Intellectual Property Rights in a Public Health Emergency: Direct Government Support in Low and Middle Income Countries as a Solution

Eunice Kim

Introduction

November 17, 2019. The first SARS-CoV-2 case was confirmed in a 55-year-old man in Hubei province, China.¹ As more and more cases are confirmed, public health experts start advising people to wear masks and social distance. Eventually in March 2020, COVID was declared a global pandemic by the World Health Organization. Schools started transitioning online and the first severe 21st-century pandemic ensued.² In times of a dire public health crisis, the heavy burden of national and global health often falls onto governments, public cooperation, and pharmaceutical companies. These stakeholders often come to odds over how to address intellectual property (IP) rights now, especially in the context of COVID vaccines. In particular, low and middle-income countries (LMICs) face a difficult time producing and distributing medications at a low price due to insufficient manufacturing capabilities coupled with the limiting nature of patents to start developing necessary medicines.³ This is when the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the Doha Declaration comes into play.

TRIPS Agreement and Waiving IP Rights

In 1994, the TRIPS agreement was signed. Coined as the greatest IP protection expansion in history, the agreement allowed for World Trade Organization (WTO) members to participate in compulsory patenting. Compulsory patenting was revolutionary as it authorized governments to produce or process a patented product without the consent of the patent owner. However, this has multiple caveats. Firstly, licensing must be tried in commercial terms and only when this fails in a reasonable period of time can a compulsory license be issued. Secondly, the patent owner must be adequately compensated. The scope and duration of the license must also be limited for the purpose it was granted. While a public health emergency (PHE) is not needed to justify compulsory licensing, in the case of a PHE, the TRIPS agreement does not require license applicants to pursue a voluntary license. However, the patent owner must still be compensated.⁴ Across the world, many countries were divided on the issue of waiving IP protections for COVID vaccines under TRIPS. In 2020, India and South Africa spearheaded support for waiving protections when they submitted a proposal to the WTO, urging a suspension of all IP on COVID-19 vaccines. They expressed that a waiver should persist until immunity was achieved in LMICs.⁵ Consequently, in 2021, the United States Trade Representative declared the US’ support of IP waivers. This move represented a shocking turn on the US’ historic support for patents.⁶ While the landmark proposal received strong support from many developing countries, rich countries like the EU, Japan, Canada, Norway, Switzerland, and Australia stonewalled negotiations.⁷ The International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) were primarily concerned with the characterization of IP “as a barrier to the pandemic response, rather than an enabler bringing healthcare solutions, safely and quickly to patients”.⁸ Vaccine manufacturing and IP are highly concentrated in high- and middle-income countries and the majority of the vaccines manufactured are going to their own nations or other high income countries.⁹

Redirection to Direct Government Support

Both sides of the debate understand the exigence of innovation in a PHE, however, both ignore the long-term ability of LMIC countries to develop capacity expansion, technology transfer, and supply line coordination to supply global demand.¹⁰ A process for LMICs to “take some level of ownership over the manufacturing and distribution of critical vaccines and medicines without the bureaucratic red tape associated with compulsory licensing” is more than ever needed.¹¹ The solution to the “patent problem” comes from direct government support in the form of public R&D funding, advance purchase commitments, and payouts.
After the height of the AIDS/HIV epidemic, a study from the Center for International Development at Harvard University concluded that patent rights have a negative effect on access to HIV/AIDS drugs.¹² The WTO realized that something must be done to better address PHE responses in LMICs. Consequently, the 2001 Doha Declaration on the TRIPS Agreement and Public Health was established. This agreement essentially reinforced TRIPS to address public health problems afflicting LMICs.¹³ One may argue that the TRIPS agreement and the Doha Declaration gives plenty of ability for LMICs to “circumvent” IP protections and manufacture and distribute vaccines. Still, the “stark inequalities in power and influence among trading nations”¹⁰ and the “desperate need to train and maintain a skilled workforce to permanently meet not only the ongoing challenges of the current pandemic and any future pandemic but also build capacity and jobs in biomedical sectors” remains unmet.¹¹ But perhaps the greatest challenge lies within the timeframe of special compulsory licensing agreements. The bureaucratic requirements that nation states lay for licenses are often inflexible and time-consuming. Negotiations with pharmaceutical companies to export medications to LMICs under TRIPS have low success rates.¹⁴ Additionally, pharmaceutical companies often engage in patent evergreening, a process where companies seek secondary patents to extend pricing exclusivity, making it more difficult for LMICs.¹⁵ This means that LMICs must domesticate vaccine development efforts through direct government support.

