The May 3rd to May 9th, 2021 roundup of major trade developments, with L.C.
The Biden administration reversed its previous opposition and endorsed the TRIPS waiver proposal for COVID-19 vaccines. The proposal, submitted to the WTO by India and South Africa last October, would waive patent protection for vaccines otherwise enjoyed by medical goods under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights. The proposal, which would waive patent protection specifically for COVID-19 vaccines, treatments, and other pandemic-related products, has the support of about 100 developing-country WTO members as well as China and Russia. All 164 WTO members would have to agree to enact the proposal, meaning that, under the WTO’s consensus principle, it could be vetoed by a single country.
Concluding the talks could take many months. Okonjo-Iweala said in an interview, according to the Washington Post, that she would press member countries to reach an agreement on the waiver petition no later than December. If, in the end, other countries scuttle a waiver deal, the US may claim some good-will for having backed it. Already, the US reversal, which comes after Washington pushed its allies to back its previous position, seems to have put Europe in particular on the defensive, and, it seems, unlikely to follow the US lead. Germany suggested it won’t change course, with a spokesperson declaring on May 6th that “The limiting factor in vaccine manufacturing is production capacity and high quality standards, not patents” – precisely the US position until a few days ago. Pfizer partner BioNTech is based in Germany, and both have come out sharply against the waiver.
The US reversal was seen as a surprise – but not a big one since pressure for the change from progressive Democrats and various activists has been intensifying.
Okonjo-Iweala welcomed the US change. She said, “It is only by sitting down together that we will find a pragmatic way forward – acceptable to all members – which enhances developing countries’ access to vaccines while protecting and sustaining the research and innovation so vital to the production of these life-saving vaccines.”
TRIPS waiver could slow rather than accelerate vaccines
The vaccine-makers oppose the waiver as unnecessary and counterproductive. They are also worried that relaxing COVID-19 patents could lead to pressure for further erosion of medical intellectual property protection. Left-leaning progressive groups and politicians have kept this narrative alive by calling for extending patent waivers to insulin and other meds.
The American Chamber of Commerce in Europe told Politico, an IP waiver “will not contribute to accelerating the manufacturing or the distribution of vaccines” but “risks jeopardizing the ongoing global vaccine roll-out by diverting raw materials and therefore disturbing tightly calibrated supply chains” and “may also give rise to numerous counterfeit products.”
Pfizer CEO Albert Bourla explained in an open letter why his company opposes the waiver. “Currently, infrastructure is not the bottleneck…. The restriction is the scarcity of highly specialized raw materials.” Pfizer’s vaccine requires 280 materials from 19 countries, but if inexperienced facilities in other countries decide to produce the vaccine, “It will unleash a scramble for the critical inputs…. Entities with little or no experience in manufacturing vaccines are likely to chase the very raw materials we require to scale our production, putting the safety and security of all at risk.” He also raised the IPR protection point: “The recent rhetoric will not discourage us from continuing investing in science. But I am not sure if the same is true for the thousands of small biotech innovators that are totally dependent on accessing capital from investors who invest only on the premise that their intellectual property will be protected.”
Germany-based BioNTech released its own statement saying, “Patents are not the limiting factor for the production or supply of our vaccine,” rather it is setting up facilities and getting needed materials and personnel that are obstacles and if these aren’t solved, “the quality, safety and efficacy of the vaccine cannot be ensured.” And showing that companies are trying to solve the problems on their own, it added that BioNTech is already ramping up production by entering into licensing and manufacturing partnerships with other pharmaceutical companies such as Merck, Novartis and Sanofi.” In fact, many of the makers of COVID-19 vaccines from various countries – especially those making them through traditional vaccine-making processes – have been actively licensing patents and assisting production facilities in other countries.
The head of the Biotechnology Innovation Organization said the US decision “will disadvantage patients by undermining existing incentives to develop vaccines and therapeutics for future pandemics.” Moreover, “Handing them the blueprint to construct a kitchen that – in optimal conditions – can take a year to build will not help us stop the emergence of dangerous new COVID variants.”
