Part II - Boosting Low-Income Countries’ Capacities for Protecting Public Health

5 Fostering Production of Pharmaceutical Products in Developing Countries

William Fisher , Ruth Okediji , and Padmashree Gehl Sampath

The residents of developing countries need pharmaceutical products at least as much as the residents of developed countries. Noncommunicable diseases (such as cancers, cardiovascular disease, and mental-health disorders), which typically are most effectively treated with drugs, are now nearly as common in developing countries as in developed countries. And communicable diseases (such as tuberculosis, HIV, and malaria), the prevention or treatment of which also typically require drugs, continue to be substantially more common in the developing world.¹

Today, most of the drugs consumed in developing countries are imported. This is especially true of the relatively new drugs that are subject to patent protection, which typically are produced in industrialized countries. The production of generic drugs is less concentrated, but most are now manufactured in large middle-income countries (primarily India, China, and Brazil) and then exported to smaller and poorer countries.

For many years, some lawmakers, scholars, and activists have argued that firms located in developing countries should produce more of the drugs that the residents of those countries need. They contend that local production would benefit the residents in two ways. First, it would create many high-paying skilled jobs and support sustainable economic development. Second, local firms could respond more quickly to the residents’ changing health needs. Skeptics have responded that local production, by forfeiting economies of scale, would be less efficient and thus would raise the costs of medicines. In addition, they contend that the systems for maintaining the quality of drugs are less robust in developing countries, and thus that local production would lead to an increase in substandard drugs.²

Section 1 of this chapter discusses some recent developments that have altered the relative strength of these competing considerations, sharply increasing the likelihood that fostering local production in developing countries would be socially beneficial. Section 2 proposes five legal reforms and economic initiatives that could help build local pharmaceutical-production capacity and thereby save lives.

1 The New Global Landscape for Access to Medicines

In the past few years, three events have strengthened substantially the case for local pharmaceutical production: the emergence of novel diseases that pose severe threats to the health of the residents of developing countries; the rise of healthcare nationalism; and revelation of the scale of the transnational trade in substandard medicines.

A The Emergence of Novel Diseases

In its 2007 World Health Report,³ the World Health Organization (WHO) noted the unprecedented rate at which new diseases are emerging. The report identified “at least 39 new pathogens, including HIV, Ebola hemorrhagic fever, Marburg fever and SARS”⁴ and cautioned that these diseases, and older well-known ones, “pose a threat to health through a combination of mutation, rising resistance to antimicrobial medicines and weak health systems.”

Today, the best-known novel diseases are Ebola and COVID-19. Ebola is now fading from view but was terrifying not so long ago. Starting in 1976, when it was first discovered in humans, the disease simmered in West and Central Africa, killing a few hundred people a year.⁵ Then, in 2013, it suddenly began to spread, ravaging Guinea, Sierra Leone, and Liberia, and sending tendrils into other countries.⁶ A delayed but ultimately fierce public health initiative was able to halt the outbreak, but not before 28,000 people had died.⁷

The threat that Ebola posed, particularly to the residents of African countries, is not fully appreciated. For example, Lagos, the largest city in Africa, almost experienced an outbreak. Had that happened, hundreds of thousands of people would have died.⁸ Nor has the danger of an Ebola pandemic disappeared. An outbreak in the Democratic Republic of the Congo between 2018 and July 2020 killed another 2,300 people.⁹ Additional outbreaks are likely.¹⁰

As readers are surely aware, the COVID-19 pandemic has been far more globally devastating. As of this writing (December 2022), over 650 million people have been infected and over six million have died.¹¹ Although the worst now seems to have passed, waves of increasingly contagious variants have kept the pandemic going.¹²

Until recently, most developing countries suffered less from the COVID-19 pandemic than the richest countries, but this comparison no longer holds. Peru now has the highest cumulative death rate in the world, and many other Latin American countries are not far behind.¹³ Sub-Saharan African countries, which long enjoyed relatively low infection rates, are now experiencing rising rates.¹⁴

When one considers the impacts of COVID-19 infections and deaths on the economy and society of each country, the picture darkens further. Prior to the pandemic, the economies of most developing countries were more fragile than those of the United States or European countries. As a result, they suffered more severely from the lockdowns and the curtailments of exports and travel that the pandemic provoked.¹⁵ For the same reason, developing countries are recovering economically more slowly than richer countries.¹⁶

The initial success of developing and least-developed countries (particularly in Africa) in curbing the pandemic was attributable not to any special characteristics of their populations or climates, but rather to a combination of (a) their ability to prevent or limit the entry of potentially infected persons, (b) their foresight in imposing stringent limitations on social interactions with which most residents complied, and (c) the low average age of their populations.¹⁷ When governments have been unable to curtail transmission through such measures, the results have indeed been catastrophic.

The premier example is Ecuador. Early in the pandemic, one or more infected persons apparently entered Guayaquil, the principal port.¹⁸ The resulting outbreak was fierce. The hospitals and morgues were soon overloaded. Infected doctors waited in wheelchairs for their patients to die so that they could use their ventilators.¹⁹ Bodies piled up in the streets.²⁰ When a lockdown eventually managed to cap the disease in Guayaquil, it began to ravage Quito,²¹ and the numbers of new cases continued to rise until May 2021.²²

The healthcare systems of most developing countries are no better than that of Ecuador.²³ The WHO notes that growth in the numbers of essential medical personnel, such as nurses, is barely keeping pace with population growth in most middle- and low-income countries.²⁴ Added to this are a shortage of doctors, prohibitive costs, and infrastructure deficits that make access to healthcare infeasible for the poorest.²⁵ In addition, several other conditions common in developing countries contribute to the risk that infectious diseases will spread rapidly: residences are close together (especially in the poor sectors of urban areas); most residents have neither savings nor credit and thus must work to survive; meager internet access limits opportunities to work at home; lack of refrigeration necessitates daily shopping;²⁶ and limited sanitation inhibits the adoption of protective measures.²⁷ In combination, these factors do not bode well for the Global South.

B Healthcare Nationalism

The second changed circumstance is a surge of what has been called “healthcare nationalism,” which is impeding the ability of developing countries to obtain the pharmaceutical products they need to meet both the new threats and the threats posed by the many diseases that have long been endemic to these countries.²⁸

The situation with respect to COVID-19 is the most dire. When vaccines capable of preventing or mitigating the disease began to appear on the horizon, the governments of developed countries purchased, in advance, the bulk of the scarce supply. The governments of most developing countries lacked the resources to make similar anticipatory purchases.²⁹ In some of the few instances in which developing countries have been able to place orders, they did not receive the promised supplies on time.³⁰ The COVID-19 Vaccines Global Access (COVAX) Facility, a commendable multilateral effort to create a more equitable system for allocating scarce supplies, was unable to correct the imbalance.³¹ The net result: the percentages of people in developing countries who are fully vaccinated remain much lower than the percentages in developed countries.³²

The impact of the pandemic on nationalism in general and on so-called vaccine nationalism in particular is complex and varies significantly by country and region.³³ But there is little doubt that, in the United States at least, popular sentiment supports the principle that the government of each country should satisfy the healthcare needs of its own residents before addressing the needs of the residents of other countries.³⁴ That sentiment guided the US government’s response to the HIV pandemic,³⁵ has thus far dominated the actions of the Biden Administration,³⁶ and will surely remain influential if one of the many other infectious diseases that pose equally severe threats to the human population becomes rampant.

In sum, when confronted with future pandemics, we should expect substantial lags between the widespread introduction of therapies and vaccines in developed countries and the widespread distribution of those same drugs in developing countries. Particularly considering the weak healthcare systems of most developing countries, such lags will likely cause large numbers of unnecessary deaths.³⁷

C The Prevalence of Substandard Medicines

The third changed circumstance is that the widespread distribution of low-quality medicines seriously threatens the health of residents in developing countries. This has likely been true for some time, but the scale of the problem has only recently become apparent. In 2017, the WHO, after aggregating many studies, estimated that 10.5 percent of the drugs distributed in low-income countries were either falsified or substandard.³⁸ In middle-income countries, the number was barely lower: 10.4 percent.³⁹ An even more recent and comprehensive study found the overall rate in low- and middle-income countries to be 13.6 percent and the rate in Africa to be 18.7 percent.⁴⁰

The rates vary by type of drug. Least likely to be falsified or substandard are antiretrovirals (ARVs) because most of them are supplied through channels closely monitored by international donors.⁴¹ The rates for tuberculosis drugs and antibiotics are higher – somewhere between 6 and 17 percent.⁴² Most likely to be falsified or substandard are antimalarial drugs.⁴³ In recent years, substandard vaccines have also been distributed in distressing numbers.⁴⁴

The presence of falsified and substandard medicines in the market has three serious effects. First and most obviously, patients who consume such drugs obtain either zero or reduced therapeutic benefit. This impact is especially severe in the administration of antimalarial drugs to young children, who are particularly vulnerable to the disease.⁴⁵ The most comprehensive study estimates that, roughly 122,000 children under the age of five die each year in Sub-Saharan Africa alone as a result of consuming falsified or substandard antimalarials.⁴⁶ As the authors of the study concede, a good deal of uncertainty surrounds these numbers. But there is little doubt that the number of deaths is appalling.⁴⁷

Second, when patients consume drugs that are supposed to cure them, but fail to do so, they (and their neighbors) lose faith in medical treatment. In settings where such faith is already shaky, this can diminish their willingness to consult doctors and receive treatment in the future.⁴⁸

Finally, consumption of degraded medicines, or a course of treatment in which legitimate and falsified drugs are mixed, accelerates the emergence and spread of drug-resistant strains of the diseases in question.⁴⁹ This, in turn, both makes it harder to suppress the diseases with medicines and may diminish the effectiveness of vaccines when they finally become available.

Identifying the sources of substandard drugs in developing and least-developed countries is a difficult task. However, public health officials in Africa and officials in various international agencies tend to believe that most substandard and falsified medicines are now coming from manufacturers in China and India.⁵⁰ Most informed observers concur.⁵¹ Officials associated with the International Criminal Police Organization (Interpol) are doing their best to locate and punish the firms engaged in this practice.⁵² In addition, China recently increased the penalties for distributing falsified medicines.⁵³ Unfortunately, the large profits that can be reaped by engaging in this practice, and the difficulty of detecting defective medicines, will likely maintain the market for substandard drugs for the foreseeable future.

To summarize: (a) new diseases threaten the lives of the residents of developing countries;⁵⁴ (b) the surge in healthcare nationalism in developed countries impedes the ability of developing countries to obtain from overseas manufacturers the vaccines and drugs they need to address public health threats; and (c) the medicines that developing countries are able to import are frequently contaminated with falsified or substandard ingredients.⁵⁵ This combination of developments sharply increases the potential benefits to the residents of developing countries of enlarging capacity for local production of pharmaceutical products.

To be sure, these changes do not neutralize entirely the objections that some economists have long made to augmentation of local production – namely, that it may forfeit economies of scale, increase the costs of drugs, and impair quality control.⁵⁶ In the remainder of this chapter, we will note several contexts in which those hazards remain relevant and how the governments of developing countries could, and should, tackle them. But all things considered, the argument for enhancing local production is strong.

2 A Framework to Support Local Production

Unfortunately, increasing local production is easier said than done. The history of efforts to achieve that goal is replete with failures. In retrospect, it appears that in most successful efforts to augment local production capacity, four conditions were present, while in unsuccessful efforts, at least one was missing. Those conditions are:

1. (1) Legal authority. The local firms had clear legal rights to manufacture the drugs at issue.

2. (2) Technological know-how. The local firms had or were provided the technology and skills necessary to engage in the production processes in question.

3. (3) Financial resources. The local companies had access to capital.

4. (4) Reliable demand for the products. A sizable set of customers stood ready to buy the firms’ products.

The first and third factors have received considerable attention from lawmakers and scholars, but the roles played by the others have not been adequately appreciated.⁵⁷

The second factor, the transmission of know-how, is especially critical with respect to the production of active ingredients – which is the most important and challenging dimension of the pharmaceutical manufacturing process.⁵⁸ Making and packaging pills using imported compounds is a less complex process, and the potential profits generated by those activities are lower – indeed, often too low to sustain an enterprise.⁵⁹ The greatest potential rewards, as well as the greatest benefits to public health and economic development, are associated with local production of active pharmaceutical ingredients (APIs).⁶⁰ The skill levels required to begin producing APIs and to engage in sophisticated drug-development processes vary enormously but typically exceed the competence of firms in developing countries. To get off the ground, such firms usually need assistance from the enterprises already engaged in that process. The same is true for vaccines, where the production of bulk antigens remains the most daunting step to be mastered by developing-country manufacturers, in general, and will be even more important in the case of new vaccine platforms.⁶¹

Inattention to the issue of technological know-how has had unfortunate results. When local firms have not had access to the know-how necessary to break into the lucrative and socially beneficial zone of API production, they have had difficulty staying afloat.⁶² This has sometimes prompted governments to prop them up by paying exorbitant fees for the modest services that the firms have been able to provide. That, in turn, has resulted in needlessly high drug prices,⁶³ prompting some commentators to insist that mercantilist industrial policy and access to medicines are incompatible.⁶⁴

Close study of such episodes, however, reveals that the source of the problem is the limited scope of the services that the firms in question are equipped to provide, which adversely affects their ability to participate in large local and international tenders.⁶⁵ This handicap, in turn, creates barriers to access the financing they need to expand and thrive. The solution is to ensure that local firms have the skills necessary to move up the value chain.⁶⁶

The fourth factor, concerning reliable demand for products, has received even less attention than the second factor but is equally important. Firms in developing countries have been reluctant to invest in manufacturing capacity absent some assurance that there will be customers able and willing to buy their products.⁶⁷ This assurance is especially important in the current environment, where generic versions of many of the drugs that the firms might consider producing are already available from Indian, Chinese, or other manufacturers.⁶⁸

Inattention to this fourth factor can be traced in part to ways in which the debate concerning access to medicines in developing countries was reoriented by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). Defenders of the TRIPS Agreement contended that a well-greased global market based on harmonized intellectual property (IP) protection would naturally foster technology transfers that would redound to the benefit of developing countries.⁶⁹ Critics of the TRIPS Agreement were concerned about rising drug prices in developing countries and emphasized mechanisms, such as compulsory licensing, that could neutralize the enhanced levels of patent protection.⁷⁰ Neither group focused on market mechanisms that could entice local producers to generate inexpensive drugs that would meet the needs of the countries’ residents.

Mindful of how things have gone awry in the past, we offer below five practicable strategies that, in combination, would more effectively promote local production of pharmaceutical products.

A Clearing Legal Space

As we have seen, a precondition of local production is that a firm considering making a drug has the legal right to do so. In the past, this requirement has rarely posed a significant barrier, either because the drug in question was no longer subject to patent protection (as is true of most “essential medicines”) or because the patentee granted the local firm a license (as was true of the Indonesian ventures created by the Japanese firms in the 1970s). However, in the future, a developing country may wish (or need) to enable local manufacture of a new therapy or vaccine without the permission of the patent owner. If so, the government of the country will be obliged to identify some reason why, despite the TRIPS Agreement, doing so would be lawful. Most of the potential reasons have been analyzed extensively in the literature, so we simply itemize them here:

1. (1) Several developing countries are not (yet) bound by the relevant portions of the TRIPS Agreement, either because they are not members of the World Trade Organization (WTO)⁷¹ or because they are classified by the Committee for Development Policy of the UN as “least developed countries” and thus need not comply until 2033.⁷² They are therefore free to structure their national patent laws to give local firms space to engage in reverse engineering and production of drugs.

2. (2) The Doha Declaration and article 31bis of the TRIPS Agreement leave developing countries considerable freedom to force patentees to grant low-royalty (nonexclusive) licenses to local firms when necessary to meet public health emergencies.⁷³

3. (3) By following India’s lead in interpreting stringently the inventive-step requirement (also known as the nonobviousness requirement), developing countries could create space for local firms to manufacture some so-called me-too drugs – that is, those that provide little or no therapeutic advantage over their predecessors.⁷⁴

4. (4) By refusing to follow the lead of the United States in extending the duration of patent protection to offset (partially) the time devoted to clinical trials, developing countries could empower local firms to commence manufacturing of a pioneering drug sooner than would be permissible in the United States or other developed countries.⁷⁵

A fifth strategy has received less focus to date and thus merits closer attention. “Working requirements” consist of obligations imposed on patentees to “work” their inventions in the countries in which the patents are granted – in other words, to make the products or processes to which they apply available in those countries.⁷⁶ Such obligations were once common components of national patent statutes, but during the twentieth century they were abandoned by many developed countries.⁷⁷ They have not disappeared altogether, however. A few developed countries (such as the United Kingdom) still have them, and many developing countries have working requirements on their books.⁷⁸

Working requirements come in various shapes and sizes. The more stringent ones require patentees to practice the patent within the country (for example, by manufacturing a patented product in a local plant or by granting a license to a local manufacturer); the less stringent permit patentees to satisfy the obligation by exporting to the country patented products produced elsewhere. Some are satisfied if the patent is practiced within any of a set of countries of which the country of issuance is a member. The penalties for violating the requirements range from forfeiture of the patent to various forms of compulsory licenses. Some penalties apply as soon as a patent issues; others take hold only after a prescribed period of time.⁷⁹

Those countries that retain working requirements rarely enforce them.⁸⁰ One of the reasons is continued uncertainty regarding whether such requirements are compatible with the Paris Convention (the premier multilateral agreement on patent law) and the TRIPS Agreement. Only once has a dispute presenting this issue come close to authoritative resolution. During the early stages of the AIDS pandemic, one of the ways in which Brazil sought to combat the disease was by threatening to enforce a working requirement against the holders of patents on AIDS therapies. The United States formally challenged that initiative as a violation of the TRIPS Agreement but eventually backed down before the claim was resolved.⁸¹ Since then, there have been no WTO dispute-resolution proceedings in which the issue has been presented.

In the absence of an authoritative ruling on the issue, many scholars have ventured opinions. Some contend that all working requirements violate article 27 of the TRIPS Agreement – specifically, the prohibition against discrimination on the basis of “whether products are imported or locally produced.”⁸² Others contend that at least the subset of working requirements that are enforced through compulsory licenses are justified by reading articles 27, 30, and 31 together or that the apparent hostility of the TRIPS Agreement to working requirements is neutralized by the more generous stance taken in article 5(A)(2) of the Paris Convention. Still others stake out compromise positions.⁸³

To clear legal space for local pharmaceutical manufacturers, developing countries might make greater use of working requirements than they do at present, and they might then rely on one or more of the arguments summarized above to resist predictable attacks from adversely affected companies and countries. To be of value in the present context, such a requirement would of course have to define “working” as manufacturing the covered product locally, not merely as a willingness to export products to the country in question. Adoption (and enforcement) of such a duty would force patentees either to set up and operate a local manufacturing facility, to grant a license to a local manufacturer, or to acquiesce in unauthorized production by a local manufacturer – any of which would benefit the developing country at issue.

None of these five options, however, would do much good unless local firms could be confident that they enjoyed the legal authority to implement them. One of the main reasons that strategies like this have been infrequently employed is the uncertainty surrounding whether they could withstand opposition or sanctions from the governments of developed countries sensitive to the interests of the patentees.⁸⁴ Two legal reforms would go far to establish confidence in the legality of these strategies.

