Tripped up: All you need to know about the Covid-19 TRIPS waiver and what it may achieve for SA (and what it won’t)

All you need to know about the Covid-19 TRIPS waiver and what it may achieve for South Africa (and what it won’t). (Photo: EMS1/Wikipedia)

By Franziska Sucker

11 May 2021

A waiver would not be a global answer to the pandemic but would be a step in the right direction. It would remove the legal barriers that prevent cross-border cooperation in generic manufacturing of Covid-19 medical products as well as cross-border manufacturing capacity building – both long-term considerations. In the short and medium term a waiver would facilitate generic export to members in need (with limited and no manufacturing capacity, eg African countries) and simplify and potentially speed up generic production (for those with manufacturing capacity such as India).

Franziska Sucker is associate professor at the School of Law, University of the Witwatersrand

On 5 May 2021, following enormous pressure, ambassador Katherine Tai announced the US government’s support for waiving intellectual property (IP) protection for Covid-19 vaccines. The following morning, Ursula von der Leyen, the European Commission president, declared the EU ready to discuss the “US proposal” even while some European governments, especially Germany, vehemently opposed the idea.

This happened in response to the October 2020 joint waiver request made by South Africa and India. They proposed a waiver allowing World Trade Organization (WTO) members to suspend their obligations to apply several (not all) provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) within their territory. This proposal extends to the suspension of protection of patents, industrial designs, copyrights and undisclosed information and to all medical products required to prevent, contain or treat Covid-19 “until widespread vaccination is in place globally, and the majority of the world’s population has developed immunity”. This would include diagnostic kits, therapeutics, vaccines, medicines, personal protective equipment and ventilators.

The proposal is co-sponsored by 60 WTO members, and generally, supported by around a further 40 members. Notably, all members that opposed this waiver (powerful members such as Canada, Japan, Norway, the EU, Switzerland, the UK and the US) had either bought enough vaccines to vaccinate their population, sometimes multiple times, and/or are home base for many pharmaceutical companies. There was little progress made for seven months in the 10 meetings held to discuss the proposal. Now, with the support of the US, text-based negotiations will begin.

But what would a waiver actually achieve considering that South Africa is already allowed to issue compulsory licences for the production of generics of Covid-19 products under certain conditions?

Seven things a waiver would achieve

First, the proposed waiver would allow WTO members to address all IP barriers and exclusivity claims that relate to producing generics of Covid-19 medical products. A compulsory licence only applies to patents, but the production of Covid-19 vaccines and other biologic medicines require, for example, using trade secrets and cell lines too.

Second, the waiver would help simplify and speed up the process of manufacturing generics of Covid-19 medical products and give members more policy space to address patent barriers. While article 31 of the TRIPS allows members to suspend patent rights, they must follow certain procedural requirements, which include negotiating patent-by-patent rather than by issuing a blanket licence for all relevant patents. This slows things down mostly. Some negotiation requirements may be waived in situations of a national emergency or extreme urgency but uncertainties exist around who determines when this is the case and what remuneration would be adequate.

Third, and most important for South Africa, the waiver would allow South African pharmaceutical companies to collaborate across borders to produce generics of Covid-19 medical products and to build manufacturing capacities. Indeed, manufacturers of generic medicaments in Africa are capable of reproducing small-molecule medicines (such as those used to treat HIV/Aids) or certain biologic products.

However, the eight manufacturers with vaccine production capacity based in five African countries (Egypt, Morocco, Senegal, South Africa and Tunisia) are not yet in a position to replicate a modern, far more complex mRNA or vector vaccine required for a Covid-19 vaccine. Thus far, they seldom engage in upscale production; mostly in packaging and labelling, and occasionally the “fill-and-finish” steps, as for example is happening at the Aspen Pharmacare plant in Gqeberha.

The Covid-19 TRIPS waiver would allow South African pharmaceutical companies to collaborate across borders to produce generics of Covid-19 medical products and to build manufacturing capacities. (Photo: EMS1/Wikipedia)

Interestingly, according to the WHO, there are about 80 sterile injectable facilities on the continent, which may provide an opportunity for building cross-border capacity for vaccine production given that the primary dosage form in Africa is the vial. However, the current TRIPS compulsory licence system requires single actions by one state and does not allow for such collaboration; or the importation of component parts.

Fourth, the waiver would facilitate the import of (cheaper) generics for members with limited or no manufacturing capacity. In other words, South Africa could import available generics, such as from India, faster. TRIPS initially prevented members from issuing compulsory licences to patents if the generic was to be predominantly exported. While the earlier crisis of access to HIV/Aids medicine led to a formal amendment allowing such members under certain conditions to circumvent this requirement, it is subject to numerous cumbersome procedural requirements involving long negotiations. As a result, unsurprisingly, this method has been used only once so far – by the Rwandan government importing generics from Canada.

