Although much of the current COVID-19 vaccine debate has centered on the issue of surrendering intellectual property rights, the transfer of knowledge and technology is only the first part. Equally important are global manufacturing capabilities and prices, both of which could still be an issue.
MILAN – At this point in the pandemic, the key question is whether or not vaccine production can be ramped up fast enough that most people can be vaccinated relatively soon. However, there is another implied in this question: whether and under what circumstances this is appropriate expose domestic and internationally agreed intellectual property rights. The matter is being discussed in the World Trade Organization after the government of US President Joe Biden comes out in surprise in support of a COVID-19 waiverand reveals a rift between Western governments.
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Most agree that this pandemic will surely satisfy them if a number of conditions warrant a waiver. The millions of lives threatened by the virus should create a shared feeling for humanity. And vaccinations are a public good because everyone’s safety ultimately depends on everyone else’s. In some cases, governments have partnered with companies to invest in vaccine development, adding to the need for mandatory licensing. Whatever we do to provide it, however, must not have any adverse or unintended consequences that could affect our responses to future crises of this nature.
We have to start with a fundamental question: would the proposal under discussion waive intellectual property rights or would it simply allow for compulsory licensing where the company retains its intellectual property rights and has the right to receive a return on them? For both, compulsory licensing is preferable. By recognizing that the creator is entitled to a return, this would minimize the adverse impact on future incentives.
One important variable, of course, is what exactly is being licensed. Are we talking about the chemical composition of the drug itself or does the license cover all of the technology embedded in an advanced production process? Increasing global production would most likely require both. However, because the proprietary manufacturing technology is not necessarily drug-specific, mandatory licensing in this case could affect the production of other drugs and raise concerns about fairness and return on investment. In addition, the transfer of production technology is not always easy.
Production capacity is another important variable. How much is there now and how much more would it need to be created quickly to ensure high quality output when broadcasting IP? Whatever the exact answers, the point is that even if the IP problem can be resolved, manufacturing and distribution remain binding constraints alongside a third key variable, price.
Public health experts and policymakers have generally refused to charge vaccinations as it would run counter to the goal of immunizing everyone. In the current context, the customers who buy the vaccines are primarily governments or multilateral institutions, which means that at least two prices must be set. One of these is the mandatory license fee that is paid to the original manufacturers, presumably the companies that license the intellectual property. But then there’s the price governments pay to licensees, who may or may not be domestic companies.
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The overall long-term priority is to maintain the incentives for large pharmaceutical companies to invest heavily and quickly in responding to the next crisis – like this one. These are risky investments. Overall, the license fees must be set in such a way that significant returns are achieved for the successful manufacturers and also a return on intellectual property embedded in the manufacturing technology is achieved. More specifically, the incentive must remain strong enough to convince all of these companies to take the risk of failure.
Some will argue that the return to successful vaccine makers from selling in developed countries is already high. That may be true, but we cannot just accept it. This question needs to be resolved in the WTO. Less uncertain are the principles that must be followed now and in future crises like this one. For the investing company, the expected returns from vaccine development (including the likelihood of failure) should not be inappropriately low or prohibitively high. It is a common mistake to only look at the returns from successful companies.
The fairest way to think about it is to base prices on the per capita income of the country whose government is buying the vaccines. (Depending on their mission, aid agencies and nonprofits may continue to subsidize purchases.) However, since discrimination between countries opens up the possibility that unscrupulous entrepreneurs and governments can envelope the system, an international institution like the United Nations would ideally negotiate for and buy You have large quantities of vaccines for distribution to countries below a certain income level.
The COVID-19 Global Access to Vaccines Facility (COVAX), launched in 2020 by the World Health Organization Gavi, the Vaccine Alliance and the Coalition for Epidemic Preparedness Innovations, is expected to do so with funds from advanced economies. It’s a good idea and should be kept. Although it has made progress in the acquisition and distribution of vaccines, it is underfunded and subject to the same supply problems (vaccine nationalism, licensing requirements and manufacturing bottlenecks) that developing countries typically face.
It is expected that vaccine-developing countries will first meet their own needs. So the only real solution on a global scale is to increase production capacity in as many places as possible.
In considering the lessons learned so far from this crisis, two final points emerge. First, critical decisions should not be made unanimously as everyone has a veto. It’s a recipe for delay and inaction. Instead, we need a responsible, largely representative body like the United Nations to declare a global emergency that should then trigger predetermined agreements. Negotiating global manufacturing and IP decisions in the middle of a pandemic is not ideal.
Second, there remains a major and pressing problem of manufacturing peak loads. Peak load capacity is expensive because while it is idle most of the time, its absence during times of crisis can result in much higher mortality and prolonged disruption. The private sector cannot solve this problem. If there is a global public interest in carrying excess drug manufacturing capacity, governments as a whole must figure out how to pay for it.