-term disruption of the market and its IP structures for a greater public health and safety concern is perfectly valid, and hence the waiver must be allowed.
Lastly, TRIPS and other allied Agreements have inbuilt obligations for the transfer of technology to least developed countries. Section 66.2 of the TRIPS Agreement states, “Developed country members shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country Members in order to enable them to create a sound and viable technological base.” The proposed waiver if passed will serve to achieve this goal. Thus, it cannot be argued that waiving IP requirements for COVID-19 vaccines for a few years will remove all incentives for medical innovation when such waivers and technology transfers are permitted and encouraged within the formative international agreements themselves.
4. CONCLUSION
This article has shown that the proposed waiver is not an outrageous demand as it is being made out to be. It arises within the WTO-TRIPS frameworks and furthermore, does not impose any undue costs on member nations nor does it hamper further pharmaceutical development. It is well established that patents are the biggest barrier when it comes to timely vaccine development, and this is exacerbated in the current pandemic. However, there are very strong arguments for waiving patent requirements in the present scenario since the vaccines were publicly funded to a large extent, it is necessary to meet the global public health challenge, and complements the technology transfer obligation under international agreements.