Undeniably, European and US pharmaceutical companies also face challenges with some patents for components that stand in the way to scale up the manufacturing of mRNA vaccines, either for domestic or global use. The US and the EU (among others) have, however, agreed not to use this possibility of parallel importation. Therefore, if, for example, a US company can manufacture more components that the EU requires, but first needs a compulsory licence because of existing patents, the US cannot override those patents to principally supply the EU with that component. TRIPS prevents the EU from importing that component produced under such a licence.

A waiver that would be available to all members would enable these members to produce (components) for export. They would therefore benefit, too.

Fifth, a waiver would signal that members would not face political retaliation for taking measures to scale up supply and trying to build cross-border manufacturing capacity for generic Covid-19 medical products. For example, the US repeatedly put pressure on India for issuing compulsory licences on cancer drugs, including threatening sanctions through the US Trade Representative Special 301 Report, an “IP watch-list”. India regularly appears on this list, including on the most recent one from 30 April 2021. Malaysia also became subject to such Special 301 Report threats when it attempted to use a compulsory licence to increase the affordability of Hepatitis C medication. Colombia faced similar pressure from the Swiss government when it took the first steps toward issuing a compulsory licence for leukemia treatment.

Moreover, a waiver would prevent challenges under the WTO dispute settlement system (DSB).

Some say it is unlikely that members will institute DSB proceedings, especially since the Appellate Body (which is responsible for the appeal stage) is currently dysfunctional and therefore disputes might not be settled before the pandemic ends anyway. However, with the Biden-Harris administration now in place the Appellate Body might soon become functional again.

Moreover, one cannot underestimate the power of the pharma industry, which is particularly strong in countries that oppose the waiver such as Germany. Recent debates illustrate that the idea to suspend IP rights threatens the economic basis of pharmaceutical companies (and therefore the development of future vaccines) is too deeply embedded in such a governments’ thinking to not expect legal retaliation. In 1997, the South African government faced such pressure when the US filed a DSB complaint requesting the revision of the South African Medicines and Related Substances Amendment Act, which was aimed at reducing medicine prices by making provision for the use of parallel importation and compulsory licences – something activists were arguing for in relation to expensive HIV/Aids medication.

Lastly, a waiver would help to keep generic manufacturers safe from patent litigation.

Four things a waiver cannot achieve

First, suspending IP rights would not result in a voluntary licence for generic vaccine production. It does, therefore, not involve any information sharing. Not all information needed to produce a modern mRNA or vector vaccine is patented and, thus, is not disclosed in the patent application (trade secrets).

If a member waives IP rights of a company that has developed a vaccine, it will less likely be that this company will freely cooperate. There is little one can do to force companies to reveal relevant trade secrets. Currently, the most developed country members are obligated to do is to “provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country members” (Article 66.2 of the TRIPS). While initiatives such as The Access to Covid-19 Tools Accelerator launched by the WHO and partners might assist in accessing the necessary information, scale-up measures based on suspension of IP rights might be slower than with information sharing, including all transfer of technology, data, know-how and cell lines.

Second, waiving IP rights would not lead to Covid-19 vaccines being considered common goods, nor would it be an assurance that everyone worldwide can be offered a vaccine (soon). Nor does it guarantee equitable access.

Being able to offer everyone a vaccine depends, among other things, on how quickly all required information to produce a modern mRNA or vector vaccine is obtained; how quickly those members with manufacturing capacity can scale up and how quickly others can build cross border manufacturing capacity. It also depends on how quickly mutations or variants of Covid-19 spread and compromise current ‘vaccine recipes’. Equitable access depends on even more factors, including which countries are able to successfully cooperate and build manufacturing capacity, how much additional vaccines could be produced and how corruption might influence vaccination priority plans.

Third, a waiver would not discharge the South African government from having to generally improve its domestic legal infrastructure. Currently, the Patents Amendment Bill is yet to be adopted, which is set to enable the effective use of existing TRIPS flexibilities for greater access to essential medicine. As highlighted by Mark Heywood, the South African government has failed to follow through on the Doha Declaration, use its permissions and turn it into actual treatment access. Reliance on the waiver, too, would require adjustments to domestic law.

Last, a waiver would not change the fact that South Africa’s health-system capacities are underfunded and limited. To make effective use of the waiver, the government would have to urgently start working on building manufacturing capacities and its public health infrastructure, even if this relates to components only, and can then contribute to cross-border collaborations.

The WHO might help and is currently engaging with, for example, Johnson & Johnson to convince it to expand its partnership and capacity building with South African companies beyond fill-and-finish to full production. It would not be too surprising if they were to agree, since both Johnson & Johnson and AstraZeneca have pledged to sell vaccines at a price that just covers their cost. While the waiver proposal might also be an “indirect attempt to put pressure on the original manufacturers to cooperate”, ultimately it remains the government’s responsibility to negotiate for technology transfer and to build domestic and regional manufacturing capacities, including investing in all aspects of the health system and to reverse the austerity measures currently implemented by Treasury. Even if this takes time there is a long-term demand beyond the current crisis for future pandemics.