First, developing countries should create or clarify declaratory-judgment procedures that enable local firms to initiate civil suits against patentees and obtain authoritative rulings in advance regarding their rights to manufacture specific drugs. In the United States, federal courts have limited the availability of such suits because of the so-called case or controversy requirement derived from the US Constitution,⁸⁵ but most countries (including most developing countries) have no such constitutional constraint. By exploiting this freedom, developing countries could help local firms ascertain, with minimal risk, what they can and cannot do.

The second reform, by contrast, would require a change in the law and behavior of the United States – and perhaps some other developed countries. In the past, the United States Trade Representative (USTR) has frequently threatened or punished developing countries that had invoked TRIPS flexibilities.⁸⁶ The USTR could be required to do the opposite. Several US government agencies already routinely and conscientiously provide private parties with guidance concerning the permissibility of proposed courses of conduct. For example, the Internal Revenue Service (IRS) issues “private revenue rulings” to individuals or firms that want assurance concerning the tax implications of business plans, and the Federal Trade Commission indicates in advance whether specific mergers would be permissible.⁸⁷ US law could be amended to require the USTR to do something analogous when asked for guidance by a developing country.

Suppose, for example, that the government of Ghana were considering imposing a compulsory license or a “working” requirement on a COVID-19 vaccine. Prior to doing so, the government could submit a description of the plan to the USTR (and perhaps to either the WTO or the World Intellectual Property Organization) and request rulings from it concerning the permissibility of the initiative in question. The ideal response would consist of a published, reasoned analysis of the compatibility of the proposed initiative with TRIPS and other multilateral agreements. A more modest and practicable response, considering the limited resources and authority of the USTR, would consist of a simple statement that the agency would or would not initiate proceedings to challenge the initiative. The United States would be bound by the USTR’s response, much as the IRS is bound by its “revenue rulings.”

To be sure, the creation of such a mechanism would entail a significant adjustment of the USTR’s responsibilities. For many years, the agency has staunchly defended the interests of the pharmaceutical firms based in the United States whenever they have objected to initiatives by developing countries to promote access to medicine.⁸⁸ To provide countries with good-faith determinations of whether it intended to challenge proposed initiatives, the USTR would have to change its practices and culture considerably.

The reorientation might be justified in either of two ways. First, the USTR might be persuaded to take more seriously its current statutory charge. In its own mission statement, the agency interprets that charge as follows: “American trade policy works toward opening markets throughout the world to create new opportunities and higher living standards for families, farmers, manufacturers, workers, consumers, and businesses.”⁸⁹ This statement appropriately recognizes that US trade policy can and should be shaped to promote the welfare of all sectors of the US population, not just businesses concerned with maximizing their export markets. In several circumstances, increasing the ability of firms in developing countries to manufacture drugs redound to the net benefit of US residents.⁹⁰ For example, if augmentation of local production significantly reduced the presence of substandard antibiotics in developing countries, the resulting inhibition of the development of drug-resistant strains of bacteria would be, in the long run, hugely beneficial to everyone on the planet. Similarly, the universal provision of vaccines could lead to a speedier recovery of the global economy from global pandemics, benefitting everyone, including US residents, in the long run. A preclearance system of the sort proposed above would enable the agency to identify such situations and thus to provide governments and firms in developing countries clarity concerning their authority to proceed.

The second route would be more sweeping and would likely require statutory change. Arguably, the aggressive way in which the USTR has been defining US trade policy since at least 1988⁹¹ is no longer consistent with US foreign policy as a whole. The latter certainly includes some degree of attention to the welfare of the residents of the rest of the world.⁹² To consistently privilege the interests of businesses based in the United States over the health of the residents of the developing world is no longer (if it ever was) compatible with the overall aspirations of the United States as a player on the world stage. It is also inconsistent with the globalized nature of scientific research today, which is characterized by transnational networks of research institutions and systems of knowledge creation, sharing, and exploitation. Adjusting to the realities of deeply integrated research and development (R&D) systems requires changes, not only in the science and technology policy of the United States, but also in its trade policy. It may well be time to amend the USTR’s charge to reduce the tension.

B Production Triangles

In 2007, the government of Uganda catalyzed an innovative joint venture between Quality Chemicals, a local distributor with no preexisting production capacity, and Cipla Pharmaceuticals, India’s largest generic producer.⁹³ Cipla was given an equity share of 38.55 percent; Quality Chemicals was given 61.45 percent. The companies shared equally in the profits of the venture.⁹⁴ The government underwrote the venture by guaranteeing a 23 percent stake (as part of Quality Chemical’s local equity) for the first plant, which was completed in 2008. The agencies responsible for the project were the Ugandan Ministry of Health and the Ugandan Investment Agency, which drew inspiration and authority from the Ugandan Drug Policy of 2002 and the Ugandan Investment Code Act of 1991.⁹⁵

As part of the venture, Cipla Pharmaceuticals was required not only to build the plant using the blueprints of its WHO Good Manufacturing Practices (WHO-GMP)-compliant plants elsewhere, but also to train all segments of the Ugandan staff – management personnel as well as scientists, chemists, and engineers – over a period of five years.⁹⁶ The deliverables specified in the agreement included: implementation of good laboratory practices, engineering for plant maintenance, information on selecting and sourcing of raw materials, organizing supply of other inputs, and planning for contingencies in production, marketing, and distribution.⁹⁷ In addition, Cipla was expected to submit dossiers for GMP compliance to the WHO, thereby enabling Quality Chemicals to compete in international bidding processes.⁹⁸ Last, but not least, the Ugandan government agreed to purchase all products produced in the plant for a period of seven years.⁹⁹

A few analogous ventures are currently in the works. For example, the government of Mozambique has initiated a similar venture that includes the government of Brazil (playing the roles of sponsor and patent licensor) and a local manufacturer, Sociedade Mocambique de Medicamentos.¹⁰⁰ But joint ventures of this sort remain highly unusual.

Such “triangular ventures” hold enormous promise for enhancing local production capacity. Their key features are:

• An experienced pharmaceutical firm, a local manufacturer, and the government of a developing country enter a long-term collaboration.

• The pharmaceutical firm provides know-how, training, guidance in creating manufacturing facilities capable of producing APIs, and advice to ensure compliance with protocols established by international organizations.

• The government provides some initial investment in the venture and, equally important, a commitment to purchase substantial quantities of the products of the venture.

• The local firm provides management, marketing, most of the personnel, and much of the financing.

One of the things that makes this model promising is that in many developing countries, the largest purchaser of drugs is the national government, which then distributes them through the public health system.¹⁰¹ The government thus has the purchasing power necessary to provide the local firm with a sufficiently large and assured market to get off the ground. To be sure, the government’s purchases are often underwritten by international donor organizations, which oversee the tender process.¹⁰² However, those agencies typically favor increasing local production and thus would not balk at arrangements like Uganda’s.

The government’s purchasing power need not be wielded profligately. An unqualified commitment to purchase unlimited quantities of drugs at whatever price the local company set would obviously be inappropriate. Benchmarks and time limits can and should be employed to avoid waste.

Crucial to the feasibility of triangular ventures is the commitment by the government to empower the local firm to manufacture APIs (in the case of drugs) or antigens and adjuvants (in the case of vaccines) by supporting the venture, and also, if possible, to participate in risk-sharing.¹⁰³ As indicated above, experience has shown that the production of active ingredients of these sorts is essential to make such ventures profitable, thus minimizing and eventually eliminating the price premium that the government needs to pay for the drugs.

Of course, the details of such triangular collaborations will vary by country and product. Further experimentation as well as adjustments of ongoing projects would be necessary to determine the optimal arrangement in each jurisdiction. But triangular arrangements could go far toward boosting local production of pharmaceutical products, thereby promoting both health and prosperity in nations desperately short of both.

C Apprenticeships

An alternative way to stimulate transfers of the kind of technological know-how that has proven to be critical to local-production initiatives would be to create an apprenticeship program. Hundreds of years ago, apprenticeship was a common and highly effective system for transferring technical knowledge across generations. For example, in the sixteenth and seventeenth centuries, roughly 10 percent of the population of London were apprentices, and two-thirds of adult male residents of the city had at some point served as apprentices.¹⁰⁴

This system could be adapted to strengthen the technical and soft skills necessary to build capacity for local drug production. Assume, plausibly, that a US or European manufacturer of a new drug or vaccine refused (or was forbidden by its national government) to export any of its products to developing countries until the needs of consumers in its country of residence were fully satisfied. Without impairing the pace of production, the firm could take on, as apprentices, scientists employed by existing or prospective pharmaceutical firms in developing countries. Working alongside the firm’s managers and scientists, the apprentices would absorb crucial technical knowledge and then return to their countries of residence to set up and run similar production facilities. They would be replaced by another cohort of apprentices, who would in turn return to their countries of origin, and so forth. In this way, firms in developing countries would gain access to the most current knowledge concerning how best to produce safe and efficacious drugs.

The feasibility of such a system is strengthened by the fact that apprenticeships have long been used effectively in German chemical and pharmaceutical firms.¹⁰⁵ Increasingly, pharmaceutical firms in other countries are relying on them to train skilled workers.¹⁰⁶ To be sure, the level at which the proposed program would operate is different. Instead of training technicians, the goal would be to train the scientists and managers who would be responsible for establishing and overseeing new and complex manufacturing processes. But if apprenticeship can be employed to teach advanced surgical techniques,¹⁰⁷ it ought to work in teaching novel pharmaceutical manufacturing methods.

Recently, the Organisation for Economic Co-operation and Development (OECD) has emphasized the importance for African countries to prioritize ways of providing African firms affordable access to technology and know-how.¹⁰⁸ One of the OECD’s specific recommendations is that African countries should encourage leading scientists and laboratories to participate in international research consortia and should incentivize local research centers to join international research partnerships.¹⁰⁹ Apprenticeship programs of the sort described above would be one way of implementing this recommendation.

Creation of a system of this sort would require three things. First, mechanisms for selecting, coordinating, and supporting the apprentices would have to be established by the governments of developing countries – in much the same way that apprenticeship was regulated by the City of London in the seventeenth century. Second, to avoid corroding the primary markets of the sponsoring companies, the firms in developing countries that benefitted from this model would have to commit credibly not to export drugs to developed countries, and the governments in those countries would have to back the firms’ commitment. Finally, the pharmaceutical firms would have to be persuaded to participate in the system.

The first two of these tasks would of course be the responsibility of the developing countries. Our recommendation is that they move forward on both fronts promptly. Ideally, developing countries should use the regional organizations already in place (such as the African Union) to create such systems. Not only would that be more efficient than constructing country-specific regimes, but it would also reduce the logistical challenges for the pharmaceutical firms.

The third task will likely be the hardest. There is little chance that the major pharmaceutical firms would participate in this system voluntarily. Thus far, the firms that have developed the leading COVID-19 vaccines have shown little interest in sharing any of the information or discoveries they are generating.¹¹⁰ Thus, to prompt them to pass on information to scientists from the developing world, they would have to be encouraged in some way – but how?

Three possibilities seem promising. The first capitalizes on the fact that almost all of the firms in the COVID-19 vaccine race have received substantial funding from the governments of the United States or the European Union.¹¹¹ The funding provided by the US government has come at various times and in various forms, but in the aggregate already exceeds $9 billion.¹¹² This amount is unprecedented, but public funding for pharmaceutical research is not; the percentage of new drugs that are funded in part by grants from governments is large and growing.¹¹³ In such circumstances, the governments dispensing the grants that help sustain the research could and should insist, as a condition of acceptance, that the recipients commit to participate in the apprenticeship system described above if the research leads to new products.

Second, when developing new drugs and vaccines, private pharmaceutical firms often rely upon innovations made by government scientists.¹¹⁴ In some instances, this reliance may be sufficiently important that, to comply with patent law, the firm would be obliged to include the government scientists in the list of inventors in its patent applications. That, in turn, gives the government substantial leverage, which it could use to insist that the firms participate in the apprenticeship program.¹¹⁵

The third possibility capitalizes on the fact that pharmaceutical firms regularly conduct clinical trials of new vaccines and therapies in developing countries. Several trials of COVID-19 vaccines are already underway in African countries.¹¹⁶ Such trials require the permission of the governments of the states in which they are conducted. It would be entirely reasonable for a government to condition its approval, not only upon a commitment by the firm to abide by safety requirements, as is routine, but also upon a commitment to participate in an apprenticeship program.

Fulfilling such a commitment would cost a pharmaceutical firm little. Indeed, the firm might well benefit from the insights and efforts of the apprentices. The supplies of drugs to the citizens of developed countries would in no way be impaired. And, by augmenting production capacity within developing countries, the apprenticeship system would save many lives.

D Quality Control

One of the reasons for the disturbingly high number of falsified and substandard medicines in developing countries is that the governments of those countries have inadequate control over drug supplies. This is partly because, as we have seen, most medicines are imported into those countries and, all too often, neither the foreign manufacturers nor the governments of the exporting countries are committed to ensuring that the products meet quality standards.¹¹⁷ A major potential benefit of an increase in local production capacity is that it would reduce reliance on substandard foreign manufacturers and create opportunities to purge developing countries of defective drugs and vaccines.¹¹⁸

In one important respect, this benefit would be realized automatically. Currently, the introduction of substandard and falsified pharmaceutical products into the supply chains in developing countries is often triggered by stockouts – that is, exhaustion of the supply of drugs. When distributors and pharmacies are unable to meet demand for particular medicines by purchasing them through regular channels, they turn to irregular sources, which, as one might expect, contain much higher percentages of nonconforming products.¹¹⁹ Displacing imports with locally produced products would decrease the frequency of such stockouts in three ways. First, the time necessary to transport products from manufacturers to distributors and retailers would of course be shorter, thus enabling quicker responses to surges in demand. Second, local production eliminates customs barriers, where batches of drugs often languish. Finally, local producers are much more likely to prioritize local needs than are foreign manufacturers – and thus to ensure that scarce supplies do not end up elsewhere.

It would be a serious mistake, however, to rely entirely on these direct benefits of local production. The profits that unscrupulous suppliers can earn would remain high, and corruption in some developing countries would ensure that such suppliers could continue to ply their nefarious trade.¹²⁰ To prevent the persistence or even exacerbation of the problem, it is essential that initiatives to augment local production be married with enhanced efforts to promote quality.

Such efforts can and should be made at three levels. First, the processes for determining which pharmaceutical products are approved for sale in each country should be improved. Second, manufacturing facilities must be built, maintained, and operated in ways that ensure their products are reliable and untainted. Finally, robust systems of post-marketing surveillance must be deployed to prevent contamination of the supply chain with falsified or poor-quality medicines. Fortunately, major initiatives on all three of these levels are already underway, but they must be intensified and adequately funded.

With respect to the drug-approval process, developing countries are increasingly recognizing, and capitalizing upon, the potential benefits of regional collaborations in creating and operating counterparts to the US Food and Drug Administration (FDA) and the European Medicines Agency (EMA). In Africa, for example, the African Medicines Regulations Harmonization Initiative (AMRH) is making good progress toward accelerating and improving the processes by which drugs are first approved for distribution.¹²¹ Among its results is the African Union Model Law on Medical Products Regulation, which has now been adopted in twenty-five countries.¹²² Even more promising is a treaty concluded in 2019 that, if fully implemented, would establish a continental African Medicines Agency analogous to the EMA. The fifteenth instrument of ratification of the African Medicines Agency Treaty was recently deposited at the African Union Commission, and the Treaty has now entered into force.¹²³ It will enable considerable improvement and streamlining of the mechanisms for securing registration of new drugs in multiple jurisdictions.¹²⁴

With respect to manufacturing quality, although few developing countries have already established systems for bringing local manufacturing facilities into compliance with the WHO’s GMP certification requirements,¹²⁵ several are currently creating such systems. The United Nations Industrial Development Organization (UNIDO) has developed a “roadmap” for countries pursuing this objective, which has already been successfully implemented in Kenya and Ghana.¹²⁶ In short, this is not an easy objective for many developing countries, but it is surely attainable.

Effective post-marketing surveillance systems have proven to be harder to implement, in part because of the ingenuity that unscrupulous counterfeiters have shown in circumventing systems for detecting their wares.¹²⁷ But technologies are now available that, in combination, enable inspectors to identify substandard or falsified medicines at any point in the distribution chain. They come in various shapes and sizes. Some facilitate tracking of products from the moment they leave the manufacturers until they are delivered to patients. Comprehensive systems of this type are now in use – or in the process of deployment – in the United States, the European Union, China, India, Brazil, Turkey, and a few other countries.¹²⁸ With sufficient funding, such systems could eventually be deployed in developing countries.

A second group of technologies does not rely on tracking, but instead uses visible or “scratchable” codes embedded in the drugs’ packaging to enable consumers to verify the authenticity of pills. The purchaser of a packet uses their cell phone to transmit the associated code to the manufacturer and receives, in response, a text message indicating whether its contents are authentic. Systems of this sort include Sproxil (developed in Nigeria) and Pharmsecure (developed in Nigeria and India).¹²⁹

Yet another set of technologies relies upon testing the chemical composition of medicines at various points in the distribution chain. They include:

• High-performance liquid chromatography (HPLC) testing of samples in laboratories that have been qualified by the WHO to conduct such testing.¹³⁰

• The “MiniLab,” developed in the 1980s by the Global Pharma Health Fund (and subsequently updated periodically), which makes possible analogous testing in the field.¹³¹

• Systems that use a combination of portable scanners (relying on Raman, near-infrared, or Fourier-transform Infrared (FTIR) spectroscopy) and portable digital libraries (containing the spectral profiles of authenticated drugs) to determine, in the field, whether pills contain the ingredients they purport to contain. Examples of initiatives of this sort include the Southern African Quality Assurance Network (SAQAN) (a nonprofit venture with initial deployments in Namibia and Malawi) and RxAll (a for-profit venture with initial deployments in five other African countries).¹³²

Systems of the first two types dovetail with patent and trademark law. In other words, they facilitate detection of pills that have been produced or distributed by companies lacking legal rights to do so. They are thus dependent upon quality-control measures (of the sort discussed above) that the authorized manufacturers employ. Systems of the third type instead determine whether tested medicines have the right amount of active ingredients (and are uncontaminated by unwanted substances) regardless of whether they have been lawfully manufactured. In most instances, the two systems will lead to the same results, but not always.

The various mechanisms currently available have features that may prove more useful in some countries than in others, depending on local factors, including the number and capacity of testing labs available, level of coordination across the responsible government agencies, expertise of testing staff, quality of telecommunications networks, transportation, and access to hospitals where drugs are distributed to patients. Regardless of the comparative advantages of any system, the point is that some reliable system of post-market surveillance is essential if the benefits of local production of pharmaceutical products are to be fully realized.

E Regional Organizations and Economic Communities

The final strategy we propose to support local production of pharmaceutical products leverages existing but underutilized regional frameworks to address legal and economic considerations necessary to strengthen the institutional environment in which local producers operate.