Need for waiver no clear cut
Regarding the argument that patents aren’t the main problem, Indian Prime Minister Narendra Modi himself, in a recent phone call with President Biden, reportedly told him the big bottleneck, given that India has capacity to produce traditional (non-mRNA) vaccines, is acquiring the necessary materials. The US has begun stepping up its shipments of the relevant materials to India, but there are still shortages as well as export barriers in some countries preventing efficient access to needed materials by factories that are capable of making vaccines.
There were reports that even within the administration there was disagreement over the policy change, with rumors that Commerce Secretary Gina Raimondo and other administration officials were opposed. Asked about this on May 6th, a White House spokesperson told reporters, “There was no split. We… listened to a number of experts before presenting options to the president. That is exactly how government should work.” But pharmaceutical company sources who said they were surprised by the announcement for which they weren’t given advance notice also reported that they had understood that there was disagreement within the administration.
Pharma weighs in
The negative reaction to the reversal of the US position was fierce from the US industry. In addition to the comments noted above, the head of the Pharmaceutical Research & Manufacturers of America (PhRMA) released a statement saying that “the Biden Administration has taken an unprecedented step that will undermine our global response to the pandemic and compromise safety. This decision will sow confusion between public and private partners, further weaken already strained supply chains and foster the proliferation of counterfeit vaccines.” The real challenges, he said, include “last-mile distribution and limited availability of raw materials.”
PhRMA’s European counterparts, the European Federation of Pharmaceutical Industries & Associations, released a similar warning against the waiver, saying the US reversal “puts the hard-won progress in fighting this terrible disease in jeopardy…. waiving patents will make winning the fight against the coronavirus even harder.”
In an interesting twist, the PhRMA head accused the president of undermining his own priority of fostering US manufacturing and US innovations. “It also flies in the face of President Biden’s stated policy of building up American infrastructure and creating jobs by handing over American innovations to countries looking to undermine our leadership in biomedical discovery.”
This point was echoed by Sen. Mike Crapo (R-ID), who released a statement warning, “What this decision [would] do is benefit countries like China that are aggressively trying to obtain US technology to bolster their own domestic champions…. Not only is the biopharmaceutical industry one of China’s targets for dominance in its Made in China 2025 strategy, but the Department of Justice handed out indictments last summer in connection with the Chines government’s attempts to steal US COVID research.” Many other congressional Republicans are incensed by the change in position on the waiver and some even say they’ll introduce legislation to block it.
The PhRMA statement also underlined how eager the pharmaceutical companies are to show they are working collaboratively to expand global vaccine access without a TRIPS waiver – a key argument against the waiver but also an effort that may have picked up steam due to the prospect of the waiver taking effect. “In the past few days alone, we’ve seen more American vaccine exports, increased production targets from manufacturers, new commitments to COVAX and unprecedented aid for India…. Biopharmaceutical manufacturers are fully committed to providing global access to COVID-19 vaccines, and they are collaborating at a scale that was previously unimaginable.”
The AIDS and Doha background
There may be another dimension to the situation. Back in 2003 and in 2005 when TRIPS waiver flexibilities were approved and then finalized for AIDS and other medicines, it was thought that the US and the West’s concession on this developing-country demand might improve the atmosphere and encourage poor countries to make some concessions in return at the WTO’s Ministerial Conferences in 2003 in Cancun and 2005 in Hong Kong. That didn’t happen (the North-South standoff over the Doha Round persisted). But there is some speculation once again that giving India and South Africa this victory on their proposal could lead them to be more accommodating on some other matters – especially fisheries subsidies but also e-commerce and various agriculture and other issues – leading into the Ministerial Conference later this year.
Whether a TRIPS waiver does pose a risk to future IP rights will become clearer once there is a final waiver text. The US will now be in a position to help shape it, so it may wind up being very limited, in both duration and scope, as noted above. Most experts expect the drafting of the waiver to be difficult and lengthy, and the outcome isn’t clear, so the implications for IP protection going forward aren’t clear either.
L.C. reports on trade matters for business as well as Founders Broadsheet.
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