TRIPS Waivers and Pharmaceutical Innovation
By Christopher Borges
On June 22, 2022, the World Trade Organization (WTO) approved a waiver of intellectual property (IP) protections for COVID-19 vaccine patents, previously secured under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The WTO is currently considering expanding this waiver to include COVID-19 diagnostics and therapeutics in addition to vaccines. As the U.S. International Trade Commission (USITC) investigates the implications of this expansion, it is important to understand what this waiver is intended to accomplish, explore whether it will be effective in the short term, and examine the long run impacts on the bio-pharmaceutical innovation system.
What Is the TRIPS Agreement?
TRIPS refers to a WTO agreement incorporating obligations related to IP protection into the global rules-based trading system. Active since 1995, TRIPS requires most WTO members to adhere to minimum rules for the protection of IP — such as patents, copyrights, and trademarks — and enforce these commitments domestically. By agreeing to respect IP protections, member countries receive certain benefits in return. For example, TRIPS allows WTO members to make exceptions to patent rights so long as they are “limited” and do not violate the “normal” use of the patent. States often employ this provision to advance their science and technology base by allowing their researchers to use patented research tools and techniques.
Why Was There a Call to Waive TRIPS IP Protections for COVID-19 Vaccines?
Despite COVID-19 vaccines being the fastest developed vaccines in history, global access to these vaccines remains uneven. The United States first administered COVID-19 vaccines in December 2020, yet, per the University of Oxford, as of March 1st, 2023, only 28 percent of people in low-income countries have received at least one dose of a COVID-19 vaccine.
Most of the vaccines approved for use are developed by firms in the United States, Europe, China, and Russia, but the Western-made mRNA vaccines are the most effective and therefore the most in-demand vaccines on the market. The wealth of Western nations along with the geographic distribution of mRNA vaccine producers enabled them to reserve large vaccine supplies early in the pandemic, effectively shutting out lower-income countries. Low-income countries currently have a 28 percent vaccination rate, whereas the United States had vaccinated 28 percent of its population by March 23rd, 2021.
Citing this disparity, many developing nations called on the international community to waive TRIPS IP protections for COVID-19 vaccines, based on the notion that allowing any company to manufacture the vaccines will boost production and, ultimately, vaccinations. South Africa and India first proposed a TRIPS waiver for COVID-19 vaccines in October 2020, drawing considerable support from over 100 lower-income countries. High-income countries, however, were initially opposed to the waiver on the grounds that it would have an adverse effect on innovation, drug quality, and drug safety. Negotiations continued for nearly two-years until the waiver was ultimately agreed to, with high-income countries easing their objections once they were sufficiently supplied with vaccines.
What Does the COVID-19 Vaccine Waiver Do?
The COVID-19 vaccine waiver suspends certain requirements regarding the use of COVID-19 vaccine patents, such as ingredients and manufacturing processes. With this waiver, states can authorize domestic manufacturers to produce COVID-19 vaccines without the permission of the patent rights holder and, crucially, to export those vaccines to other countries.
The waiver was designed to be a short term action, taken as an emergency measure in the midst of a global pandemic. However, as implementing the waiver required all 164 WTO members to agree, it took nearly two years of deliberation to come to consensus. By the time WTO members agreed to the waiver in June 2022, the response to the pandemic had progressed considerably and over 12 billion vaccine doses had been administered.
Why Are There Calls to Expand the TRIPS Waiver?
The WTO is currently considering if the waiver should be expanded to include the production and supply of COVID-19 diagnostics and therapeutics. This would cover a broad category of products, including products utilized for diseases and conditions beyond COVID-19.
To date, the FDA has approved dozens of COVID-19 therapeutics. Oral antiviral treatments paxlovid and molnupiravir were quickly developed by Pfizer and Merck, respectively, and approved by the FDA in late 2021. Remsidivir, a therapeutic first developed in 2009 by Gilead Sciences, was repurposed to treat COVID-19 after studies concluded that it reduces the risk of hospitalization and death in high-risk patients by up to 87 percent.
The efficacy of these COVID-19 treatments prompted low-income countries and international organizations such as UNICEF to demand an expansion of the TRIPS waiver to include these drugs along with diagnostic tests. To continue combating COVID-19—the World Health Organization (WHO) reported 70,000 new cases on March 1st—they assert that all medical tools must be made available to the fullest extent.
How Effective Is the TRIPS Waiver? How Effective Would the Expansion Be?