Regional integration has long been a significant feature of the international economic order. Starting with European regionalism in the 1958 Treaty of Rome, which established the European Economic Community, regionalism has gradually intensified and today is deeply entrenched in the multilateral trade system. Indeed, the idea of regional integration was codified in the General Agreement on Tariffs and Trade (GATT), which noted explicitly the “desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries parties to such agreements.”¹³³

The abiding interest in closer trade integration and liberalization has fueled subregional coalitions of countries politically committed to tackling economic development challenges. For many developing and least-developed countries, the formation of such regional economic communities (RECs) was a strategic response to overwhelming development challenges that individual countries lacked resources and capacity to address. The first UN Economic Commission for Africa (ECA) study on regional integration identified a number of benefits from regional integration, including increased foreign and domestic investment; increased global competitiveness; promotion of regional public goods; prevention of conflict; consolidation of economic and political reform; and economies of scale.¹³⁴ These benefits, and the effectiveness of the regional institutions that support the integration process generally, offer important benefits with respect to local pharmaceutical production.

The treaties that establish RECs are especially complex (and, for our purposes, important) in Sub-Saharan Africa, which boasts several regional communities, including the South African Development Community (SADC) and the Economic Community of West African States (ECOWAS), with different purposes and overlapping memberships. Without much exception, however, all RECs anticipate deeper regional integration and are largely justified by concerns relating to overcoming major constraints to competitiveness, such as enabling economies of scale in production, achieving leverage in global fora, and enhancing mutual benefit from improved growth and development. These considerations are strongly aligned with the rationale for local pharmaceutical production.

Five aspects of the RECs can be employed to increase the feasibility of enhancing local production of pharmaceutical products. The first and most obvious is scale. Not all developing countries are large enough to support commercially viable pharmaceutical manufacturing firms selling products (directly or indirectly) to domestic consumers. If they are to participate in the initiatives set forth above, they must be combined into groups that enable economies of scale. The RECs provide ready-made combinations of this sort. The populations (in millions) encompassed by the principal developing-country regional communities are set forth in Table 5.1.¹³⁵ With the possible exception of the Caribbean Community (CARICOM) and the Gulf Cooperation Council (GCC), all of these are sufficiently large to sustain vibrant and efficient regional pharmaceutical industries.

Table 5.1 Principal developing country regional economic communities (RECs)

REC	Region	Population in millions
Andean Community (CAN)	South America	98
Southern Common Market (MERCOSUR)	South America	284
Caribbean Community (CARICOM)	Caribbean	18
Arab Maghreb Union (UMA)	North Africa	102
Economic Community of West African States (ECOWAS)	West Africa	349
Economic Community of Central African States (ECCAS)	Central Africa	121
Common Market for Eastern and Southern Africa (COMESA)	Southeast Africa	390
East African Community (EAC)	East Africa	177
Southern African Development Community (SADC)	South Africa	345
Gulf Cooperation Council (GCC)	Middle East	54
South Asian Association for Regional Cooperation (SAARC)	South Asia	1,713
Association of Southeast Asian Nations (ASEAN)	Southeast Asia	647

Second, member countries of RECs typically have similar disease footprints and thus need similar portfolios of drugs. Third, freedom of trading within these blocs means that shipments of goods can move easily and quickly from a manufacturer in one member country to distributors and consumers in other member countries. Fourth, many of the agreements underlying the RECs provide explicitly for cooperation in health matters and thus create legal frameworks that local firms can exploit. For example, article 110(1)(b) of the Common Market for Eastern and Southern Africa (COMESA) Treaty requires that member states cooperate in health “through the facilitation of movement of pharmaceuticals within the Common Market and control of their quality.”¹³⁶ COMESA member states undertake to, among other things:

devise and implement systems to ensure that pharmaceuticals entering the Common Market from third countries, produced in the Common Market or moving within the Common Market conform to internationally acceptable standards in terms of quality and therapeutic value;

develop a national drug policy that would include establishing quality control capacities, national formularies and good procurement practices;

harmonize drug registration procedures to achieve good control of pharmaceutical standards without impeding or obstructing the movement of pharmaceuticals within the Common Market;

accord each other mutual recognition of drugs registered in the Common Market;

co-operate, within the framework of co-operation in industrial development, in the local production of pharmaceutical products; and

establish an audit team to assist local pharmaceutical industries in producing high quality products that are safe, effective, and free from harmful side effects, and to assist the Member States in controlling the standards of pharmaceuticals manufactured within their territories in conformity with the WHO Certification.¹³⁷

Similarly, article 29 of the SADC Protocol on Health requires that parties cooperate and assist one another in “(a) harmonization of procedures of pharmaceuticals, quality assurances and registration; (b) production, procurement and distribution of affordable essential drugs; (c) development and strengthening of an Essential Drugs Programme and the promotion of the rational use of drugs; [and] (d) development of mechanisms for quality assurances in the supply and conveyances of vaccines, blood and blood products.”¹³⁸

In the ECOWAS region, the West African Health Organization (WAHO) is responsible for leading the harmonization of health policies, pooling resources, and strengthening cooperation to address health-related challenges in the subregion.¹³⁹ Like SADC and COMESA, ECOWAS adopted a Protocol to establish WAHO that gave the institution a broad policy mandate to address health matters on a regional basis.¹⁴⁰

These provisions and associated regional institutions establish clear authority for policymaking and a legal framework that would enhance the viability of local pharmaceutical production, including prospects to address many of the dimensions of the initiatives described in the preceding sections of this chapter.

Some RECs have already experimented with stronger regional commitments to address access to pharmaceutical products. For example, a SADC Pharmaceutical Business Plan was published in 2007 with the overall goal of reducing the disease burden in the region by enhancing sustainable access to affordable, safe, and efficacious essential medicines.¹⁴¹ To achieve these targets, SADC identified several strategies aligned with the region’s Protocol on Health: harmonizing standard treatment guidelines and essential medicine lists; strengthening regulatory capacity, supply, and distribution of basic pharmaceutical products through ensuring a fully functional regulatory authority with an adequate enforcement infrastructure; promoting joint procurement of therapeutically beneficial medicines of acceptable safety, proven efficacy, and quality to the people who need them most, at affordable prices; and facilitating trade in pharmaceuticals within SADC.¹⁴² Although implementation has been slow, the Pharmaceutical Business Plan provides an institutional platform on which the political commitments of states to local production of pharmaceuticals can be sustained and strengthened over time. Such action-oriented frameworks also offer important context to justify new legal or regulatory tools necessary to deploy strategic initiatives in response to public health challenges in the region.

Even absent formal provisions on health or medicines, regional organizations may operate under more general provisions concerning free movement of goods, security, or human welfare to undertake initiatives to support local production along one of the dimensions we have described. For example, under the general purpose of eliminating technical barriers to trade, the ASEAN Pharmaceutical Product Working Group was established by the ASEAN Consultative Committee for Standards and Quality with the objective of harmonizing pharmaceutical regulations of member countries.¹⁴³ Harmonization of labeling standards for pharmaceutical/medicinal products in the ASEAN region was achieved in March 2006,¹⁴⁴ and additional harmonization initiatives remain ongoing.¹⁴⁵

A comparison of provisions to support local manufacture of pharmaceutical products suggests that most RECs already have the requisite legal and policymaking authority to launch and support local production initiatives (Table 5.2).

Table 5.2 Features in select RECs favorable to enhanced local production

REC	Free movement of goods	Harmonization of medicines regulation	Pooled procurement of medicines
ASEAN	✓	✓ (Harmonization of labelling standards for pharmaceutical/medicinal products achieved)	✕
CARICOM	✓	✓ (Caribbean Regulatory System for Medicines (CRS) which seeks, inter alia, to harmonize regulations for medicines and pharmaceuticals)	✓
COMESA	✓ (Expressly provides for facilitation of movement of pharmaceuticals)	✓ (Specifically, for medicines registration)	✕
ECOWAS	✓	✓ (Provides generally for harmonization of standards and measures)	✕
MERCUSOR	✓	✕	✓ (Unclear whether this is pursuant to a legal instrument)
SADC	✓	✓ (For harmonization of procedures of pharmaceuticals, quality assurances and registration)	✓ (Pooled Procurement Services (SPPS) system)

Finally, most RECs also have in place governance systems that could be employed to prevent paralyzing struggles among member countries concerning where pharmaceutical manufacturing plants will be located, which courts will have jurisdiction over the firms (particularly for triangular agreements), and which regulations are applicable.¹⁴⁶ In their efforts to combat the COVID-19 pandemic, the institutions responsible for the implementation of regional integration agreements have already demonstrated impressive capacity to draw on the authority provided in the relevant treaties to accomplish novel measures such as standardization and deployment of common technology platforms needed to secure public trust in testing data, coordination of pooled procurement of diagnostics and other medical products, and establishment of regional lab-referral networks to assist the poorest countries that lack diagnostic capacity.¹⁴⁷

In sum, in parts of the developing world there exist large differences between countries’ infrastructure, human capital, and security. These differences impede countries from relocating their pharmaceutical manufacturing capacity; therefore, organizing regional initiatives would be especially promising to remedy these issues. Even in areas such as the South Asian Association for Regional Cooperation (SAARC), where individual countries are large enough on their own to sustain local industries, regional initiatives may still offer advantages such as possible manufacturing complementarity between nations and common trading tariffs.

3 Conclusion

In combination, the recent emergence of new infectious diseases, the associated surge of healthcare nationalism, and the prevalence of falsified and substandard drugs have strengthened substantially the net benefits of augmenting the capacity of developing countries to produce pharmaceutical products locally. Most previous efforts to do so have foundered. The chance of success in the future would be maximized by the adoption of five strategies: (a) clearing the legal space to ensure that local firms have the freedom to operate; (b) using “production triangles” (collaborations among developing-country governments, local firms, and developed-country pharmaceutical firms) to reduce regulatory impediments and to ensure that there exist adequate markets for locally produced products; (c) building the human capital base in developing countries through initiatives such as an international apprenticeship system to facilitate the acquisition by local firms of crucial technological know-how; (d) strengthening the legal and administrative apparatus for preventing the dissemination in developing countries of substandard and falsified drugs; and (e) relying on regional economic communities to create economies of scale and to ensure that medicines are made available to all residents of all developing countries, while also stimulating competition among networks of local firms. Initiatives that incorporate these recommendations could both save many lives and catalyze meaningful economic development.

6 Patent Philanthropy

Haochen Sun ^†

As in previous global public health crises, such as the HIV epidemic, patents have presented a major obstacle to the supply of medicines and vaccines amid the devastating COVID-19 pandemic. Compulsory licensing and an intellectual property (IP) waiver have been put forward as solutions. However, as other chapters of this volume reveal, neither proposal alone can address global vaccine inequality with sufficient urgency. Nor would these measures significantly improve the capacity of developing countries to produce medicines and vaccines. As the Director General of the WTO has already cautioned, the solution to the problem of vaccine inequality must be holistic, and the IP waiver, for example, should not preclude further action.¹

In this chapter, I propose the establishment of a Patent Philanthropy Initiative (PPI) as an alternative approach to equipping the global community with better preparedness for future public health crises. The United States Patent and Trademark Office (USPTO) would be called upon to administer the PPI. Pharmaceutical companies owning USPTO-granted medical patents would be required to contribute 1 percent of their annual post-tax profits accrued from their patented medicines to the PPI. Such financial contributions would then be deployed by pharmaceutical companies to promote public health in the United States and abroad through transferring knowledge, donating medical products, constructing facilities, training professionals, and facilitating public health education.

Section 1 of the chapter presents the PPI as an alternative, or complement, to the existing proposals on patent law and public health, detailing the structure of a potential USPTO-administered pilot program. Section 2 examines how the PPI could improve public health globally and also considers why the USPTO should take responsibility for overseeing the PPI. Section 3 responds to concerns that the PPI may violate the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the US Constitution and disincentivize investment in medical innovation.

1 The Creation of the PPI

A Structure of the PPI

In essence, the PPI is intended to require pharmaceutical companies to devote resources to sharing the benefits of their patented medical inventions for charitable purposes. For each patent acquired from the USPTO, the PPI would require a pharmaceutical company to make a corresponding contribution to a domestic or global social welfare program. The USPTO can be the designated administrator of a pilot PPI program requiring each pharmaceutical company to contribute as PPI funds 1 percent of its annual post-tax profits from sales of patented medical products. Such financial contributions would apply to medical patents registered with the USPTO and already under patent protection, as well as any future medical patents the USPTO grants. Pharmaceutical companies would be able to take a range of actions to fulfill this responsibility, provided that they spend approximately 50 percent of PPI funds domestically and 50 percent internationally.

Actions

To enforce their PPI responsibilities, this chapter suggests that pharmaceutical companies carry out, in good faith, at least three categories of capacity-building actions as follows.

Technology Transfer

Despite longstanding arguments that local firms should be empowered to produce the medicines their residents need, most medicines and vaccines consumed in developing countries are imported.² Developing countries remain “systematically excluded from accessing the ability to produce highly complex drugs”³ and thus lack self-sufficiency in addressing medical challenges. As of 1986, it was estimated that only 11 percent of global pharmaceutical production occurred in developing countries and over 80 percent in six industrialized countries.⁴ The COVID-19 pandemic has demonstrated the urgency of capacity building in developing countries. Despite global calls for the waiver of COVID-19 vaccine patent rights to increase availability in developing countries, capitalizing on the direct transfer of vaccine production knowledge is more effective.⁵

Therefore, pharmaceutical companies may fulfill their responsibilities under the PPI by engaging in efforts to transfer the following four kinds of technologies to a company located in a developing country.

First, pharmaceutical companies may transfer essential medicine production know-how. According to the WHO, essential medicines “satisfy the priority health care needs of the population.”⁶ People should have access to these medicines at all times and in sufficient amounts, and their prices should be set at generally affordable levels. Transferring know-how to essential medicine producers in developing countries would greatly enhance efforts to promote public health.

Second is know-how about the production of essential vaccines. Vaccination is one of the best ways to protect people – infants, children, and teens in particular – from diseases that can cause serious or deadly harm to health.⁷ It plays a critical role in preventing and containing outbreaks of diseases that “[are] difficult to control and have consumed public health resources in affected areas.”⁸ Amid the COVID-19 pandemic, essential vaccines were recommended or required for people in different age groups.⁹ The transfer of know-how to vaccine producers in developing countries would enable public health interventions that improve lives and prevent deaths.

Third, pharmaceutical companies may transfer know-how to produce medicines and vaccines for neglected diseases. Every year, neglected diseases such as Chagas disease, sleeping sickness, and visceral leishmaniasis cause hundreds of thousands of deaths among the poor and marginalized in developing countries.¹⁰ There are few resources available in developing countries to address these diseases overlooked by policymakers.¹¹ Therefore, pharmaceutical companies could fulfill their responsibilities under the PPI by transferring neglected disease research know-how to a company located in a developing country.

Fourth, pharmaceutical companies may transfer to developing countries physical objects or equipment for production of pharmaceuticals at reduced prices compared to their prices in developed countries. Sufficient availability of such objects and equipment is vital if developing countries are to boost research and production capacities in protecting public health.¹²

Donation

To meet their PPI obligations, pharmaceutical companies may donate medical products and equipment to a not-for-profit organization or developing country. Such products and equipment include essential medicines and vaccines (whether produced or purchased by the company), testing toolkits, disease diagnostic equipment, medical research equipment, and manufacturing facilities.

Donation of raw materials also falls within this category of action. Pharmaceutical manufacturers require a complex range of raw materials, including, “starting compounds, intermediates, solvents, cell lines, yeast, bacteria, cell-culture media and feeds, excipients, production materials such as tubing, single-use manufacturing equipment, and packaging materials.”¹³ Raw material deficiencies can directly result in drug shortages. For instance, in 2012, the Food and Drug Administration (FDA) reported 117 drug shortages in the United States, of which 27 percent resulted from raw material issues.¹⁴ Amid the COVID-19 crisis, raw material shortages have been frequently cited as a major obstacle to universal vaccine access.¹⁵

Facility Building

As proved by the production of COVID-19 vaccines, manufacturing lines are of critical importance. The manufacture of mRNA vaccines, for instance, requires equipment to produce lipid nanoparticles.¹⁶ Pfizer’s car garage-sized lipid production suite at its Michigan plant “is crisscrossed by pumps and pipes, and crowded with tanks, filtration units and half-dollar size jet mixers,” with about 100 of these mixers being used simultaneously for lipid formulation.¹⁷ Although “several commercial kits are available to produce mRNA for preclinical studies at laboratory scale, their costs are high.”¹⁸ Experts have pointed out that there are currently few existing factories capable of producing mRNA vaccines and that retrofitting of existing sites would potentially cost billions of dollars.¹⁹ For mRNA vaccine production to occur across the globe, the need for sustainable and cost-effective manufacturing must first be addressed.²⁰ This could be achieved through donation by pharmaceutical companies of both basic and special equipment and facilities for the construction of medicine and vaccine manufacture lines.

Pharmaceutical companies may also assist in building and improving distribution channels for medicines and vaccines. Pfizer/BioNTech’s COVID-19 vaccines, for example, must be stored in ultra-cold temperatures and should be distributed using thermal shipping containers, freezers, temperature monitoring devices, and ancillary supply kits for diluting, mixing, and dispensing vaccines.²¹ Donation of such facilities by pharmaceutical companies would represent an important contribution to the safe and sufficient distribution of medicines and vaccines in both the United States and developing countries.

Professional Training

Pharmaceutical companies may also deploy staff to train and boost the knowledge and skills of medical professionals and pharmaceutical researchers in low-income regions in the United States and developing countries. Local production of pharmaceuticals in developing countries offers general benefits, including the creation of high-paying skilled jobs, which would support sustainable long-term economic development and allow local firms to respond more quickly and flexibly to future crises.²² Effective local production could be encouraged by collaboration between developing governments, local firms, and developed country pharmaceutical companies, international internship initiatives to facilitate the acquisition of technological know-how, and strengthening legal and administrative apparatuses to prevent dissemination of substandard or falsified drugs.²³

Under the PPI, major pharmaceutical companies could contribute to this process through schemes to increase the number of pharmaceutical scientists and researchers in developing countries. Such schemes could take the form of apprenticeship programs for scientists from existing or prospective local firms to “absorb crucial technical knowledge and then return to their own countries of residence to set up and run similar production facilities.”²⁴ For such a system to work, developing country governments would need to be responsible for selecting and supporting apprentices, while local firms would need to commit to not exporting the drugs they create to developed countries.²⁵

Public Knowledge Sharing

Pharmaceutical companies should develop educational programs to better disseminate health-care knowledge to the US public and in developing countries. They could deploy their own professionals, hire similar professionals, or commission a medical care organization for online and face-to-face activities such as open lectures and talks, distribution of health-care brochures, and meetings with doctors and nurses. Such programs would reflect the ethos of preventive medical care, whereby the spread of basic knowledge on topics ranging from blood pressure to cancer to mental health screening prompts people to take precautionary measures to maintain personal health and prevent infection.²⁶ The programs would also promote a communal sense of health care, where “nobody is fully protected until everyone is protected.”²⁷

The COVID-19 pandemic has proven the special importance of sharing public health knowledge. Despite sufficient availability of COVID-19 vaccines, vaccination rates are still relatively low in many parts of the United States, making the country very vulnerable to new coronavirus variant outbreaks.²⁸ Vaccine hesitancy has been identified as the leading cause of low vaccination rates,²⁹ with some declining vaccinations based on mis/disinformation obtained from social media.³⁰ Many young people are hesitant because they feel that COVID-19 is not something that will impact their health.³¹ Vaccine producers are well positioned to share information about COVID-19 vaccines and reduce vaccine hesitancy. Also, vaccination rates have remained lower in black and Latino communities in the United States due to public health inequalities and the relative lack of health knowledge.³² Pharmaceutical companies may fill such public health “blind spots” left by the government, delivering information about vaccine efficacy and vaccination locations to communities in need.

