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The Biden administration may have been contemplating the crisis in India when it made its decision about COVID vaccine patents.(Source:Alex Wong/Getty Images)

The US government’s 5 May declaration of support for waiving intellectual property protections for COVID-19 vaccines at the World Trade Organization is a significant political defeat for pharmaceutical manufacturers, but it is just the first move in a complicated process that could still play out in industry’s favor.

There are several steps that still need to happen before a waiver is granted and anyone could begin effectively using the IP to produce copies of COVID-19 vaccines. Industry will likely have opportunities to influence the process each step of the way.

US Trade Representative Katherine Tai acknowledged that waiver negotiations “will take time given the consensus-based nature of the institution and the complexity of the issues involved,” in her announcement of the Biden-Harris Administration’s support of the move.

The Tai statement might also allay industry fears that this decision is a slippery slope that could lead to further IP erosion as it highlighted both the “extraordinary" nature of the current circumstances and the measures being taken because of them.

“The Administration believes strongly in intellectual property protections, but in service of ending this pandemic, supports the waiver of those protections for COVID-19 vaccines,” Tai’s statement said.

Will Other Countries Get Onboard Now?

Advocates of alleviating IP barriers to COVID-19 vaccines were optimistic that the decision will have trickle down effects, including pushing other holdout nations, such as Japan, the UK, Norway, France, Canada in Germany to also agree to a waiver.

“This changes the balance of power,” Peter Maybarduk, director of Public Citizen’s Access to Medicines program told the Pink Sheet. The Biden administration is “joining the world in designing an actual public health response and being willing to tell the companies what is going to happen rather than just letting the companies establish all the parameters. ... It’s a significant power shift that frees the world to design more of a health response.

Maybarduk said he isn’t sure if the US decision “instantly” leads to a unanimous decision at the WTO, which typically operated by consensus, but he said it is a huge step to getting to this agreement.

If there international agreement to move forward on the waiver, the next battle will be over how the waiver is constructed – and how long that process takes.

Speed and Content of Waiver Matter

Opponents of a waiver, including industry, have argued the process is too time consuming to make a difference in an ongoing global emergency. But advocates of the waiver say the Biden White House has the power to speed that up.

“We are going to need President Biden to really demonstrate that global leadership to show that we are committed to an accelerated process. The negotiations need to move quickly and the US as America, we’re in a potion to drive that,” said Priti Krishtel, co-executive director of I-MAK.

A big test of the Biden administration’s commitment will be the speed and also transparency of the negotiations, she told the Pink Sheet.

The process has already been dragged out for a long time, said Jamie Love, Director of Knowledge Ecology International. In October, India and South Africa proposed the waiver of certain provisions of the TRIPS agreement but other countries including the US blocked the move. (Decision On Covid-19 TRIPS Waiver Postponed)

Tech Transfer, Financial Support Needed

Once a waiver is agreed to, many parts of the world will need additional assistance to make use of the IP.

In many cases they will need to work directly with the IP holders and original manufacturers to transfer technology and they will also need significant funds to develop manufacturing capacity.

The IP is the “recipe and all the technical details on paper, the cookbook,” said Gregg Gonsalves, of Yale University. Tech transfer is when the expert chef like Julia Child comes to your kitchen and shows you how to cook the perfect chicken, he explained.

Love said to speed vaccine access countries will need access to working cells lines, standard operating procedures and other information that will require company cooperation. It might also be a challenge to get regulators to determine how to authorize or approve the vaccines as many governments lack clear generic or biosimilar pathways for such products, Love said.

However, Love and others like Maybarduk said that while the process is easier with companies cooperation, it can be done without them as there are other experts in the vaccine technologies at issue.

The US government could also financially compensate companies for the technology being used, Maybarduk said.

Gonsalves and other waiver advocates are pushing for the US to dedicate $16bn in unspent funds allocated towards COVID emergency medical supplies and supply chains from the America Rescue Plan to subsidize scale-up of manufacturing and other aspects of the global vaccine effort related to the waiver.

Industry Ready To Push Back

The main drug industry trade groups’ strong rhetoric indicates they are taking the potential threat very seriously.

PhRMA CEO Steve Ubl called the Biden move “an empty promise” that could compromise safety, “weaken already strained supply chains and foster the proliferation of counterfeit vaccines.”

“This decision does nothing to address the real challenges to getting more shots in arms, including last-mile distribution and limited availability of raw materials,” Ubl said.

The Biotechnology Industry Organization used a similar tech transfer analogy to Gonsalves to voice its opposition to the Biden decision.

“Handing needy countries a recipe book without the ingredients, safeguards, and sizable workforce needed will not help people waiting for the vaccine. 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. The better alternative would have been to follow through on the President’s pledge just last week to make the United States the world’s ‘arsenal of vaccines.’ This policy leads in the opposite direction,” BIO president and CEO Michelle McMurry-Heath said in a statement.

Last week, BIO was also disagreeing with the White House, saying it should loosen the controls it has in place on vaccine supply materials via the Defense Production Act. (Of Patents And Production Industry-White House Row Over Vaccine Exports Highlights Policy Divide)  

McMurry-Heath’s 5 May statement offers a five-point list as to how the trade group will aim to limit the impact of the waiver. BIO is asking the administration to:

    • “Prevent the expropriation of technology that has use beyond COVID vaccines which could be used to compete against American companies and workers in the future;
    • “Protect American companies from the coerced transfer of technology by foreign governments;
    • “Ensure that these actions do not impede global supply chains for existing facilities;
    • “Avoid any precedents that would work to undermine incentives to develop vaccines and treatments in future pandemics;  and
    • “Ensure that the manufacturing of any vaccines is done in compliance with rigorous safety and manufacturing standards.”

Pfizer Inc. and Moderna, Inc. stock both finished down, but investors appeared to be aware of industry’s leverage and other constraints on vaccine manufacturing that affect the impact of the Biden move.

Despite all the lingering unknowns, “the headline or even suggestion that other countries could just manufacture, and override patents could decrease investor confidence in the business models during a pandemic,” Jeffries analysts wrote in a same-day note. But they added that there are a lot of obstacles to this becoming reality including limits on manufacturing supplies and raw materials and manufacturing know-how.

Possible Impact On US Pricing Debate

Outside of the direct COVID vaccine impact there are open questions about what this means for other industry battles, in particular the drug pricing debate.

 

Chris Meekins, managing director of Washington Healthcare Policy at Raymond James, said Biden move might actually be good news for pharma on the pricing front.

“Progressive Democrats were putting a lot of pressure on the Biden Administration to allow this waiver. They appease progressives on this knowing that progressives won't be happy with what the Administration may support in a final reconciliation bill on infrastructure on drug pricing (not Medicare negotiating). Maybe the Biden team knows another nation will block the waiver so no harm will really happen to industry,” Meekins wrote in a 5 May note.

Others see it as a sign of the industry’s vulnerability.

“I thought drug companies might become politically untouchable if they successfully produce lifesaving COVID-19 vaccines. With US support for waiver of intellectual property protections on vaccines and the continuing push to lower drug prices, that doesn’t seem to be the case,” tweeted Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation.

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