What now?

With the support of the US, text-based negotiations will now begin. Waiver proponents are preparing a revision to their text from October 2020, intending to present a fine-tuned proposal at the next TRIPS Council meeting at the end of May before a further discussion on 8 and 9 June in the General Council meeting.

A waiver would not be a global answer to the pandemic, but a step in the right direction. It would remove the legal barriers that currently prevent cross-border cooperation in generic manufacturing of Covid-19 medical products as well as cross-border manufacturing capacity building; both long-term considerations. In the short and medium term a waiver would facilitate generic export to members in need (with limited and no manufacturing capacity, such as African countries) as well as simplify and potentially speed up generic production (for those with manufacturing capacity, such as India).

To ensure such potential gains it will be important that the waiver applies to all Covid-19 medical products, including therapeutics and diagnostics, and not only to vaccines, as suggested by the US. It must also apply to all exclusive rights that hinder the production of such products. Most important for increasing manufacturing capacities and production will be finding ways for pharmaceutical companies to share their knowledge and to encourage technology transfer, ideally through the Access to Covid-19 Tools Accelerator.

This would resonate with the TRIPS objectives stipulated in Article 7 and 8 of the TRIPS. Article 7, for example, broadly captures the need for balance between private property rights and public interest in respect of socioeconomic and technological development. In addition, information sharing, as well as the inclusion of vaccine approval standards, would contribute to the safety of vaccines. Pharmaceutical companies might be most interested in defining the duration of the waiver – that is, what is understood by the end of the pandemic.

Given that Germany, France and other major economies are vehemently objecting to the waiver, achieving consensus (the preferred decision-making method) is highly unlikely. However, this might be an opportune time to remind the membership that if consensus is not achieved, members shall turn to voting (Article IX:1 of the GATT). Indeed, voting is mandatory, notwithstanding members’ practice. Accordingly, it would require 123 members to adopt the waiver. Using the voting mechanism might even serve as a first tentative step in an institutional shift that might lead to faster, more successful negotiations at the WTO and increasing global relevance.

For negotiations to be fruitful, we must start demystifying key assumptions about IP protection and not hesitate to investigate the arguments of prominent scholars. William Landes and Richard Posner note, for example, that “a major input into new IP is existing IP”. Joseph Stiglitz adds that almost all IP rights holders “used technologies and ideas that were developed by others. Had that prior knowledge not been publicly available, [they] could not have done what [they] did.”

Michele Boldrin and David Levine go as far as suggesting that “economic theory shows that perfectly competitive markets are entirely capable of rewarding (and thereby stimulating) innovation, making copyrights and patents superfluous and wasteful”, concluding that, with social welfare in mind, the current IP system is totally inappropriate for the innovative process. Admittedly, this claim ignores the fact that a perfectly competitive market is utopian and does not exist. In an imperfect competitive market, exclusive rights are not entirely unsuitable as an incentive to entrepreneurial spirit, intellectual creativity and innovation. However, if these exclusive rights “go beyond what is necessary” for incentives, they can lead to welfare losses and impede future innovations, particularly through monopoly prices. Needless to say, such discussions will be difficult, but are long overdue.

With mutations and variants of Covid-19 on our doorstep, possibly making current vaccinations less or even ineffective, it is undoubtedly in all members’ interest that negotiations start without delay and be speedily concluded. However, the US expects negotiations to take some time and EU officials argue it might take two years to agree upon a waiver text, potentially rendering it irrelevant for the current pandemic. Nevertheless, the outcome could still set a precedent for future pandemics.

The situation is fluid. In Brazil, the only developing country to initially oppose the waiver, the Senate has passed a bill to suspend Covid-19 vaccine patents. If agreeing to negotiate is a delaying tactic, other members might follow and then simply rely on Article 73 of the TRIPS that provides an exception to obligations to protect IP rights in situations where essential security interests are at stake. After all, this would resonate with EU leaders’ recent claim that vaccines and increasing European production capacity have become security policy.

But would this not be a Trump-style approach? So far, waiver proponents choose a WTO tool that is readily available for exceptional circumstances; a tool that involves negotiation and permits the stipulation of specific conditions for its use. To recall, members adopted a waiver allowing the EU to continue providing trade preferences to banana exporters in their former colonies.

Is the pandemic really a less “exceptional circumstance”? DM/MC

Franziska Sucker teaches courses in international trade law and public international law at both master’s and undergraduate level (since 2011). She serves as executive co-treasurer of the Society of International Economic Law (SIEL) and is co-editor (with Kholofelo Kugler) of the book (Southern) African perspectives and priorities in international economic law (forthcoming May 2021).

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