B 1 percent

With regard to the 1 percent of pharmaceutical companies’ annual post-tax profits from patented medical product sales that would fund PPI actions, a few questions arise. How should such annual profits be calculated? Some patented medical products contain one patent, while others consist of multiple patents. Should these patents be treated as equal? Further, a pharmaceutical company may manufacture many kinds of medical products, not all of which utilize medical patents. As of July 2021, Pfizer has 189 approved drugs and 29 medical patents registered in the United States.³³ Some of those drugs use Pfizer’s existing patents, some use Pfizer’s expired patents, and some do not use any patents at all. Should Pfizer’s annual profits be calculated on sales of all Pfizer drugs in the marketplace in a given year or only those that use its medical patents? Pfizer may also license its patents to another company to make and sell medical products. For PPI purposes, should Pfizer’s patent royalties be included in its profits?

This chapter suggests that annual profits for PPI purposes should be determined as follows. First, such annual profits should be calculated based on sales of medical products using a company’s patents. The number of patents used in a medical product should be considered, and medical products that do not use a company’s patents should be excluded from the calculation of annual profits. However, a company’s royalties from licensing its medical patents should be included. Second, such annual profits should deduct the relevant taxes pharmaceutical companies pay.

Pharmaceutical companies should bear the burden of calculating their annual profits derived from sales of their patented medical products, and each should then submit an end-of-financial-year profit report to the USPTO. It would be relatively easy for these companies to calculate such profits. Many are publicly listed companies that utilize accounting firms to prepare documents about quarterly and annual profits for public release, and they also need to make annual tax filings. Therefore, as long as they identify the medical products that use their patents, they can figure out the post-tax profits accrued from sales of these products and contribute 1 percent to the PPI.

Meanwhile, the USPTO should provide channels for the public to make financial donations to the PPI. If the donor designates a specific company that is willing to accept the donation, the USPTO may allocate the donation accordingly. If a donor does not designate a company, the USPTO may allocate the donation to a company willing to use it for PPI actions.

While 1 percent may sound like a small contribution, Johnson & Johnson earned post-tax profits of approximately $15 billion each year from 2018 to 2020,³⁴ and Pfizer earned around $11, $12, and $9 billion in 2018, 2019, and 2020, respectively.³⁵ Based on these earnings, their respective contributions to a PPI fund would be approximately $150 million and $110 million each year.³⁶ Adding other pharmaceutical companies and potential donations, the PPI could contribute enormous amounts of funds to the promotion of public health in the United States and developing countries.

C Review

The USPTO should require each participating pharmaceutical company to submit an annual report detailing the nature, scope, and effects of its actions taken in fulfillment of the responsibility attached to each of its medical inventions. In particular, the report should explain how a company’s expenditures on PPI actions have amounted to the requisite 1 percent of post-tax profits from sales of its medical products. The USPTO could review those reports every five years with a panel consisting of its own administrators, independent patent experts, auditing professionals, and public interest activists. The panel would decide whether a relevant pharmaceutical company has met its responsibility and, if not, make recommendations to the USPTO on mitigating actions the company should take.

Every ten years, the USPTO should conduct a comprehensive review of the PPI, studying its efficacy and how it should be improved with new measures to boost social welfare and safeguards to protect pharmaceutical companies’ interests. For example, the USPTO may review whether any of the five categories of PPI actions should be removed or any new category added. It may also review other issues such as whether 1 percent is a proper rate for financial contributions and how to improve the calculation of annual profits accrued from sales of patented medical products. Therefore, the PPI would continue to create dynamic schemes reflective of social and technological developments. To better implement the PPI, the USPTO should consider how it could collaborate with other governmental agencies, such as the Centers for Disease Control and Prevention, the FDA, and the United States Trade Representative, as well as international organizations such as the World Health Organization (WHO). The USPTO may invite them to share their expert opinions about how to improve the PPI and how to work together on specific programs to enhance the efficacy of pharmaceutical companies’ PPI actions.

Meanwhile, all USPTO decisions (including those by the panel it designates to review the PPI) could be announced subject to judicial review, allowing pharmaceutical companies to utilize judicial proceedings to settle their disputes with the USPTO should negotiations fail. The availability of this dispute resolution mechanism would prevent improper decisions that are unfair to pharmaceutical companies.

Nonprofit organizations may contribute to the PPI through actions such as creating a ranking of best-performing pharmaceutical companies entitled, for example, the World’s Most Responsible Pharma.³⁷ Every year, this program would access and rank the performance of pharmaceutical companies’ PPI actions, thereby encouraging companies to design and carry out PPI actions diligently. It would also create an additional oversight system to monitor any problems with PPI actions and generate public discussion about subsequent solutions. Figure 6.1 shows the holistic operation of the PPI:

Figure 6.1 Patent Philanthropy Initiative (PPI)

2 The Institutional Need of the PPI

A The PPI’s Potential Effects on Improving Public Health

How would the PPI promote public health in the United States and developing countries? COVID-19 provides a vantage point for a thought experiment about the PPI’s efficacy. If the PPI had been implemented five or ten years ago, the United States and the rest of the world would have been better prepared to cope with the COVID-19 pandemic.

First, the PPI would provide a feasible framework for large pharmaceutical companies’ sharing of technologies and know-how in developing countries. Deficiencies in the current global approach to technology transfer are evident in the current struggle to provide universal access to COVID-19 vaccines. Vaccine production has been largely limited to wealthy and highly industrialized countries and regions, including the United States, the United Kingdom, and the European Union.³⁸ Vaccine acquisition has similarly favored such countries, with nearly 85 percent of all COVID-19 vaccines administered by May 26, 2021 going to people in high-income and upper-middle-income countries.³⁹ Patent monopolies and the reluctance of firms to share technology through licenses have prevented pharmaceutical manufacturers in underrepresented regions from taking matters into their own hands, leaving only 43 percent of the estimated global vaccine manufacturing capacity being used as of February 2021.⁴⁰

Moreover, even if all COVID-19 vaccine patents were to be waived, a lot of essential information is still not included in the patents, preventing manufacturers from immediately beginning production.⁴¹ As complex biological inventions, COVID-19 vaccines are “highly dependent on specific manufacturing processes and practices, many of which are not disclosed in a patent.”⁴² The challenge of reverse engineering such processes is one reason behind the expense and delay historically associated with the entry of biosimilars into the market.⁴³

The PPI responds to the much-needed transfer of technologies and know-how. In public health crises, the PPI would encourage pharmaceutical companies to increase technology transfer and donate manufacturing ingredients and equipment to boost the production and distribution of vaccines, as well as medicines. After containment, the initiative would promote the medical capacities of low-income regions in the United States and developing countries in the long term. Efforts from developing countries alone have been insufficient to address deficiencies in local production of pharmaceuticals. For instance, through tax and import duty exemptions and import bans on forty-four locally made medicines, the government of Ghana sought to promote local pharmaceutical production and has reportedly established a 30 percent market share for local producers.⁴⁴ However, the success of these measures is tempered by “limited product choice amongst local companies, low capacity utilization, and a lack of ability to manufacture APIs or expand production into new therapeutic categories.”⁴⁵ Greater efforts by major pharmaceutical companies to transfer technology and know-how could be instrumental in overcoming such deficiencies.

By facilitating technology transfer measures toward developing regions, the PPI could promote greater global access to COVID-19 medicines and vaccines. Pharmaceutical companies would be more willing to transfer COVID-19 vaccine production know-how because their efforts could count toward fulfilling their PPI obligations. Such efforts are critical for enabling vaccine manufacturers in developing countries to ramp up production. As scholars have found, “[to] get off the ground, [firms in developing countries] typically need assistance from the enterprises already engaged in that process. The same is true for vaccines, where the production of bulk antigens remains the most daunting step to be mastered by developing country manufacturers.”⁴⁶ Pharmaceutical companies could also take the PPI action of entering into collaborative licenses with vaccine manufacturers in developing countries, which would also promote COVID-19 vaccine production in these countries.⁴⁷

Second, the PPI would promote greater self-sufficiency in developing countries, countering the nationalism that occurred at the expense of much of the world’s population during the COVID-19 pandemic. One means of pursuing this goal is through training health-care workers in developing countries. The WHO has declared the scaling up and strengthening of health workforce training and education a priority in both its 2019 Sustainable Development Goals global action plan and 13th General Programme of Work. This plan is intended “to address the global gap of 18 million health workers, and to support, strengthen and empower the existing health workforce.”⁴⁸ Similarly, Global Health Progress has operated the Healthworker Programme since 2009 to address “the estimated shortfall of at least 7.2 million health workers.”⁴⁹

Third, the PPI could help pursue the more general goal of ensuring universal access to affordable medicines. Drugs fall under two major categories: global drugs created for rich markets but also of benefit to developing countries⁵⁰ (a prime example of which are drugs developed to treat cancer⁵¹), and drugs specific to developing countries, such as those designed to treat malaria or tuberculosis.⁵² Historically, pharmaceutical investment has overwhelmingly favored research into global drugs. For instance, in 2001, the Harvard School of Public Health surveyed twenty major firms. It found that only eight respondents had conducted research over the previous year into tuberculosis, malaria, African sleeping sickness, leishmaniasis, or Chagas disease, while seven others had spent less than 1 percent of their research and development budgets on any of these.⁵³ Currently, funds for research into developing country-specific drugs often come from public or philanthropic sources or public–private partnerships.⁵⁴

Pharmaceutical companies under the PPI could, therefore, commit to investing more in addressing developing country-specific diseases to produce more effective drugs and increase competition to drive down prices. This would be instrumental in addressing diseases which have been largely eradicated in rich countries but remain a problem in the developing world. For instance, whereas the WHO recently declared that China was now malaria-free after reporting 30 million annual cases of the disease in the 1940s, malaria continues to kill hundreds of thousands annually, especially in Sub-Saharan Africa.⁵⁵ In parts of Kenya specifically, cases are reported to be as high as 725 per 1,000 people.⁵⁶ Moreover, the challenge of COVID-19 has undermined existing efforts to combat malaria. For instance, malaria cases spiked in some parts of Zimbabwe after the beginning of the pandemic.⁵⁷ This problem could have continued to develop as the antimalaria drug chloroquine did show potential as a treatment for COVID-19, which could have made the drug less accessible for malaria patients in developing countries.⁵⁸

B Responsibilities of the USPTO

The Conventional Role of the USPTO

The COVID-19 pandemic has exposed deep-seated problems in the US public health-care system⁵⁹ and reform is imperative. The COVID-19 pandemic was also a global public health crisis necessitating a global response.⁶⁰ When developing countries face severe lack of patented vaccines, this raises the question as to how to adjust the patent protection system that has been heavily influenced by developed countries with the greatest access to vaccines.⁶¹ Moreover, given the comparative fragility of developing economies, such nations have been hit hardest by lockdowns and curtailment of trade, and are also predicted to recover much more slowly than richer countries.⁶² A global recovery from the pandemic benefits the United States in terms of decreasing domestic transmission of infection from abroad. Global recovery will also drive quicker national economic recovery through normalization of global trade and investments.⁶³ As demonstrated in this section, the PPI would greatly promote public health in the United States and abroad, and would not disrupt pharmaceutical innovation in the United States. Therefore, the US government should take the lead in protecting public health globally and implement the PPI under the auspices of the USPTO.

The USPTO is the federal agency responsible for granting patents and registering trademarks in the United States, with the former aimed at fulfilling the mandate of the IP clause of the US Constitution.⁶⁴ The clause holds that, in order to “promote the progress of science and useful arts,” Congress should have the power to provide inventors limited periods of exclusive rights over their discoveries.⁶⁵ In pursuit of this goal, the USPTO is responsible for examining patent applications to determine whether an applicant is entitled to a patent under the law.⁶⁶ While the USPTO lacks substantive rulemaking authority,⁶⁷ it provides advice to the US president and government agencies to further “effective IP protection for U.S. innovators and entrepreneurs.”⁶⁸

Once a patent application is submitted to the USPTO, patent examiners review its conformance with formal requirements of patent law, investigate any relevant prior art and negotiate with the applicant as to the proper scope of the claims.⁶⁹ The work of patent examiners is divided among a number of technology centers, with each center having jurisdiction over certain areas of technology.⁷⁰ If patent grants are refused by examiners, appeals can be made to the Patent Trial and Appeal Board (PTAB).⁷¹ The USPTO publishes granted patents, and most patent applications, eighteen months from the earliest effective application filing date, records assignments of granted patents, and maintains a search room for the public to examine granted patents and records.⁷²

Why should the USPTO expand its conventional role to administer the PPI? In the following two subsections, I argue that oversight of the PPI would enhance the USPTO’s capacities in fulfilling its responsibilities to promote innovation and protect patents as public franchises, both of which will ultimately promote public health.

Responsibility for Promoting Innovation

As outlined, the USPTO examines and grants patents for the purpose of promoting innovation. However, several USPTO practices arguably work against this purpose. By assuming responsibility for oversight of the PPI, the USPTO could counteract some of these practices.

The primary way in which the USPTO can be considered as failing to promote innovation is in the granting of poor-quality patents, which have a range of negative effects on entrepreneurship and innovation. For example, the grant of poor-quality patents facilitates holdup licensing and patent thickets, creates deal-killing transaction costs by forcing contracting parties to reexamine the validity of USPTO-granted patents, and encourages rent-seekers to form “speculative patent acquisition and enforcement ventures.”⁷³ There have been persistent accounts of diminished patent quality at the USPTO, and it has been cautioned that its patents risk becoming no more than “R&D Completion Certificates.”⁷⁴

As evidenced by the practice of evergreening, low-quality patents are certainly a problem in the pharmaceutical industry. Evergreening involves the artificial extension of patent terms through secondary patent applications for minor changes to drugs that are often not novel, nonobvious, or useful.⁷⁵ For instance, before GlaxoSmithKline’s patent for the heavily prescribed antibiotic Augmentin was due to expire in 2002, the company was able to secure a secondary patent and prevent generic competition from entering the market to reduce costs for patients.⁷⁶ Augmentin’s original patent was for a combination of amoxicillin and a salt of clavulanic acid, and the secondary was based on the same priority document used in 1975, for the single claim of a “solid pharmaceutically acceptable salt of clavulanic acid.”⁷⁷ Although the patent was invalidated by a US court in 2002,⁷⁸ the fact such a poor-quality patent was granted sounds alarm bells for the USPTO.

The practice of evergreening pervades the pharmaceutical industry. A study of every drug on the market between 2005 and 2015 found that 80 percent of best-selling drugs had extended their exclusivity at least once and 50 percent had done so more than once.⁷⁹ By granting such patents, the USPTO must assume some responsibility for the role evergreening plays in inhibiting the progress of science. Most significantly, in a “blithe disregard” for the exchange-of-secrets justification for patent law, instead of allowing a pharmaceutical invention to fall into the public domain after the expiry of a patent term, evergreening denies the public the benefit offered by the intended diffusion of inventive knowledge.⁸⁰

USPTO efforts to improve patent quality have encountered numerous practical and legislative challenges. For instance, Professor Mark Lemley has argued that investment in efforts to curb poor USPTO patents would be wasteful.⁸¹ Primarily he claims that the costs of having examiners spend more time examining patents and searching prior art would not be justified as 95 percent of patents are either never used or are used in contexts which do not rely on the determination of validity.⁸² Moreover, he contends that the assumption that more examination time would weed out more bad patents without weeding out good ones is unrealistic. Such false negatives risk reducing innovation incentives.⁸³ Placing too much emphasis on the denial of patents, therefore, counterintuitively risks further limiting the progress of science.

Similar problems can be found in efforts and proposals to curb the practice of evergreening. For instance, the USPTO attempted to introduce a limitation to the availability of continuation applications, with only two such applications being available per application family.⁸⁴ The limitation was controversial as it risked blocking legitimate patent extensions and, in any case, was ultimately invalidated in court for exceeding the USPTO’s authority to regulate.⁸⁵ Despite the grant of a rehearing, the USPTO ultimately decided to voluntarily withdraw its proposed limitation.⁸⁶ Other proposed legislation presents similar challenges. For instance, a 2019 bill called the “No Combination Drug Patents Act” would create a presumption that follow-on pharmaceutical patents were obvious.⁸⁷ Critics have also questioned the impact of this presumption on legitimate conduct. They pointed out that secondary patents could be essential in bringing certain necessary treatments to the market, as in the case of the failed cancer drug AZT being granted a secondary method patent for use to treat AIDS.⁸⁸

Oversight of the PPI provides the USPTO with a golden opportunity to drive innovation in public health through the patents it grants. Rather than turning away from incentivizing disclosure through the grant of patents and focusing on increasing examination scrutiny and the denial of patent grants, the USPTO could counteract the negative effects of poor-quality patents by ensuring pharmaceutical companies appropriately give back to the public as a means of promoting innovation.

Under the PPI, efforts to promote voluntary technology transfer could help overcome evergreening’s attempts to delay the introduction of inventions to the public domain. For instance, the ongoing COVID-19 crisis has highlighted the need for greater sharing of essential information not contained in patent documents. As complex biological inventions, COVID-19 vaccines are “highly dependent on specific manufacturing processes and practices, many of which are not disclosed in a patent.”⁸⁹ Collaborative licenses between patent-owning firms and individual manufacturers have, therefore, been proposed as the most efficient way to advance vaccine production.⁹⁰ By ensuring that companies engage in such measures to fulfill their duties under the PPI, the USPTO would be able to promote innovation more proactively than through focusing on the denial of patents.

Responsibility to Protect Patents as Public Franchises

A second reason that the USPTO should assume responsibility for oversight of the PPI is that patents granted by the USPTO are by nature public franchises. This should confer some responsibility on the USPTO to ensure that the patents are used in the public interest, and the PPI can provide a vehicle for ensuring this.

The designation of patents as public franchises came in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC.⁹¹ The case concerned a patent for technology to protect wellhead equipment used in hydraulic fracturing, allegedly infringed by Greene’s Energy Group.⁹² Greene’s initiated validity proceedings at the District Court and petitioned the USPTO to conduct inter partes review.⁹³ The PTAB of the USPTO issued a decision concluding that all of Oil States’ claims were unpatentable.⁹⁴ Oil States then appealed on the grounds that inter partes review was unconstitutional.⁹⁵

When considering Oil States’ arguments, the Supreme Court began by noting that the grant of a patent involves the USPTO taking from the public rights of substantial value and offering them to the patentee.⁹⁶ The court likened this to the granting of public franchises and noted that such franchises can be qualified by the authority of the grantor to reexamine and perhaps cancel the grant.⁹⁷ Oil States argued that patents conferred private property rights to a patentee, but this claim was held not to contradict the court’s decision as the specific property right granted by a patent was a public franchise.⁹⁸ As public franchises can only confer the rights that a statute provides, patent rights are limited by the provisions of the Patent Act, which include inter partes review.⁹⁹

The primary objective of all franchise grants is to benefit the public at large. The interests of grantors and grantees are secondary to such grants.¹⁰⁰ Generally, the public benefit sought is market regulation, for example by ensuring low prices or subsidizing costs.¹⁰¹ Grantees’ agreement to pay certain fees, shoulder some responsibility, or perform a public duty is the quid pro quo to receive a franchise from the government. It is the responsibility of the state or a duly authorized body to oversee the agreement.¹⁰² In the case of patents, it can be argued that, as the granting government agency, the USPTO should assume responsibility for ensuring patents are used as public franchises in the public interest.

