The US spat over the vaccine IP waiver

Hi from Washington, where the sun is shining and the vaccines are now available to us all.

On which note, our main piece today looks at the growing attention trade types are giving to vaccine equity, and how to get shots to poorer countries. In DC, there is growing chatter around IP protections for Covid-19 medicines, the big question being should they stay or should they go?

Our Person in the News is China’s President Xi Jinping, who has called for a new world order in what amounts to a (thinly) veiled attack on the new US administration.

Pharma and USTR risk spat over vaccine IP

As inoculation rates soar in the US and other developed economies, attention is increasingly turning to how trade could help get vaccines made and distributed faster to poorer countries — and this has led to a row in Washington.

The debate at the World Trade Organization in Geneva over intellectual property rights for Covid-19 vaccines and other medicines has been going on since October last year. But it’s only recently that a lot more attention has been paid to it in DC. Over in Geneva, India and South Africa have been leading the charge on pressing for a waiver on the intellectual property rules in the Trade-Related Aspects of Intellectual Property Rights (Trips) for Covid-19 vaccines, medicines and diagnostics.

The Trips agreement has been in place since 1995, and was updated again in 2001 following the HIV/Aids crisis to make it easier for poorer countries to continue to protect public health despite not being able to afford the drugs their populations needed. Among the flexibilities in the Trips are compulsory licences, which allow countries to waive IP and let anyone who can manufacture versions of the relevant drugs do so — though in this case a fee is still paid to the patent holder. The World Health Organization has said that both fear of triggering the ire of more developed nations and slowness to change domestic laws have meant the compulsory licence mechanism remains underused, however.

With AstraZeneca pledging to sell its vaccine for $3 to $4 a shot until the pandemic is over, the issue is not so much of cost but of supply. India and South Africa believe a Trips waiver would enable their domestic pharmaceuticals industry to make generic versions of some of the vaccines, alleviating bottlenecks in production that have left the companies behind the successful vaccine candidates struggling to fulfil orders.

Still, the US and EU, among others, have opposed a waiver. At least, the US opposed it under Donald Trump.

New US trade representative Katherine Tai has irked the pharmaceutical industry by appearing to review the US position, even if it has not yet changed. In a series of meetings in recent weeks, she has met industry and business lobbyists, pharmaceutical companies, trade unions and advocacy groups to discuss whether waiving IP rights would be a good idea. She also made clear, in a speech to the WTO, that the market was not doing enough to get vaccines out globally.

Just considering the possibility of a Trips waiver (even if it’s just being done in the spirit of being open-minded) is a marked change of position from the Trump administration’s firm opposition to the waiver, and has drawn ire from pharma companies who view patents and IP as crucial to protecting their products. USTR has been keen to point out that nothing has been decided, it is just exploring options.

Several Democratic senators have been pressing the current administration to look at the waiver option. There was also, following this, a big letter signed by a lot of Nobel Prize winners (mostly in the sciences and economics) as well as former world leaders, calling on President Joe Biden’s team to grant the waiver.

Chatting to Joseph Stiglitz, an economist and signatory to the letter, Trade Secrets asked where he felt the line was in deciding when to waive IP and when not to — if we waive IP for medicines now, then why not always? And would that not, as the pharma industry argues, destroy the private sector’s incentive for investment? He responded that global pandemics are special and unusual situations, and therefore the “slippery slope” argument did not hold. He also pointed out the large public investments made in getting the vaccines up and running under the Trump administration’s $7bn Operation Warp Speed programme (summarised well by a Peterson Institute paper, which we will come back to).

The industry, for its part, argues that the bottlenecks cannot be alleviated through relaxing IP rules and that they are there simply because there is only so much manufacturing capacity to make products as complicated as vaccines.

Rather than allowing for generic versions to be made, pharmaceutical companies want to continue with their licensing system, where they can step in to help would-be third-party manufacturers make vaccines safely. That, they say, means there will be scientific oversight of the quality of vaccines produced. In turn, that would prevent rogue producers from making dodgy jabs, which could harm the already fragile confidence in vaccine safety seen in many countries. As long as the licensing system is in place, pharmaceutical companies have an incentive to hand over their technology and help make sure that complicated production processes are being carried out correctly. This is particularly true in the case of messenger RNA vaccines, such as those made by Moderna and Pfizer, which use genetic code made by a biological process and involve technology that is not easily replicated by generic producers.

USTR has said it is exploring all of the options, and seems in no rush to back the waiver.

So, if not an IP waiver, what else can be done? The Peterson Institute has, interestingly, looked at Operation Warp Speed as a model. The prevailing narrative is that the US has not been all that great at managing the pandemic. But Peterson points to the US administration’s success in using the Defense Production Act to subsidise procurement of vaccine ingredients and inputs such as vials and bioreactor bags, as well as putting up money to accelerate the financially risky portion of testing new vaccines. Global co-operation to replicate this approach of subsidising all levels of the vaccine supply chain could be achieved through a trade deal-type vehicle, which they dub Covid-19 Vaccine Investment and Trade Agreement (CVITA). Within this, a framework to subsidise the vaccine supply chain could be set up, so that countries can co-ordinate their investments in materials such bioreactors, vials, syringes and so on. It could also ensure that countries would promise not to impose the export controls that have marred the vaccine rollouts in some jurisdictions.

It seems beyond doubt that investment in accelerating the manufacturing and distribution of vaccines pays huge dividends. An article in the academic journal Science reckons each vaccine currently made is worth $5,800 when priced according to the collective global benefits to the world economy (more on the methodology here), making even the more expensive mRNA vaccines a snip. Let us hope the WTO conversations go in the right direction.

Person in the news

Speaking at the Boao Forum for Asia, Chinese president Xi Jinping earlier this week launched a veiled attack against US global leadership and warned against an economic decoupling of the two superpowers.

Xi did not name the US in his 18-minute speech, my colleagues in Beijing report, but he took aim at Washington’s efforts to decouple supply chains and bar critical American semiconductors and other high-tech goods from being sold to Chinese companies such as Huawei.

“The rules set by one or several countries should not be imposed on others, and the unilateralism of individual countries should not give the whole world a rhythm,” he said on Tuesday. Aime Williams

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