The Solution

During a PHE, it is essential for governments to be able to incentivize drug makers to undertake large R&D costs to develop new vaccines without giving exclusive IP rights. Especially when there is a high cost barrier and risk to drug development, governments must take more initiative to directly incentivize innovation by aligning profit-seeking pharmaceutical companies and public health goals in a good pandemic response. The possibility of a legal monopoly through a patent incentivizes pharma companies to frontload funds so that slower diffusion of drugs brings tremendous monetary gain. Incentivizing drug makers through advance purchase agreements with large quantities and high pricing guarantees a return on a risky investment.¹⁰ Another way to appease pharmaceutical companies is to publicly fund R&D development. The government could provide raw data for pharmaceutical companies, building a private-public partnership.¹¹ This relationship could be essential to coordinate public health responses in the short-term. Moreover, in the long-term, LMIC governments can forge product development partnerships (PDP) with established pharmaceutical companies. PDPs would provide equipment, build trial sites, establish good clinical practice (GCP), and leverage knowledge.¹⁶ This would encourage drug makers to develop drugs and set up large bases in these countries, securing long-term capacity for drug development. The direct government support model in LMICs offers necessary manufacturing and development capacities. Oftentimes, LMICs present a new or unsaturated market for pharmaceutical companies. “Increased brand recognition, increased market penetration, entry into new markets, preserving the existing customer base, gaining new customers, and garnering favorable status for introduction of new products” are all attractive concepts for pharmaceutical companies when innovating in LMICs.¹¹ Directly funding R&D builds capacity for LMICs to build their biomedical sector and provides economic opportunities for drug makers while creating potentially-life saving drugs. Especially for LMIC countries like Iran, Algeria, Sudan, and Belarus, without WTO membership and unable to leverage the TRIPS agreement, direct government support is a method to build their domestic supply chain and biomedical capacity.¹⁷ This strategy offers incentives superior to that of patent law. The government cushions the upfront costs of drug development while guaranteeing a return through advance purchase commitments. More importantly, this approach circumvents the lengthy compulsory licensing procedure under TRIPS that costs lives in a PHE. It also gives countries and drug makers a secure opportunity to innovate solutions without worries about cost. While, the model works in theory, there are a few barriers to acknowledge. High-income countries (HICs) consistently outbuy LMICs and often possess a surplus of essentials like PPE, vaccines, and ventilators. Additionally, HICs are hesitant to share resources and IP information.¹⁸ To circumvent lack of information along with low available capital, LMIC governments can build “lighthouse” projects that are short-term and successful, signalling to investors that the country can handle more ambitious projects like vaccine development. Additionally, LMICs can adopt a regional approach to reduce costs. By strategically aligning comparative advantages, counties/states/provinces can establish regional value chains and build production capability without sacrificing much capital.¹⁹ Last but not least, LMICs can form coalitions like COVAX during COVID. While COVAX was unsuccessful partly due to HIC’s lax participation,²⁰ LMICs can group together to frontload R&D costs and incentivize multinational companies to work with LMICs rather than HICs.

Conclusion

LMICs experienced COVID death tolls four-times higher than that of high-income countries.²¹ It is thus extremely crucial that LMIC governments find robust, durable supply chain management, drug development, and distribution infrastructure to best aid the public. While pharmaceutical companies’ insane markup prices protected by patent monopoly are an issue, during a PHE, it is important not to avoid painting drug companies as evil and government public health efforts as good. Pharmaceutical companies possess unmatched, developed organizational capabilities and could innovate the short-term and long-term solutions to epidemics, pandemics, diseases, and everyday illnesses. The goal of governments during a PHE should be to leverage strengths and align the interests of drug companies and public health so that all forces could cooperate to orchestrate the most effective, swift public health response. This could come in the form of a direct government support model where LMICs could invest in publicly funded R&D and complete advance purchase commitments while simultaneously building long-term capacities to better address biomedical matters.

References

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