In the pharmaceutical industry, there are notable examples of patents being used against the public interest and failing to serve their role as public franchises. For example, as outlined above, evergreening artificially extends patent monopolies and delays the entrance of medicines into the public domain.¹⁰³ The practice of price gouging is another example. Taking advantage of the substantial freedom to set prices that a patent monopoly offers,¹⁰⁴ patent owners frequently engage in abusive practices. In the first half of 2019, more than 3,400 drugs saw their prices raised by an average of 10.5 percent, with about 41 of these experiencing price increases greater than 100 percent and one increased by 879 percent.¹⁰⁵ Generally, the most dramatic price rises occur in the category of “specialty drugs,” which may be used to treat rare conditions, require special handling such as ongoing clinical assessment, or simply fall into the category for costing in excess of $10,000 a year.¹⁰⁶ From 2010 to 2015, specialty drugs accounted for more than two-thirds of growth in drug spending and in 2016 it was projected that specialty drug prices would mean that 1 percent of all drugs would account for 50 percent of all drug spending in the United States by 2018.¹⁰⁷

In cases of abusive price gouging that relies upon medical patents, it could be argued that the USPTO should be empowered to intervene. However, determining the nature of this intervention is a challenge. In cases of patents with questionable validity, it might be suggested that inter partes or post-grant review could be used as a means for the USPTO to revoke monopoly rights. Inter partes review can be initiated by petitioners either nine months after the grant of a patent or following the termination of post-grant review.¹⁰⁸ In contrast, post-grant review must be initiated within the nine months following the grant of a patent.¹⁰⁹ While inter partes review focuses only on nonobviousness and considers only patents and printed publications as prior art, the post-grant review covers all grounds for invalidity and considers a broader range of evidence.¹¹⁰ Currently, inter partes review is more common as the window to institute it is wider.¹¹¹

The first problem with this approach is that it would only be available to the USPTO in the case of weak patents. However, the strategy of pursuing revocation of weak patents being used against the public interest is also not without its flaws. For instance, while it is cheaper for prospective generic manufacturers to pursue inter partes review than court litigation, “inter partes review filing fees of $23,000 and attorney costs of around $400,000 or more are still substantial.”¹¹² Furthermore, drugs are often covered by multiple patents and “30-month stays will remain available so long as at least one Orange Book-listed patent remains.”¹¹³ Even if all relevant patents were invalidated, generic-free periods provided for new drugs (five years), drugs for rare diseases (seven years), and biologics (twelve years) are not affected by patent invalidation.¹¹⁴

Commentators have argued that promoting post-grant opposition mechanisms such as inter partes review risks providing challengers with too many bites of the apple, “allowing them to inundate patentees with an endless set of challenges.”¹¹⁵ Other statements cautioning against this approach have been made. For instance, it is claimed that the decision to label patents as public franchises is unfounded.¹¹⁶ This is because as a category of legal rights, patents have historically been understood to impart private interests.¹¹⁷ However, commentators also claim that allowing the revocation of patents to become too commonplace risks “effectively stating that a public franchise remains a public right, even after the public right has been conferred upon the individual.”¹¹⁸

Rather than focusing on the invalidation of patents, the USPTO could ensure patents are being used in the public interest through oversight of the PPI. Practices like price gouging could be counteracted by ensuring that pharmaceutical firms commit a fraction of profits from patented products to efforts aimed at improving public health. Aside from engaging in voluntary technology transfer, as described earlier, pharmaceutical companies could be encouraged to participate in schemes aimed at promoting universal access to affordable medicines. Such efforts would ensure that the public franchises offered to pharmaceutical companies are not abused while also not undermining the private interests that a public franchise confers. It would also avoid some of the limitations of inter partes review, especially problems unique to the pharmaceutical industry, such as generic-free periods. Furthermore, as the PPI would require 1 percent of profits from pharmaceutical products with both strong and weak patents, it would allow the USPTO to ensure that even the former category is used in the public interest.

3 The Legitimacy of the PPI

In the preceding sections, I examined the case for establishing the PPI and its economic and social functions in promoting public health, both in the United States and abroad. In this section, I seek to respond to potential concerns that the PPI would run afoul of US obligations under the TRIPS Agreement as well as the Takings Clause of the US Constitution. I also consider whether the PPI would disincentivize pharmaceutical companies from investing in research and development and thereby severely disrupt innovation in the medical sector.

A International Law Obligations and Constitutional Protection

TRIPS Agreement

Would the PPI violate the TRIPS Agreement? This agreement sets out minimum standards for IP protection in WTO member states, including the United States.¹¹⁹ In my opinion, the United States would remain in full compliance with the TRIPS Agreement notwithstanding USPTO implementation of the PPI.

First, the PPI does not alter patentability standards. Pursuant to the TRIPS Agreement, member states must make patent protection available for inventions that have novelty, inventiveness, and industrial applicability.¹²⁰ It is obvious that the PPI would leave those standards intact as it only imposes the relevant responsibilities after a medical patent is granted.

Second, the PPI does not affect the exercise of patent rights. The TRIPS Agreement confers upon a patent owner rights to make, use, offer for sale, sell, and import the patented product and process.¹²¹ Under the PPI, pharmaceutical companies fully enjoy this bundle of exclusive rights with no effect on their ability to merchandize their products in the marketplace.

Third, the PPI stays within the scope of patent limitations that WTO member states can carve out in their domestic patent laws. The TRIPS Agreement allows member states to “provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.”¹²² A “limited” exception to patent rights, according to the WTO dispute resolution panel, “makes only a small diminution of the rights in question.”¹²³ The PPI only requires pharmaceutical companies to contribute 1 percent of their annual post-tax profits; absolutely “a small diminution” compared with the 99 percent of total profits that would go into their pockets. In this sense, the PPI is a limited exception.

With respect to the second condition, the PPI would not unreasonably conflict with a normal exploitation of a patent. As shown earlier, the PPI does not disrupt the exercise of patent rights by a pharmaceutical company when it seeks to merchandize its products on the market. Only after the company’s annual exploitation of its patent rights is completed should it contribute 1 percent of post-tax profits to the PPI.

Nor would the PPI run counter to the third condition. As the following section shows, a pharmaceutical company’s charitable actions would not unreasonably prejudice its economic investment in medical patents.¹²⁴ As interpreted by the WTO panel, the second prong of the third condition, “taking account of the legitimate interests of third parties,” permits a member state to impose and enforce a legitimate patent limitation, provided that it is “supported by relevant public policies or other social norms.”¹²⁵ The PPI satisfies this second prong given its ostensible support from policies promoting public health.

US Constitution

Pharmaceutical companies may allege that the PPI violates the Takings Clause of the Fifth Amendment to the US Constitution, which stipulates that just compensation must be provided for any private property taken for public use.¹²⁶ The Supreme Court has ruled that deprivation of patent rights is subject to this clause.¹²⁷ The PPI triggers two kinds of allegations of taking of patent rights: the prospective application of the PPI to new patents to be granted by the USPTO, and the retroactive application of the PPI to existing patents that have already been granted by the USPTO and still remain within their protection terms.

With respect to the former, the prospective PPI application would not constitute a taking of a patent under the Fifth Amendment. This is because the PPI is an additional legal requirement for the grant of a new medical patent. It becomes a quid pro quo for the USPTO to approve a new patent application. Once a medical patent is granted, its owner has a responsibility to participate in the PPI.

However, the retroactive application of the PPI to existing patents may give rise to property-taking concerns, given that it requires pharmaceutical companies to financially contribute to the PPI for public use without just compensation. Both the direct taking away of 1 percent of their post-tax profits¹²⁸ and the potential diminution in the value of their patent(s)¹²⁹ may constitute compensatable takings under the Fifth Amendment. However, the USPTO may maintain that the PPI requirements are by nature equivalent to the patent maintenance fees that it charges patentees.¹³⁰ As the USPTO has the power to increase patent maintenances fees,¹³¹ it can duly include the PPI requirements as additional maintenance fees for pharmaceutical patents it grants. As judicial rulings have demonstrated,¹³² courts will not invoke the Takings Clause to rule against such decisions as they are within the ambit of the USPTO’s legal powers.

Were all these constitutional concerns about the PPI not to be addressed, the USPTO may petition Congress. Since Congress has the power to “prescribe conditions” on which patents rights are granted and exercised,¹³³ it could pass an amendment to the Patent Act authorizing it to establish the PPI and apply it to all pharmaceutical patents, both prospectively and retroactively.

B Pharmaceutical Companies

The third concern about the PPI’s legitimacy relates to whether it would disincentivize pharmaceutical companies from investing in and developing new medicines and vaccines. There is virtually unanimous agreement that the patent system is designed to promote innovation, as well as the societal benefits innovation provides, by rewarding investment with the opportunity to charge monopoly prices in exchange for the benefits of the innovation.¹³⁴ It is therefore necessary to explore whether, in practice, the 1 percent of post-tax profits from patented inventions required by the PPI would harm medical innovation by discouraging investment in research.

Studies have frequently supported the notion that the pharmaceutical industry is especially reliant on the patent system. For instance, one study of US firms found that between 1981 and 1983, around 65 percent of pharmaceutical products would not have been introduced in the absence of patent protection.¹³⁵ The study also found that 60 percent of products would not have been developed in the first place, a much higher percentage than in other industries studied.¹³⁶ Similarly, a survey of UK research and development managers led economists to estimate that research and development expenditure would be reduced by 64 percent in the absence of patent protection, in contrast to an estimated 8 percent reduction across all other industries.¹³⁷ These findings accurately reflect the reality of modern-day research and development in medicine, which typically requires years of work by large teams of scientists and can cost hundreds of millions of dollars.¹³⁸ The development of new drugs often takes more than a decade to complete and only around one in eight will survive clinical testing and go on to reimburse firms for their efforts.¹³⁹ Once a formula is found, products can be reverse engineered or imitated at very low cost, making it easy for competitors with free access to the market to price out the creators and make it difficult for them to recoup their costs.¹⁴⁰ However, research in the 1980s found that the cost of imitating drugs was made 30 percent more expensive thanks to patent protection.¹⁴¹

There are multiple reasons to suggest that the PPI is unlikely to have an impact sufficient to undermine patent law’s function in promoting medical innovation. First, pharmaceutical investment in innovation is also based upon demand, and so long as diseases continue to be a problem, pharmaceutical companies will continue to attempt to meet demand. To maximize profits, the pharmaceutical industry tends to focus on drugs to treat chronic conditions that affect a large number of people, and endeavors to stimulate this market demand by spending much more on marketing than on research and development.¹⁴²

Moreover, as described, pharmaceutical companies have traditionally focused their research on “global drugs,” which are in the widest demand and offer the largest market.¹⁴³ Studies have shown that the pull of market demand has been sufficient to encourage investment in innovation, even following the introduction of limitations on patent rights. For instance, one study of six antitrust consent decrees found that only one resulted in a reduction in investment.¹⁴⁴ The study concluded that only the highly predictable imposition of a compulsory license on a very significant market would be likely to discourage innovation.¹⁴⁵ As the PPI offers a choice of voluntary measures and will not force pharmaceutical companies to sacrifice their markets for global drugs in large wealthy nations such as the United States, the outcome is unlikely to be any different.

Throughout history, medical innovations have occurred regardless of the level of patent protection available. Commentators offer Switzerland as an example of an environment in which pharmaceutical innovation flourished even in the absence of patent protection.¹⁴⁶ In the early 1900s, Swiss pharmaceutical companies began to produce drugs protected in other countries and quickly developed one of the most innovative and successful pharmaceutical industries in the world, resisting international pressure to introduce patent protection for pharmaceutical inventions until 1977.¹⁴⁷

Second, an examination of how pharmaceutical companies currently use their funds suggests that the 1 percent of post-tax profits from patented products required by the PPI should not force firms to reduce research expenditure. Currently, the pharmaceutical industry only spends around 1–2 percent of gross revenues on basic research to discover new molecular entities, with most basic knowledge now coming from publicly funded laboratories and institutions.¹⁴⁸ Although private pharmaceutical companies continue to be the primary contributor to overall research investment,¹⁴⁹ their focus has been increasingly on late-stage clinical development and distribution of products, while academic researchers are increasingly responsible for the discovery and pre-clinical and early-stage evaluation of potential new pharmaceutical products.¹⁵⁰

In fact, more pharmaceutical industry funds are directed toward efforts to maximize shareholder value than research and development. For instance, one study of how the eighteen largest US pharmaceutical companies use their profits found that, from 2006 to 2015, 99 percent of profits were distributed to shareholders, with 50 percent as stock buybacks and 49 percent as dividends.¹⁵¹ The total $261 billion spent on buybacks amounted to 56 percent of the combined total of research and development expenditure.¹⁵² This data suggests that there would be profits available to redirect toward innovation after 1 percent of profits from patented products have been donated through the PPI.

Last, but not least, in addition to assuming more responsibility for early research, the public sector offers many incentives to innovate in the form of funding, subsidies, and other benefits. For instance, though the majority of the National Institutes of Health’s (NIH) 2020 budget went toward funding research in universities, private pharmaceuticals were beneficiaries as well, with the three top recipients receiving $31,493,555, $11,323,283, and $8,428,162, respectively.¹⁵³ The pharmaceutical industry also benefits from a research and development tax break, introduced in 1981, to encourage private sector investment in pioneering research.¹⁵⁴ Moreover, in cases of sufficient demand, advance purchase orders from national governments can reduce the risks traditionally associated with pharmaceutical research. For instance, while in the process of developing COVID-19 vaccines, Johnson & Johnson, Moderna, and Pfizer all sold millions of doses to the US government.¹⁵⁵ The combination of these ex ante and ex post rewards suggests that innovation would be encouraged “even in the absence of patent protection.”¹⁵⁶

4 Conclusion

When the TRIPS Agreement was passed to strengthen global protection of patents, Nobel Prize in Economics winner Joseph Stiglitz cautioned that the world had signed a “death warrant” for thousands of those in developing countries who would be deprived of life-saving drugs.¹⁵⁷ Some pharmaceutical companies have now executed this warrant through their insistence on the sanctity of their patents while COVID-19 has claimed millions of lives across the globe. The actions of these companies, however, have demonstrated that equitable access is not their top concern. It is the profits they can make from their patents, not the health of billions of people, that motivates them.

The PPI requires the United States to take leadership toward effective patent reform, driving pharmaceutical companies to develop a new sense of responsibility for the promotion of public health in the United States and developing countries. The PPI would position the USPTO to proactively tackle the public health problems that arise from the medical patents it grants. If the USPTO can lead by example, other patent offices throughout the global community will also be prompted to implement a PPI.

Crisis brings opportunity for change. We cannot afford to waste it.¹⁵⁸ The COVID-19 pandemic has revealed the asymmetry of patent owners’ rights and responsibilities and, along with this disturbing clarity, an opportunity for reform. The PPI has the potential to be an institutional “vaccine,” offering global immunity against the devastating effects of the prevailing patent system.

7 Beyond Traditional IP Addressing Regulatory Barriers

Cynthia M. Ho

The COVID pandemic has underscored that intellectual property (IP) can limit the ability to address public health crises because IP owners have the legal right to bar others from making needed supplies. However, what is less well understood yet critical to making medical treatments available are IP-related barriers existing in regulatory laws that complement traditional IP protection. In other words, even if a potential manufacturer of a needed treatment can obviate patent and trade secret hurdles, that manufacturer could be thwarted due to less well understood regulatory barriers.

There are two key barriers to treatments for which regulatory authorities are involved in review, such as drugs and vaccines. The most dominant is “data exclusivity,” which can prevent approval of follow-on treatments (a generic or biosimilar)¹ by barring reliance on previously submitted clinical data of the comparator original that is used to expedite regulatory approval of these lower-cost treatments.² In addition, in some countries “patent linkage” can bar regulatory approval of a safe and effective drug solely due to alleged infringement of patent(s) associated with making that drug.

The chapter begins with the genesis of these regulatory protections and their general parameters before discussing their prevalence among countries. It then turns to discussion of proposed and actual modification of Trade Related Agreement on Intellectual Property Rights (TRIPS) requirements for COVID and how that intersects with these regulatory barriers. The chapter concludes with recommendations.

1 Background

A Genesis

Data exclusivity and patent linkage were both introduced in the United States in 1984 as part of a legislative compromise intended to promote development of new drugs and expedite generic entry, along with other amendments to patent laws to similarly promote the same balance.³ Although some aspects of these laws create regulatory barriers, they have also helped to promote more generics.⁴

The new law promoted generic entry by permitting proposed manufacturers of generics to rely on clinical data of the originator drug companies to help infer the generic is safe and effective with a limited showing of bioequivalence to the original; this essentially provided an expedited approval process that avoided unnecessarily duplicating all the same clinical tests of the original approved drugs.⁵ This reliance was only possible after a newly established term of data exclusivity from the date of approval of the originator. Permitting subsequent companies to rely on this clinical data to obtain regulatory approval was a major improvement. Previously, the Food and Drug Administration (FDA) considered this data to be an indefinite trade secret.⁶ As a result, there were few generic drugs approved even after patents on the original drugs expired since potential generic companies needed to create their own clinical data, but could not recoup costs to do so.⁷ Whereas the manufacturer of a new drug can easily recoup the costs of its clinical data by charging a premium enabled by a patent, a generic is by definition a copy of another’s drug and so would not meet the patent requirement of being “new.” To address pioneer companies’ concerns about the ability of generic companies to “free ride” on the time and expense of their data, data exclusivity was created.