The COVID-19 TRIPS waiver has had minimal impact on overall vaccine access. As of the end of 2022, no country had declared intent to make use of the TRIPS waiver.
Global vaccine demand had plummeted by the time the TRIPS waiver was agreed to. In December 2022, the board of Gavi, a nonprofit that supplies vaccines to low- and middle-income countries voted to stop supplying COVID-19 vaccines to most nations due to lack of demand. This drop in demand indicates that the primary issue impeding vaccinations today is not lack of supply, but lack of distribution capacity. Administering COVID-19 vaccines across a population requires significant healthcare infrastructure which some developing countries lack, such as refrigeration to keep vaccines at low temperatures and a well-trained healthcare workforce. To increase global vaccination rates, efforts should focus on building healthcare infrastructure and distribution capacity, not facilitating additional vaccine production.
Currently, the supply of treatments to COVID-19 far outstrips demand as well. This is largely because secure IP rights have incentivized drug inventors to enter over 140 partnerships with manufacturers worldwide, boosting supply while transferring technology and tacit knowledge to these foreign firms. Secure IP rights assure companies that their inventions will not be stolen in the short-term, thereby allowing them to reveal their secrets and participate in these productive manufacturing partnerships. Expanding the TRIPS waiver to therapeutics would have little added benefit to access.
Further, expanding the TRIPS waiver to therapeutics will disincentivize the creation of new COVID-19 treatments. Biopharmaceutical research is expensive and risky—the R&D process for new drugs costs close to $1 billion on average, and only 12 percent of drugs which enter clinical trials are ultimately approved for use. Companies will simply not invest in creating new therapeutics if they will lose ownership of their IP should their huge and risky investment prove fruitful.
Can the COVID-19 TRIPS Waivers Damage the Biopharma Innovation Ecosystem?
IP rights advocates point out that undermining IP protections will weaken incentives for pharmaceutical companies to innovate. Bio-pharmaceutical research and development (R&D) costs are so high that private capital will not invest without the promise of exclusive rights on the output. While quick government action and spending in the early days of the pandemic accelerated the development of COVID-19 vaccines, the rapid response to COVID-19 was built on the long-term stability of IP protections.
For example, the science and technology behind mRNA vaccines, an essential tool in the fight against COVID-19, was supported over decades by both far-sighted government investment as well as through commercialization drawing on considerable private capital expecting a return. The success of mRNA vaccines was not a slam dunk, yet investors took the risk on the understanding that they would receive substantial returns should the technology prove effective. Throughout this long and risky R&D process, the secure and predictable assignment of property rights allowed universities, government labs, and large and small companies to cooperate effectively to develop mRNA vaccine technology, and, ultimately, deliver vaccines in record time.
By removing IP protections on COVID-19 vaccines and treatments, the WTO is weakening the incentives for companies to invest in financially risky technology in the future as, even if their venture is successful, they may lose IP protections which allow them to recoup their investment.
How Will the TRIPS Waivers Impact U.S. National Security?
Global trends such as climate change, urbanization, and rising meat consumption make future pandemics more likely. It is critical that the United States maintain a dynamic and innovative pharmaceutical industry to combat this threat.
Government action, in partnership with private industry, in the early days of the pandemic accelerated the rapid development and scale up of COVID-19 vaccines. Through a myriad of policies such as pre-ordering millions of vaccine doses, Operation Warp Speed expedited the development and roll-out of vaccines by months, saving thousands of lives.
While quick action played a key role in the overall response, however, a crucial lesson from COVID-19 is that waiting until a pandemic is declared to act will be too late. mRNA vaccine technology was developed over decades and sustained by a dynamic and innovative bio-pharmaceutical ecosystem that connects universities, government labs, and large and small firms in the industry. Because of this large body of pre-existing work, much of which was facilitated through the security and predictability afforded by IP protections, pharmaceutical companies were able to prototype COVID-19 vaccines within days of receiving the viral genome. Further, this ecosystem not only rapidly produced dozens of COVID-19 therapeutics, but also possessed an existing supply of drugs that proved effective in treating COVID-19. Without a long-standing healthy innovation ecosystem, this could not have happened.
TRIPS waivers undermine the U.S. pharmaceutical industry by degrading the IP protections which are essential to the pharmaceutical innovation ecosystem. Less innovation in the pharmaceutical industry means fewer vaccines and drugs in the future, leaving the United States and other nations less prepared for future pandemics and other health emergencies.