In addition, generic companies obtained an exception from patent infringement for making a patented drug as part of clinical tests needed to create its proposed equivalent to conduct bioequivalence testing and obtain regulatory approval. This patent exception promoted generic approval and avoided undue extension of the patent term that would otherwise occur, since it typically takes years for regulatory authorities to review data. Although new at the time, most countries today have similar laws and the patent exception is also consistent with international IP rules.⁸

Creators of new drugs also obtained benefits from this new law. First, they obtained an extension of the patent term to compensate for the fact that review of drug applications usually reduces the effective term of a patent since a patented drug has no market power without regulatory approval.⁹ Moreover, these creators obtained patent linkage, a powerful new way to bar competitors from the marketplace by delaying regulatory approval to address alleged patent infringement. As a result of this law, applicants of new drugs submit a list of patents that would allegedly be infringed by manufacturing the drug when seeking regulatory approval. When drugs are approved, the patents covering the drugs, as well as their expiration dates, are published in conjunction with the drugs so that potential generic applicants are aware of these patents.¹⁰ Generic applicants need to certify as part of their regulatory approval that there are no unexpired patents, thus creating a link between patent status and regulatory approval.¹¹ Although the United States created a mechanism for a generic to potentially challenge whether linked patent(s) were invalid or not infringed, the system still generally resulted in an undue delay of two or more years while the patent issues were litigated.¹²

In 1987, the EU created a similar abbreviated pathway for approving generics by permitting them to rely on earlier clinical data after a newly created period of data exclusivity expired.¹³ Data exclusivity was granted for different reasons in the European Union than in the United States. Not all EU member states at the time provided the scope of patent protection desired by the pharmaceutical industry; Spain and Portugal did not provide product patents to pharmaceuticals and instead only patented methods of making drugs.¹⁴ The European Union, however, has thus far not adopted patent linkage; the EU considers patents irrelevant to the function of a regulatory agency that is intended to protect public health.¹⁵

B Parameters of Regulatory Barriers

Data Exclusivity

Data exclusivity essentially bars a subsequent applicant from relying on the clinical data of the original manufacturer for the period of the exclusivity to seek expedited approval of new treatment without creating its own clinical data.¹⁶ During the term of data exclusivity, no reliance is possible and applications for follow-on versions will not be approved.¹⁷ Some countries extend the term of exclusivity based on submission of additional clinical data relating to new use of an existing drug, or pediatric use.¹⁸ Also, some countries provide a separate type of exclusivity to promote “orphan drugs” to treat rare conditions even if there is no reliance on any clinical data.¹⁹

Data Exclusivity Rationale?

Proponents of data exclusivity argue that it protects and encourages investment in producing clinical data that supports new drugs.²⁰ However, this is the same justification for the existence of patent protection, such that some have argued there is no need for both data exclusivity and patent protection.²¹ That said, the industry and some commentators argue that data exclusivity may be helpful for providing protection for drugs that have some value, even if unpatentable.²² In addition, the industry has claimed that data exclusivity will promote more investment in countries that provide it.²³

But is data exclusivity justified? A new drug must provide clinical data of safety and efficacy to be marketed and the clinical data from these tests are not improved in any way if data exclusivity is granted to its creator. Moreover, the policy reason for providing data exclusivity in countries with less economic means seems particularly tenuous given that it slows access to lower cost drugs without any public benefit. This is especially true since the current data does not show any positive effect of adding data exclusivity on the economic development for countries in the Global South, rebutting the claim that data exclusivity will promote more investment in countries that provide it.²⁴

How Data Exclusivity Is Different than Patent Protection

Patents and data exclusivity have different requirements. A patent is only awarded to an invention after verification that it meets certain requirements (such as being novel and having an “inventive step”) and provides a disclosure of information to the public who can then build on this invention; these requirements are considered part of the social bargain to justify the high prices that result from patent protection. In contrast, there are no similar requirements of novelty of a drug, or public disclosure to receive data exclusivity. Rather, it is generally automatically “granted” for a drug deemed to satisfy usual regulatory standards of being safe and effective. Although, like patents, data exclusivity can provide a measure of exclusivity in the marketplace, it cannot be challenged in the same way as patents; for example, whereas patents can be challenged for failing to meet patentability requirements (such as not actually being novel), there is generally no possible challenge to data exclusivity for a drug deemed safe and effective. In addition, unlike the issuance of a patent that comes with an official document that provides its owner legal rights to enforce in a judicial system, data exclusivity is enforced not by its owner, but by government agencies. Essentially, where it exists, governments are barred from approving a subsequent drug that relies on the previously submitted clinical data during the period of data exclusivity.²⁵ Unlike with patent protection, nothing is disclosed to the public in exchange for this exclusivity. Whereas patent protection is often justified in part due to the disclosure of how to make and use the invention that might otherwise be kept as a trade secret, there is no similar justification for data exclusivity.²⁶ And, in fact, even in countries that do not provide data exclusivity, companies must provide the same clinical data to be able to sell their drug. Also, whereas patents and most other types of IP are enforced by the IP owner, data exclusivity is enforced by regulatory agencies. Lastly, although most countries have an exception from usual patent rights for compulsory licenses, most nations do not have an exception from data exclusivity to ensure effective use of a compulsory license.²⁷

Intersection of Data Exclusivity and Patent Protection

When a drug is subject to both data exclusivity and patent protection, the term of data exclusivity may impact whether it lasts beyond patent protection. The effective term of a patent is about twelve years from grant of regulatory approval, which is longer than the five-year term of data exclusivity in most countries.²⁸ However, data exclusivity can last beyond the patent term for a drug whose patent application was pending a long time, if a regulatory approval process was lengthy, or if a country provides a longer term of data exclusivity or delay before approval of a generic. Also, in the United States, although there is a five-year term of data exclusivity for conventional drugs, there is a twelve-year term for more complex and expensive biological drugs such as insulin. So, in such cases, data exclusivity can sometimes outlast patent protection, but even then, it could depend on whether there are multiple patents. The arthritis drug Humira, for example, was first approved for sale in the United States in 2002 and although the initial patent on the drug composition expired in 2016, due to a thicket of over 100 patents on different aspects of the drug it is still under some patent protection more than twenty years later despite a novel challenge on antitrust grounds.²⁹ There are also situations beyond the United States where generic drugs can be delayed after the patent expires due to data exclusivity or other protection, such as supplementary protection certificates that essentially extend patent protection. For example, a study of these TRIPS-plus provisions imposed on Ukraine found that the average delay of generics was over one year due to such provisions.³⁰

In addition, whereas the novelty requirement of patents requires companies to apply promptly (to avoid a bar to patentability), there is no similar criteria that would prompt a company to seek regulatory approval in less profitable countries where data exclusivity applies. Since most countries provide exclusivity from the date of domestic approval, rather than first global approval, there is often no incentive to seek timely approval in all countries – unless a country specifically requires data exclusivity to begin from first global approval. Unless data exclusivity is triggered by first global approval, companies may deliberately introduce products later in less profitable developing countries so that they can first benefit from exclusivity in the wealthier countries, followed by an additional term in the developing country.

Moreover, although patent and data exclusivity are separate barriers, sometimes data exclusivity alone will be a problem. There are different reasons this could be the case. First, there may be no patent either because a patent application was denied, or an issued patent was invalid. So, sometimes data exclusivity alone can be a barrier to generic drugs. This was the case in Russia where the primary patent on a Hepatitis C treatment was partially revoked, but data exclusivity barred generics for six years.³¹

Intersection of Data Exclusivity and Emergency Approval

Data exclusivity, along with the ability to use an expedited path for follow-on approval begins with traditional regulatory approval of a drug. Data exclusivity may not exist when there is emergency approval of a new treatment that is likely to occur during a pandemic based on a more limited showing of data.³² For example, in the United States data exclusivity is reflected in laws that bar a subsequent applicant from relying on data from a fully approved drug; there is no expedited generic approval based on emergency approval.³³ However, depending on how long an emergency situation lasts, there could be time to obtain full approval of drugs initially approved based on emergency authorization. For example, both the Pfizer and Moderna COVID-19 vaccines received full approval in the United States about eight months after emergency approval.³⁴

It is also possible that a drug approved before a pandemic could be discovered to be useful for a pandemic. In such a situation, even if there was emergency approval of the drug for the new use, a data exclusivity period based on the original approval could bar a company from obtaining regulatory approval to make a follow-on drug. This seems especially true in a country that has a longer period of data exclusivity. On the other hand, if a drug is long known, data exclusivity would have expired. That was true for hydroxychloroquine, which was initially considered a promising treatment for COVID-19; it was first approved to treat malaria in 1950, such that no data exclusivity existed during the COVID-19 pandemic that would have barred generics.³⁵

Patent Linkage

The term patent linkage refers to a conditional relationship between approval of a follow-on drug and the patent status of the original product. If one or more patents are linked to making the follow-on drug, that may delay its marketing approval. Importantly, a follow-on drug could be denied regulatory approval not based on the usual regulatory standards of safety and efficacy, but solely on a potential patent problem. Typically, information about whether a drug (or its active ingredient) would be infringed when made is based on assertions by self-interested patent owners. A company that seeks marketing approval for a new drug typically informs a regulatory agency of patent(s) the company asserts would be violated by anyone making that drug. There is often no independent assessment by the regulatory agency that enforces patent linkage of whether the patent(s) associated with a drug are relevant, let alone valid.³⁶

Is There More than One Type of Patent Linkage?

There are different ways that nations provide patent linkage. A country may bar or stay regulatory approval of a generic entirely based on alleged patent infringement.³⁷ Another possibility is that a country may permit the patent owner to address the patent issue with the alleged infringer in a litigation or administrative proceeding. Yet another possibility is that a country could notify the patent owner of a follow-on application, but without the need to delay approval to resolve a patent issue. In addition to these three mechanisms, nations may provide the same system of patent linkage for all follow-on drugs, or different systems for generics versus biosimilars.³⁸

What Is the Justification for Patent Linkage?

Companies that develop new drugs generally argue that patent linkage is needed to ensure effective patent enforcement.³⁹ However, the usual way to enforce patents is for patent owners to pursue their own claims in court. The industry argues that judicial enforcement, even with the possibility of preliminary injunction, is uncertain. It is true that patent linkage can provide more certainty by absolutely barring approval of an allegedly infringing drug. However, it is a costly one for society in terms of preventing timely approval of lower-cost drugs that may not in fact infringe any patents since patent linkage occurs generally without review of patent issues.⁴⁰

What Does Patent Linkage Add to Traditional Patent Protection?

Patent linkage can be a major hurdle that delays entry of follow-on drugs if a regulatory agency stays approval. This is true even in countries that permit the follow-on manufacturer to challenge the patent because such challenges take time, which could be a serious problem during a pandemic. However, patent linkage does not add much to patent protection if a country only notifies the patent owner, rather than delaying regulatory approval.

C International Requirements and Prevalence of Regulatory Barriers

Before discussing the prevalence of regulatory protections globally, it is important to consider whether any international agreements require them. The foundational international agreement concerning IP is TRIPS, which applies to all members of the World Trade Organization (WTO) – that is, most countries of the world.⁴¹ Since TRIPS was concluded in 1994, the United States and European Union have continued to seek stronger IP protection in a series of free trade agreements (FTAs) often referred to as “TRIPS-plus” agreements since they require more than TRIPS. Data exclusivity is more often required since only the United States requests patent linkage.

Is Data Exclusivity Required?

Whether TRIPS requires data exclusivity has been a major point of contention. The TRIPS provision at issue is part of the provisions related to countries generally requiring trade secret protection. In particular, the relevant part ambiguously states:

Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use.⁴²

For countries that require submission of clinical data to approve a drug, which is true in most industrialized countries,⁴³ the United States, European Union, and the pharmaceutical industry claim this provision requires data exclusivity, arguing that reliance on the data of another is “unfair commercial use,” but this point is heavily contested.⁴⁴ Although the United States did bring a request for consultation, there has never been a WTO panel decision on this issue, leaving it unresolved.⁴⁵ There was an earlier draft that explicitly required data exclusivity, but it was not enacted, such that a proper interpretation should indicate that data exclusivity is not required, as many scholars and policymakers agree.⁴⁶

Although TRIPS should not require it, this provision may have prompted some countries to adopt data exclusivity. For example, Jordan, Switzerland, and New Zealand adopted data exclusivity when amending their laws to comply with TRIPS.⁴⁷ Even for countries that did not adopt data exclusivity to comply with TRIPS, they may have been required to adopt it because of FTAs that explicitly mandate such an obligation.

Is Patent Linkage Required?

Unlike data exclusivity, most countries do not consider patent linkage to be part of TRIPS.⁴⁸ There is nothing in TRIPS that specifically refers to regulatory authorities and patents. The industry has asserted that the general TRIPS provision about providing expeditious remedies to prevent infringement is violated by a country that does not have patent linkage.⁴⁹ However, patent linkage does not require a method to challenge a patent; that is simply a feature of some types of patent linkage. Moreover, even FTAs that require patent linkage do not necessarily require a method of challenging a patent covering a drug.⁵⁰

Prevalence of Data Exclusivity

There are roughly fifty countries and the EU that provide data exclusivity, which is a substantial number, and yet this represents less than half of the over 100 members of the WTO.⁵¹ Data exclusivity exists not only in the United States and European Union, where it originated, but also in other high-income countries such as Australia, Canada, South Korea, New Zealand, and Switzerland.⁵² FTAs also require this for lower-income countries such as Bahrain, Brunei, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Laos, Malaysia, Mexico, Morocco, Nicaragua, Oman, Peru, Panama, Singapore, and Vietnam.⁵³ China proposed data exclusivity in May 2022.⁵⁴

The term of data exclusivity is typically at least five years from approval of the original drug in the country granting such exclusivity.⁵⁵ The EU originally required at least six years and permitted variation among member states, but later adopted a uniform eight-year period of exclusivity, largely reflecting industry demands.⁵⁶ The United States has a twelve-year term of data exclusivity for follow-on biologics (complex drugs that are injected or infused such as vaccines), but only a five-year term for generics.⁵⁷ The United States has tried to mandate longer terms for biologics in FTAs, mirroring its domestic laws, but thus far have been unsuccessful.⁵⁸ Other countries often provide the same term for all treatments.⁵⁹

Some FTAs that mandate data exclusivity have mediating factors. For example, some FTAs permit an exception to such exclusivity in the event of compulsory license or public health needs, which Malaysia, Chile, and Columbia have implemented.⁶⁰ In addition, some FTAs mandate data exclusivity but permit countries to specify that the data exclusivity may not exceed the term of patent protection,⁶¹ or begin the term of data exclusivity not from the earlier date of approval in a partner country, so long as the originator drug is approved shortly after the approval in a partner country.⁶²

Prevalence of Patent Linkage

The United States originally negotiated patent linkage in FTAs with high-income countries such as Canada (1993), Singapore (2004), Australia (2005), and South Korea (2007).⁶³ The United States proposed patent linkage when negotiating the Trans-Pacific Partnership Agreement.⁶⁴ Although the United States withdrew from that agreement, the patent linkage provision remains in the renamed and now concluded Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes Vietnam, Malaysia, Chile, and Peru.⁶⁵ Japan is also required to provide patent linkage pursuant to the CPTPP, but its official position is that no changes in the law are required⁶⁶ since Japan has unofficially considered whether a generic might conflict with a patent on the active ingredient to deny regulatory approval since 1994.⁶⁷ China adopted patent linkage in 2019 and is also required to provide patent linkage as a result of a 2020 FTA with the United States.⁶⁸ Taiwan, Ukraine, and United Arab Emirates also provide patent linkage.⁶⁹ So, in total, there are more than a dozen countries that provide patent linkage, or must provide patent linkage pursuant to FTAs,⁷⁰ as well as some countries that adopted patent linkage without a specific FTA.⁷¹ In addition, there are some countries that do not formally provide patent linkage, but have informal measures such as requiring applicants to indicate a proposed generic is not protected by patents.⁷²

Implementation of patent linkage varies much more than data exclusivity. For example, although the United States has a relatively transparent system for patents that are linked to generic drugs, with a public list of patents associated with approved drugs, it does not for biologics.⁷³ Other countries treat generics and biologics the same for patent linkage but may have no public information available for potential generic manufacturers to know whether there are associated patents.⁷⁴ Also, although countries may provide a system for adjudicating whether patent(s) are valid and infringed, this can happen in traditional court systems, or through an administrative procedure that may involve regulatory authorities.⁷⁵ In addition, the stay of regulatory approval of the follow-on generic can vary substantially – up to nine months (South Korea), thirty months (United States), or even indefinite (Australia).⁷⁶ Although the potential stay in Australia is indefinite, other aspects of its law promote approval of follow-on drugs. Notably, if the follow-on applicant certifies that it will market the drug in a manner that will not infringe, the patent owner is not notified, and no stay of approval will occur.⁷⁷ In addition, even if the patent owner is notified, that only happens after approval of the follow-on (instead of upon receiving it), such that there is no undue delay in grant of marketing approval.⁷⁸

Some countries have measures in their patent linkage system that aim to limit abuse by patent-owning companies. Some countries do not permit companies to add patents after the initial application for approval.⁷⁹ Some countries impose penalties for false and misleading action by the patent owner.⁸⁰ In addition, some countries provide an incentive for a generic applicant to challenge weak or irrelevant patents by providing a short period of exclusivity as the only generic in the market.⁸¹ However, this would not be an incentive in markets where prices of follow-on drugs are regulated. Even if prices are not regulated, the utility of this provision has been undermined by anticompetitive agreements whereby initial challengers are paid by the originator to not enter the market for a period of time.⁸²

2 Exploring the Intersection of Regulatory Protections and International Obligations

This section explains the IP obligations under TRIPS that are not previously discussed, proposed and actual waiver of TRIPS obligations to promote access to needed COVID treatments, and how these reflect incomplete understanding, or at least failure to fully address these regulatory protections. Although there are FTAs that require regulatory protections, they are not specifically discussed here since there have been no proposals to waive these FTA provisions. This likely reflects a strategic decision to first address the international agreement that applies to most countries, especially since some countries believe that TRIPS requires data exclusivity.

A International Obligations: TRIPS

Of particular importance to the issue of medical treatments, TRIPS requires all countries to provide minimal levels of patent protection in all fields of invention, including drugs.⁸³ Although TRIPS requires that inventions be patented and subject to enforcement, there are exceptions from patent rights: a compulsory license and a “limited exception.” Since the “limited exception” under TRIPS has been narrowly interpreted thus far,⁸⁴ a compulsory license to usual patent rights is the primary flexibility for minimizing the TRIPS requirement that patents must be granted on medical treatments. Consistent with prior international laws, TRIPS permits governments to issue compulsory licenses of patents which essentially permit the government to grant anyone the right to use a patented invention, subject to government-dictated royalties.⁸⁵ However, TRIPS imposes additional conditions, including that they must be mostly for domestic use.⁸⁶ In addition, after members realized that compulsory licenses were of no utility for countries that lack inadequate capacity to domestically manufacture drugs, TRIPS was amended to permit compulsory license for export to such countries with even more conditions.⁸⁷

An important issue is the consequence for failure to comply with TRIPS. There is a WTO dispute settlement process that can mandate a country to bring its laws into compliance or else face sanctions that can include withdrawal of WTO benefits.⁸⁸ Member states use this dispute process infrequently, likely due to fear of an undesirable ruling. However, the Global North has often suggested violations of TRIPS and based on this exercised unilateral pressure on countries. For example, there have been no formal WTO challenges concerning compulsory licenses, but the United States and European Union have repeatedly criticized use of these licenses and even done so during COVID.⁸⁹

B Proposed and Actual Modification of TRIPS Requirements for COVID

After the Global North engaged in vaccine nationalism by pre-ordering many more vaccines than needed, and companies were unwilling to license adequate numbers of manufacturers, India and South Africa proposed waiving IP obligations under TRIPS so that countries could create COVID vaccines.⁹⁰ Modification of TRIPS does not automatically change domestic IP laws. But modification can permit nations to modify domestic laws without international liability under the WTO and hopefully also without unilateral pressure from other countries. This section explains the original proposal, a counterproposal by the EU, and the ultimate agreement as background to understanding the extent to which they would impact regulatory barriers.

India and South Africa Proposal: Waive Multiple TRIPS Obligations to Address COVID

The original TRIPS waiver proposed a broad exemption from multiple provisions of TRIPS for prevention, containment, or treatment of COVID-19, which was later clarified to include vaccines, treatments, diagnostics, and personal protective equipment for three years from the date of the decision.⁹¹ The TRIPS provisions that would have been suspended during this time period included all the patent provisions and trade secrets, including protection of undisclosed data submitted for regulatory review from “unfair commercial use.”⁹² This proposal was suggested by South Africa and India but had broad support from developing countries, as well as heads of state and policymakers.⁹³ The United States also supported this, but only for vaccines.⁹⁴

EU: TRIPS Compulsory License Clarification

In June 2021, the EU sent a communication to the WTO that it believed voluntary licenses were most effective to increase production, and beyond that, it proposed use of compulsory licenses and suggested language to explain their use for COVID-19. The EU suggested clarifying that:

• the COVID-19 pandemic is a national emergency, such that waiver of prior negotiation with patent owner is not necessary;

• remuneration for licenses “should reflect affordable price.”⁹⁵

Although these statements may seem helpful, they do not add anything. A global pandemic clearly satisfies a national emergency under the existing TRIPS agreement, such that no prior negotiation is necessary. Moreover, even if there was any controversy concerning what constitutes a national emergency, each WTO country has the right to decide for itself.⁹⁶ In addition, TRIPS only requires licenses to provide “reasonable compensation,” so it already permits affordable prices; for example, India permits compulsory licenses to be issued if prices are unaffordable.⁹⁷

Limited TRIPS Waiver

In May 2022, the WTO circulated a draft text to all member countries based on language that was negotiated by South Africa, India, the United States, and the European Union in March 2022.⁹⁸ Some supporters of the original proposal strongly objected to this text as unduly narrow, with over 100 organizations urging rejection of the proposal,⁹⁹ whereas industry claimed it was unnecessary and harmful.¹⁰⁰ In June 2022, the WTO membership adopted a limited waiver of one TRIPS patent obligation for COVID-19 vaccines.¹⁰¹ This waiver is very limited because it only modifies a complicated and cumbersome provision to circumvent the usual TRIPS requirement that compulsory licenses must be predominantly for domestic use that has only been applied once.¹⁰² Although this is a welcome change given the provision is wholly unsuited for emergency use, the waiver of this provision only applies to developing countries and even explicitly discourages countries with existing capacity to use the procedure.¹⁰³ This seems patently illogical in that developing countries in the best position to supply other countries with vaccines are encouraged not to do so.¹⁰⁴

C Examining the Intersection of TRIPS Modifications and Regulatory Barriers

Now that the individual TRIPS proposals and actual waiver have been introduced, this section shows how each incompletely addresses regulatory barriers beyond the obvious fact that additional waivers of TRIPS-plus obligations would be required to remove all international barriers.¹⁰⁵ But before discussing these, a few observations about the relevance of regulatory barriers to the Global South and Global North may be helpful.

Even though these proposals and actual waiver do not fully remove regulatory barriers, this is a nonissue in some countries. For example, neither South Africa nor India currently require data exclusivity or patent linkage. However, this may change; data exclusivity is proposed in the FTA between India and the United Kingdom currently under negotiation.¹⁰⁶ Moreover, even if South Africa and India are successful in resisting FTAs that require regulatory barriers, both will likely soon exist in China, which has been an important source of COVID-19 vaccines. In addition, there are other developing countries that could make follow-on treatments that are currently subject to these regulatory barriers, such as Mexico, Vietnam, and Chile.

High-income countries that have these regulatory barriers may reduce their flexibility to protect domestic citizens during a pandemic. For example, early in the COVID-19 pandemic there were inadequate supplies of the treatment remdesivir, such that many recommended that the United States use its domestic powers to override usual patent rights.¹⁰⁷ Although remdesivir was only approved for emergency use and thus not subject to data exclusivity, if it had been granted orphan drug exclusivity as its manufacturer had planned before public protest, that would have been an additional barrier.¹⁰⁸ Moreover, the statutory provision permitting the United States to override patent rights for government use does not provide for overriding regulatory barriers such as data exclusivity or orphan drug exclusivity.¹⁰⁹

India and South Africa Proposal

The original proposal to modify TRIPS requirements proposed waiving not only patent obligations, but also ones concerning undisclosed information that some have argued requires data exclusivity.¹¹⁰ However, discussion of this proposal suggests that some countries failed to understand that data exclusivity can be a barrier. Countries that strongly objected to this proposal repeatedly noted that it would not be effective on several grounds, but data exclusivity was not one; rather, they suggested that voluntary or even compulsory licenses were adequate.¹¹¹ But licenses are ineffective in countries where there is data exclusivity without any exception, as developing countries noted.¹¹² In addition, many that opposed this proposal focused on the fact that a waiver of trade secret obligations under TRIPS would not help scale up manufacture of vaccines since removal of liability does not mandate disclosure of trade secrets.¹¹³ That is true. However, data exclusivity is a bigger, largely undiscussed hurdle. Some countries may be able to mandate or encourage companies to share needed trade secrets.¹¹⁴ Even without compelled disclosure, companies can develop an alternative method as underscored by South Africa’s successful creation of a method to make the Moderna COVID-19 vaccine.¹¹⁵ In contrast, data exclusivity in most countries is an absolute legal barrier without any exception. The few countries known to have exceptions to data exclusivity, such as Malaysia, are not major sources of generic drugs.¹¹⁶

EU Compulsory License-Only Proposal

The EU’s proposed clarification of compulsory license provisions does not address regulatory barriers at all. It completely ignores the fact that effective use of compulsory licenses could be blocked by the existence of data exclusivity or patent linkage. Accordingly, this proposal is a strong example of lack of recognition of data exclusivity as a barrier to making needed treatments.

This lack of recognition is somewhat surprising. The EU’s own data exclusivity laws have previously been a barrier to use of a compulsory license during the Avian flu pandemic; public health advocates suggested that the EU should amend its laws to create such an exception.¹¹⁷ In addition, the EU is aware that data exclusivity can be a barrier since the EU has an exception to such exclusivity for compulsory licenses of drugs for export.¹¹⁸ Since the EU has previously recognized data exclusivity as a barrier, its proposal could be considered an intentionally incomplete attempt to address the pandemic.

TRIPS Waiver for COVID-19

Although the final June 2022 waiver (as well as the leaked March 2022 text) is better than the EU proposal in explicitly noting that the provision some argue to require data exclusivity should not bar regulatory approval of subsequent treatments, its utility is limited.¹¹⁹ First, the waiver seems to improperly suggest that a pandemic is a unique situation for which article 39(3) should not be a barrier, rather than that this provision should never be interpreted to require data exclusivity.¹²⁰ Moreover, this waiver does not alone eliminate regulatory barriers adopted in domestic laws. Failure to consider that developing countries may be barred from effective use of the waiver due to data exclusivity mandated by TRIPS-plus agreements is a significant omission. Although some countries such as India and China could make vaccines, the waiver explicitly discourages countries with capacity from doing so. In addition, China has both data exclusivity and patent linkage and has proposed data exclusivity.

The waiver is also inadequate for excluding countries of the Global North that could grant compulsory licenses to export drugs and vaccines – but for which such licenses could be stymied by regulatory barriers.¹²¹ Canada, for example, is completely excluded from using the new waiver of the usual complex compulsory license procedure for export. Canada is notably the only country that has ever issued a compulsory license for export in the over twenty years that TRIPS has permitted this to occur. And, while a Canadian company has agreed to provide Bolivia with COVID-19 treatments, due to lack of amendment of Canadian laws to permit such a license for those treatments, no shipment has occurred.¹²² Moreover, although Canada’s law permits an exception from data exclusivity for such licenses, there is no exception from patent linkage, which Canada must provide pursuant to an FTA.¹²³

3 Looking Ahead

There are several things nations should do domestically to reduce regulatory barriers to accessing treatments during a pandemic. Since data exclusivity and patent linkage can impose barriers to timely access to lower-cost treatments, these should be avoided if possible. If that is not possible, then adopting patent linkage that simply provides notice to the patent owner and an exception to data exclusivity would be preferable.

At the international level, nations should avoid new agreements or unilateral pressure to mandate data exclusivity or patent linkage. Although this may seem obvious, it is very important considering that available generics for the world could quickly change if India adopts one or both protections. Also, to the extent that there are existing international agreements imposing commitments, nations should create exceptions.

The above steps should be helpful to promote access to medicine in future pandemics as well as non-pandemic circumstances. Even if data exclusivity and patent linkage cannot be eliminated, hopefully awareness will help create exceptions, or at least voluntary waivers of usual data exclusivity or patent linkage to promote access to affordable follow-on treatments.¹²⁴

8 Capability Approach to Developing Global Health Initiatives for Equitable Access to Vaccines

Calvin W. L. Ho

Structural injustices in national and global health architectures have become conspicuous from the initial stages of the outbreak and global spread of the SARS-CoV-2 (severe acute respiratory syndrome coronavirus-2) virus,¹ aggravating health inequalities particularly among already vulnerable individuals and communities. Inequalities have widened across social position indicators, all closely tracking gross inequities that arise from the distribution of vaccines, ventilators, and healthcare services on the wider canvas of global health, especially during the initial stages of the pandemic from early 2020 to the third quarter of 2021. To be sure, such inequalities are not unique to this pandemic, even if the global death toll and societal disruptions attributed to COVID-19 will quite easily distinguish it as one of the most devastating.² Yet what is arguably different about the COVID-19 pandemic is the speed at which effective vaccines have been developed, essentially by countries that are relatively well resourced and technologically proficient, and the role that private and nongovernmental organizations (NGOs) assumed on the global health stage through the Access to COVID-19 Tools – Accelerator (ACT-A), quite possibly the largest public–private partnership to have ever been established as a pandemic countermeasure.

As ACT-A is essentially a pandemic response initiative, it did not engage with the structural causes and catalysts of COVID-19 and the devastation that its outbreak caused on many fronts. Instead, it focused on countering the pandemic based on three sets of technologies, namely diagnostics, treatments, and vaccines. This chapter focuses on vaccines, which fall under the purview of the COVID-19 Vaccines Global Access (COVAX), the vaccine pillar of ACT-A. COVAX is co-led by the Coalition for Epidemic Preparedness Innovations (CEPI), Gavi (formerly known as the Global Alliance for Vaccination and Immunization) and the World Health Organization (WHO), alongside key delivery partner United Nations International Children’s Emergency Fund (UNICEF). Although a noble project that was conceived out of a concern for global solidarity, COVAX failed to live up to expectations owing to various conditions, some of which were beyond its control. As part of a global program to develop and distribute vaccines through pooled purchases, its choice of vaccine type was ultimately constrained by its inability to raise adequate funds,³ as well as to procure sufficient vaccines,⁴ and its failure to adapt to changed circumstances, notably when well-resourced governments procured vaccines directly from vaccine manufacturers through bilateral deals. To meet vaccine shortfalls, COVAX ultimately had to accept surplus vaccines from high-income countries. These vaccines were in turn rejected by some of the intended donee countries for reasons that included national pride and vaccines being nearly expired.⁵ COVAX has also been criticized for limiting access to vaccines by underresourced governments and blocked sharing of vaccine technology, which, had it occurred, could have enabled less well-resourced countries to build their vaccine manufacturing capacity earlier.⁶

As I shall discuss further later on in this chapter, COVAX did not provide financial support for the development of mRNA vaccines as these were considered to be too risky and cost ineffective. From June 2020, vaccines developed through more conventional technology platforms were already approved for emergency use by vulnerable groups, and the hope was to scale up their production and distribution if they were proven to be safe and effective for wider use. At that time, a number of research initiatives were underway to develop vaccines through novel technological means, including mRNA technology. Initial success was publicized by the Pfizer–BioNTech partnership and Moderna, with the latter announcing a pledge in October 2020 that it would not enforce patents related to its mRNA COVID-19 vaccine while the pandemic continued.⁷ Moderna’s announcement was made at a time when a proposal was put forward to the World Trade Organization (WTO) by India and South Africa for a waiver from certain provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which sets out the rights, obligations, and standards of the international intellectual property (IP) regime.⁸ The mRNA vaccine developed by Pfizer–BioNTech was first to receive regulatory approval for use, on December 2, 2020,⁹ and this mRNA vaccine technology has proven to be most effective against COVID-19 in clinical trials.

In spite of the availability of different types of vaccines and the intermediation of COVAX in facilitating vaccine development and access, a large proportion of the world’s population remained unvaccinated throughout 2021. By the end of that year, over 90 percent of Africa had not received a single dose of any vaccine.¹⁰ Independently of COVAX, various countries began to discuss the possibility of establishing local production of mRNA vaccines.¹¹ In June 2021, the WHO announced that it was in discussion with a South African consortium comprising Biovac, Afrigen Biologics and Vaccines, a network of universities, and Africa Centres for Disease Control and Prevention to establish the first COVID-19 mRNA vaccine technology transfer hub in Africa.¹² By early 2022, the WHO-backed mRNA technology transfer consortium in South Africa announced that it was close to completing its own version of Moderna’s mRNA COVID-19 vaccine;¹³ a development that was seen as a capacity for not just South Africa but the whole African continent to be self-reliant, and as a step toward greater preparedness for the next pandemic.¹⁴ While the WHO’s other partners in the COVAX program (together with Medicine Patent Pool, or MPP) appear to be involved in the mRNA vaccine technology transfer hub,¹⁵ their exact roles and responsibilities are unclear. As a key driver of the technology transfer hub initiative, the WHO voiced unequivocal support for a broad patent waiver, which (as I shall also discuss further) has more recently been endorsed by the WTO. These developments are instructive for the implicit acknowledgment of the grave inequities that limit the means of low-resource health systems to respond to a pandemic, even with the aid of international partnerships such as COVAX. It also provides the opportunity to reimagine what a fairer global health system could look like, and when it may be necessary to work outside of the international IP regime.

This chapter adopts the capability approach in arguing for deeper relationality in the global health governance of vaccine development, production, and distribution, and from within a human development paradigm, which is designed to actualize this approach. The capability approach seeks to expand people’s freedoms and capabilities that are comparatively assessed against a wider set of principles (rather than only or primarily efficiency) with a focus on people as agents who are to be valued as ends in themselves and on the realization of outcomes that are just. Under TRIPS, IP rights holders are legally empowered to prevent others from using protected technology or proprietary information unless with their permission, usually through means such as licensing agreements or other kinds of contractual arrangements. This is a very limited form of relationality (if relational at all), and is essentially one-sided since rights holders are free to disengage unless compelled otherwise under extremely limited conditions.

The capability approach enables deeper relationality by adopting a more dynamic interpretation of the information function of IP rights, not only as a means of incentivizing investment in, as well as the disclosure of, novel technological know-how, but also as a means of building and sustaining trust through the sharing of technological capability. By this approach, the IP protection system and its goal of advancing science and technology are treated firmly as means, and not ends in themselves. There should be no controversy on the point that IP rights are, like all other property rights, instrumental in nature. There is general consensus in theories on property law that property rights are never absolute. The strength of possessory rights in an asset (whether tangible or intangible) should depend on a number of factors, including the prioritization of use by an agent (or group of agents) that is capable of maximizing the asset’s value for that agent’s benefit. Arguably, IP should be more amenable to wider relationality beyond a single agent since it is open to multiple uses at the same time, and is hence nonexclusive by its nature.

Intellectual property (similar to tangible property) encapsulates different rights and interests, and their relative importance depends on the context within which they are nestled. There is unresolved debate as to whether, or to what extent, global health should fall within a market-based IP context, where only limited exceptions apply within narrowly construed TRIPS flexibilities.¹⁶ After all, a health product (unlike a regular consumer good) may be life-sustaining and thereby a necessity, and can also affect the health and well-being of others, notably where vaccines are concerned. While this point may seem obvious, the extension of IP protection through “TRIPS-plus” measures involving the use of supplementary protection certificates and other forms of market exclusivity across all technological fields seem to prioritize technological progress over the freedoms and well-being of people. A similar and essentially market-based mindset is evident in ACT-A. To be sure, market-based approaches can and have been useful to building capacity, but excessive reliance on market-driven forces to determine and shape progress in science and technology (in our case, vaccine development and production) leads to economically suboptimal outcomes, while exacerbating inequities and producing results that contradict the goals of public and global health.¹⁷

The limitations of ACT-A as a market-based pandemic countermeasure has not escaped notice by the global health community. In May 2020, the Solidarity Call to Action was launched as a complement to ACT-A by the WHO and Costa Rica.¹⁸ The Solidarity Call sought the assistance of WHO member states to ensure that all publicly and donor-funded research outputs remain accessible on a global scale through a variety of arrangements that include legal measures to lower barriers such as IP rights. This initiative did not garner much support from high-income countries. The recent measures adopted by the WHO and the WTO to facilitate technology transfer represent alternative approaches to pandemic response that are not market-based and better reflect building deeper relationality in the capability approach. A health system should have, whether on its own or through geopolitical association, the (technological) capability to access sufficiently safe and effective vaccines as a pandemic countermeasure when such vaccines are available. Such a capability includes the means of contributing to the development, production, and distribution of vaccines. In the section that follows, I first examine the rise of ACT-A and consider why the global pandemic response should not be defined by this private–public partnership alone. I then consider how measures like the WHO-led mRNA technology transfer initiative and the TRIPS waiver are important as means of operating outside of a market-based paradigm, while still retaining the relevance of property-based tools.¹⁹ In the third section, the capability approach is applied to explain why these complementary or supplementary measures to ACT-A are likely to be more impactful over a longer time horizon, particularly in advancing pandemic preparedness and the human development agenda through forging deeper relationality. Here, relationality refers to the technological capability of health systems and sovereign states to contribute to or participate in technological (specifically, vaccine) development, production, and distribution. In the final section, the need for a global framework to ensure that these developments are sustained beyond the current COVID-19 pandemic and in ways that are fair and equitable is highlighted.

1 ACT-A and the Problem with the Status Quo

About three months after the declaration of the outbreak of SARS-CoV-2 as a public health emergency of international concern (PHEIC) under the International Health Regulations (IHR),²⁰ ACT-A was launched on April 24, 2020. Its structure is of a voluntary partnership that draws on the existing global health infrastructure, but without the intent of becoming a new entity. Conceived at a virtual event co-hosted by the WHO, the President of France, the President of the European Commission, and the Bill & Melinda Gates Foundation (BMGF), ACT-A was intended to serve as an informal and agile coordination mechanism for three products deemed crucial in the mobilization of a rapid global response to the pandemic, namely vaccines, therapeutics, and diagnostics (subsequently referred to as the “three product pillars”). ACT-A is also possibly the largest public–private partnership of its kind to have been constituted, and its partners were co-opted based on their ability to contribute collectively toward the development, production, and equitable distribution of the three product pillars.²¹ The partnership initially comprised the BMGF, CEPI, Gavi, the Global Fund, Unitaid, Wellcome, the WHO, and three industry groups (the Developing Country Vaccine Manufacturers’ Network, the International Federation of Pharmaceutical Manufacturers & Associations, and the International Generic and Biosimilar Medicines Association). A facilitation group, comprising nine high-income countries (or donor governments), the WHO, two charitable foundations, and one international NGO, was responsible for coordinating among the different partners, with the WHO also assuming various roles in this mechanism.²² By late June 2020, a system-level concern was added as the fourth pillar of ACT-A along with a description of the roles of the partners:²³ (i) Vaccines, headed by CEPI and Gavi; (ii) Therapeutics, headed by UNITAID and Wellcome; (iii) Diagnostics, co-led by a new collaborator,²⁴ the Foundation for Innovative New Diagnostics (FIND), and the Global Fund; and (iv) the Health Systems Connector, headed by the World Bank and the Global Fund, and subsequently involving the WHO as a co-convenor. That year, the WHO highlighted in its report for the World Health Assembly a number of antipandemic initiatives, including increased support for the evaluation of vaccines and maintaining communication among funders for implementation of critical research, and the sharing of viral materials, clinical samples, and data for public health purposes.²⁵

A “Facilitation Council” was launched on September 10, 2020 to provide high-level advice, guidance, and leadership to facilitate the work of ACT-A.²⁶ The terms of reference of the Facilitation Council do not give it decision-making or oversight authority, although its composition was intended to ensure appropriate and diverse representation of global leaders and partners. Donations were made directly to co-convenors, not to the ACT-A itself since it was not a legal entity, and donors retain “full oversight of the allocation of their pledges,” and “grant management and financial reporting to donors will be managed by the receiving entity.”²⁷ ACT-A has consistently emphasized that its loose governance structure ensured that it remained “nimble”²⁸ and “time-bound”²⁹ in the realization of its vision of “rapid development, scale-up and equitable distribution of COVID-19 vaccines, therapeutics and diagnostics, underpinned by the strengthening of health systems.”³⁰ By April 2021, ACT-A governance roles were assumed by the Facilitation Council, a new Principals Group, and ACT-A Hub, which would collectively provide advice, guidance, fundraising, advocacy, and coordination of the three operational pillars (Vaccines, Diagnostics, and Therapeutics) and two cross-cutting functional areas (Health Systems Connector and Access and Allocation).³¹ ACT-A did not include the three industry groups as part of the Principals Group, but “industry” has been noted to have “standing invitations,” along with civil society and communities, to the Facilitation Council.³² For the purposes of this chapter, my discussion from this point onwards will focus on the vaccine operational pillar of ACT-A, better known as COVAX. As I noted earlier, COVAX is headed by CEPI, which has expertise in investing in vaccines research and development, and by Gavi, with expertise in procurement and allocation through financing mechanisms such as advance market commitment. The WHO has also contributed its expertise in effective regulation and optimal allocation, as well as vaccine injury indemnification in certain health systems.

Unlike vaccine development in the past, ACT-A recognized that scaling up manufacture and completion of human trials for vaccine candidates must be done in parallel. The COVAX pillar of ACT-A was intended to be a collaborative risk-pooling mechanism to facilitate vaccine development and access through portfolio diversification, pooling of financial and scientific resources, and economies of scale.³³ It uses both the “push” and “pull” mechanisms to support vaccine development and production. These mechanisms push development by providing funding up-front (for example, grants and innovation funds) and pull in innovators by offering a financial reward once a product has been developed (for example, through advance market commitments). This market-based approach to financing vaccine development is mainly directed at offsetting development costs. The first investment cases were published in mid-2020, with total funding cost for R&D and manufacturing, volume guarantees, or procurement and delivery costs determined to be $18.1 billion for 2020/2021.³⁴ By these projections, high- and upper-middle-income countries would commit funds to procure approximately 950 million doses through the COVAX facility and to underwrite the costs of manufacturing at risk in order to ensure that vaccines can be delivered at the greatest possible speed, in particular to low- and middle-income countries. This “portfolio approach” allows participating countries to buy a share of many vaccine candidates as a hedge against the failure of some of these candidates. Vaccine candidates that turn out to be successful would be procured and distributed in a cost-effective and targeted manner. This arrangement would enable governments with limited or no financial resources to pursue bilateral procurement with vaccine manufacturers to have access to the vaccines. Pooling risks was also expected to lower prices as competition for a limited supply of vaccines would otherwise lead to a disorderly market as individual buyers seek to outbid each other.

The vaccine research and development for COVID-19 occurred at an impressive pace following the publication of the genetic sequence of SARS-CoV-2 on January 11, 2020 through the Global Initiative on Sharing All Influenza Data (GISAID). By April 8, 2020, around 115 vaccine candidates were being investigated, with the first vaccine clinical trial being tested on humans on March 16, 2020.³⁵ In a relatively short time span, there were 356 vaccine candidates, of which 138 were in clinical testing.³⁶ Regulatory approval for emergency use of vaccines similarly followed in rapid succession, beginning with the CanSino vaccine in China on June 25, 2020,³⁷ the Sputnik V vaccine in Russia on August 11, 2020,³⁸ the Pfizer–BioNTech vaccine on December 2, 2020 in the United Kingdom and on December 11, 2020 in the United States of America.³⁹ Approximately a year from first reports of the outbreak of COVID-19, at least four of the six technology platforms were used to create a vaccine that is effective against COVID-19; these being:⁴⁰

1. (1) Nucleic acid or genetic platform, whereby self-replicating RNA or (in some cases, nucleoside modified) mRNA is used to produce B-cell and T-cell immune responses by inducing target cells to produce S protein. Lipid nanoparticles are used in the delivery of mRNA, and may be the cause of anaphylaxis (or severe adverse reactions) in a small handful of individuals. COVID-19 vaccines that apply this platform include the Pfizer–BioNTech and Moderna vaccines;

2. (2) Adenovirus vector platform, which is used to produce viral vector-based vaccines. These vaccines, such as the Oxford–AstraZeneca COVID-19 vaccine and the Sputmik V COVID-19 vaccine, relies on a nonreplicating adenovirus shell to elicit an immune response. Although the shell contains DNA which encodes a SARS-CoV-2 protein, it is nonreplicating;

3. (3) Inactivated virus platform, which uses viral particles that are grown in culture and then killed to stimulate an immune response. This technological approach has been used to develop Sinovac’s CoronaVac and Sinopharm’s BIBP (Beijing Institute of Biological Products) and WIBP-CorV vaccines; and

4. (4) Protein subunits platform, which uses one or more antigen (or some fragments of the pathogen) to stimulate immune response rather than introducing the entire pathogen. The Novavax COVID-19 vaccine and the Sanofi-GSK vaccine have been developed using this platform.

Of these various platforms, the mRNA vaccines have been found in clinical trials to be most effective in adults and also among young persons between the ages of five and eighteen years.⁴¹ However, COVAX did not invest in this vaccine technology platform, or so it was reported by the Washington Post after it gained access to an internal document that was circulated by COVAX.⁴² As Larry Gostin observes, financing mechanisms that COVAX deployed might have helped to drive down costs, but leaving IP protections intact still pose a hurdle to wide access if some vaccines are developed outside of COVAX.⁴³

The nucleic acid or genetic technology platform was at that time novel and hence riskier, and the cost per dose of mRNA vaccine was said to be ten times more than traditional vaccines. For essentially budgetary reasons, COVAX entered into advance purchase contracts with AstraZeneca and Novavax for vaccines developed using more conventional technological platforms, and reached agreement with the Serum Institute of India (SII) for 1.1 billion doses. As the Washington Post reports, COVAX failed to deliver on the vaccines when AstraZeneca faced production issues while SII was prevented from exporting vaccines produced by it when India experienced its most intense wave of COVID-19 outbreaks between April and June 2021. Even if we leave aside the issue of choice of vaccine technology platforms, COVAX’s pooled purchasing approach could itself have been too conservative in concentrating the development and production of vaccines to a handful of vaccine developers, which were themselves hampered by production issues.⁴⁴ In contrast, the establishment of technology transfer hubs represents a different philosophy, as the sharing of technical knowledge (whether through IP waivers or through more open licensing arrangements) was intended to enable developing countries to acquire vaccine manufacturing capacity, and to become self-reliant. Pooled purchasing might have been an attempt to side-step entanglement with IP rights, but with early signs that mRNA vaccines could be a safe and effective pandemic countermeasure, IP waiver became front-page news.

2 Outside of a Market-Based Paradigm

In October 2020, India and South Africa put forward a proposal to the WTO for the waiver of patents, industrial designs, copyright, and trade secrets covering products and technologies that were needed to prevent, contain, or treat COVID-19.⁴⁵ After months of negotiation, a watered down proposal was presented in May 2021 to call for a temporary waiver of legal obligations under the TRIPS Agreement for a duration of at least three years, and in relation to the types of health products and technologies needed in response to COVID-19 (diagnostics, therapeutics, vaccines, medical devices, and personal protective equipment), rather than by broad classes of IP rights.⁴⁶ Under this revised formulation of the proposal, WTO member states may issue a single authorization for access to patented products and technologies, as well as their components and processes. Weighing in on the side of IP waiver, the Human Rights Council of the United Nations General Assembly (UNGA) highlighted the need to ensure equitable, affordable, timely, and universal access to COVID-19 vaccines.⁴⁷ This resolution was subsequently adopted by the UNGA,⁴⁸ and its message on equitable access to vaccines was reiterated in a more general call for global solidarity to ensure wider access to pandemic countermeasures.⁴⁹

Vaccines and other medical products (as well as their components) that are required to prevent, diagnose, and treat COVID-19 are protected under the TRIPS Agreement when patented. As temporary suspension of IP rights is not permitted under the TRIPS Agreement, the proposed waiver ensures that WTO member states that issue compulsory licenses to use such patented products or technologies will not violate their international law commitments. Unlike the existing TRIPS flexibilities, the patent waiver will release the WTO member state from its obligation of having to issue a compulsory license individually in order for a patented technology to be used without the patent holder’s permission, and thereby help to free up public resources in a time of public health emergency. The proposed waiver will also lend clarity to the inclusion of trade secrets, which may not fall within the scope of a compulsory licensing regime. By the middle of 2022, a ministerial decision was made during the 12th session of the WTO Ministerial Conference on the TRIPS Agreement to allow WTO member states to diversify production of COVID-19 vaccines and to dislodge patent exclusivity through a targeted waiver for a period of five years from June 17, 2022,⁵⁰ while recognizing the need for WTO member states to explore means of fully utilizing all the TRIPS flexibilities.⁵¹ In this vein, a proposal was put forward by essentially high-income WTO members to promote different licensing models for a range of IP rights including patents, copyright, trademarks, and know-how to be applied, and for a collaborative ecosystem to be developed by enabling WTO members through the provision of training, online guidelines, contract templates, legal services, and dispute settlement mechanisms.⁵² When the WHO announced in May 2023 that the COVID-19 pandemic no longer constitutes a public health emergency of international concern, the possible inclusion of an IP waiver for COVID-19 diagnostics and therapeutics was still being discussed.

The European Union was initially hesitant to support the proposal for a TRIPS waiver owing to concerns that innovation (presumably in mRNA technology spearheaded by German biotechnology company BioNTech) could be stifled, and instead emphasized other measures that include limiting expert restrictions, resolving production bottlenecks, and increasing contributions to COVAX.⁵³ Others, notably the International Federation of Pharmaceutical Manufacturers & Associations,⁵⁴ considered the TRIPS waiver to be a wrong solution to inadequate supply and unequitable distribution of vaccines. From an academic standpoint, Ana Santos Rutschman and Julia Barnes-Weise challenge the claim (based on the information function of patents) that if the exclusionary right for a certain period of time is dispensed with, manufacturers will be able to replicate existing vaccines and produce them at scale so that populations in low-resource settings will be able to access them.⁵⁵ They raise two objections to this claim. First, they argue that information disclosed would not increase availability of vaccines for populations in low-resource settings since dislodging exclusivity problems through means such as compulsory licensing was unlikely to enable other manufacturers to produce the vaccines and bring prices down. Second, they observe that patent waiver would not address other constraints on vaccine production by other manufacturers, notably lack of know-how (or tacit knowledge) in producing a complex biologic product, and the absence of human capital, raw materials, and infrastructure to produce and distribute COVID-19 vaccines. Additionally, patent waiver may disincentivize investment in vaccine research and development for COVID-19, and may lead to fewer vaccines and vaccine producers, and ultimately limit technology transfer. In essence, Rutschman and Barnes-Weise consider the limited availability of COVID-19 vaccine to populations in low-resource settings to be contractual and infrastructural problems rather than an IP problem.

In a follow-up paper that speaks more broadly to proprietary rights that apply to COVID-19 vaccine technology,⁵⁶ the same stance is reiterated, along with a proposal to support – both financially and structurally – collaborative relationships between innovators and potential trusted regional partners, as well as to cultivate trust-building partnerships. Importantly, Rutschman and her colleagues recognize that formation of collaborative relationships and partnerships can be challenging as the parties concerned have different priorities, interests, and bargaining power. In their opinion, greater effort is required on the part of the global community to build “relationships, infrastructure, best contractual practices and capacity, as well as funding earlier purchases of vaccines by countries in need and procurement mechanisms such as COVAX.”⁵⁷ While Rutschman and her colleagues hold fast to the status quo of the international IP regime, key international organizations appear to be more open to change. This is implicit in a key question raised in a report jointly published by the WTO, the World Intellectual Property Organization (WIPO), and the WHO:

Whether a solution to access problems in developing countries can be found by operating within the IP system, including by making full use of the flexibilities in the TRIPS Agreement, or whether such a solution would require waiving certain obligations under the TRIPS Agreement during the pandemic in order to allow for a rapid scaling up of manufacturing capacities.⁵⁸

While it may be useful to collect evidence on whether IP did constitute a barrier to accessing COVID-19 vaccines, it is unlikely that any analysis of this kind will produce a definite and conclusive answer to the question. Meanwhile, the Director-Generals of the WHO, WIPO, and WTO have in a joint statement committed to intensifying cooperation in support of access to health products and technologies to address challenges arising from the COVID-19 pandemic.⁵⁹ Initiatives introduced include: (1) Compile and share online all COVID-related IP measures by the Secretariat of the TRIPS Council of WTO;⁶⁰ (2) Establish and manage an online platform on COVID-19 Policy Tracker by WIPO;⁶¹ and (3) Launch a trilateral COVID-19 technical assistance platform to help WTO members and WTO accession candidates address their capacity-building needs to respond to the COVID-19 pandemic.⁶² While these initiatives remain market-based, the focus appears to have shifted back to concerns over capacity building and human development.

3 Capability Approach and the Case for Vaccine Interdependence

Few will dispute that vaccines are informationally and legally complex as they are usually constituted by proprietary and nonproprietary information or data. Additionally, the distribution of information or data, whether proprietary or not, tends to be across multiple layers and may reside with individuals or within organizations. The proprietary aspect is usually defined by patents and trade secrets, which give rise to ownership rights in, for instance, test data from the development of vaccine candidates, or information relating to vaccine production. Nonproprietary data on vaccine development or production may be tacit or experiential knowledge, but is nonetheless exclusive since such know-how may be difficult to replicate by a third party without the benefit of past knowledge or experience, or to otherwise reverse engineer.

As discussed above, it is in the light of these complexities that some have argued the TRIPS waiver will not increase the supply of vaccines and could stifle research and innovation. By this view, there is an implicit assumption that only existing vaccine developers could produce certain types of vaccines based on a relatively well-defined combination of proprietary and nonproprietary information or data. It follows that there may be insufficient recognition that other developers could use information or data that becomes available from the TRIPS waiver to produce different vaccines in combination with the knowledge or data that they possess. This more open-ended approach to vaccine research, development, and production is perhaps best represented by the WHO-backed mRNA vaccine technology transfer hub that was established in South Africa in July 2021 to produce mRNA vaccine at laboratory scale and to transfer its technology to six African countries. As the WHO explains, mRNA technology is a good focus for the technology transfer hub as mRNA vaccines have proved highly efficacious against COVID-19 and new variants that have emerged. From a development viewpoint, this technology can more crucially be adapted for other diseases and treatments, and is easy to share, develop, and adapt to new COVID-19 variants.⁶³ At the time of writing, the number of mRNA technology recipients has increased to fifteen, inclusive of Biovac in South Africa.⁶⁴ It may be helpful to recapitulate at this juncture that, quite aside from the TRIPS waiver, Moderna indicated in October 2020 that it was prepared to share its knowledge of the mRNA vaccine technological platform with vaccine producers in developing countries to meet local needs, and has since invested in building a manufacturing plant in Kenya. BioNTech has also announced plans to establish mRNA vaccine production in different jurisdictions, starting with the establishment of a manufacturing facility in Rwanda.⁶⁵

Unlike ACT-A, the goals of mRNA technology transfer hubs are not limited to countering the COVID-19 pandemic. As training facilities that seek to establish a relatively new technology at industrial scale, these hubs are intended to build technological and production capacity in low- and middle-income countries over a longer-term horizon. As the WHO has indicated, its hope is to enable manufacturers in these jurisdictions to deploy mRNA technology to develop vaccines and treatments for other diseases, particularly those that are underserved by the global pharmaceutical market. Labeled by some as a “plug and play” technology, this vaccine platform could in theory be easily adapted to other diseases.⁶⁶ There are additionally at least two positive spillover effects. First, capability in managing intellectual property and in issuing licenses may be acquired, as the technology transfer hub provides a platform for local or regional manufacturers to access the expertise of the Medicines Patent Pool.⁶⁷ Second, manufacturers in these jurisdictions could acquire the capability to procure and/or produce essential raw materials that are required for vaccine production. The WHO recognizes that supply chains are a critical barrier to national and regional responses, and is working with its partners to introduce production know-how, quality control, and licenses to overcome these barriers.

Evaluating these developments through a normative lens, both the ACT-A initiative and that of the mRNA technology transfer hub are directed at justice-related concerns, particularly in its distributive sense. ACT-A raises questions over the possibility of reconciling egalitarian commitments with the endorsement of robust rights of private ownership, alongside a strong presumption against paternalism, even if international law tends not to be paternalistic in the way that private law could be. Confronted with the limited success of COVAX, we are again confronted with the question of how our social and economic institutions should be arranged in order to fairly distribute the benefits and burdens of social cooperation on a global scale, while simultaneously problematizing the nature of social cooperation itself. Aside from the urgency of mounting a pandemic response, COVAX reflects a tendency of distributive justice initiatives to focus on distributable goods. As we have seen, COVAX as a procurement and allocation mechanism made little progress in achieving distributive justice, although for reasons that are not entirely attributable to it.⁶⁸ This failing does underscore a crucial precondition to Rawlsian-style distributive justice, which includes the existence of institutions that constitute the basic structure of society, along with social primary goods that correspond to needs and capacities within a normal range. Without a clear constitutional order and effective means of enforcement, international institutions, international norms, and state actions do not fit neatly with the Rawlsian paradigm. Even then, international institutions and state actions could be assessed to be unjust if they disrupt fair distribution.

In contrast, the capability approach may be more appropriate to consider and apply for its focus on human development. The capability approach is essentially concerned with the effective freedoms of a person or people to achieve valuable states of being and doing (for example, escaping morbidity). There are clearly links between these two approaches since distributive justice speaks to capabilities rather than serving only as a humanitarian principle. Distributive justice usually includes both productive processes and distributive mechanisms, and is, in this sense, concerned with the distribution of advantages, and not only recognition and happiness. As Michael Walzer explains, the idea of distributive justice has as much to do with being and doing as with land, capital, or personal possessions.⁶⁹ However, the capability approach is wider in the sense that it is concerned with well-being and freedom, rather than institutional justice. Capability relates to combinations of functions (or achievements in being and doing) that reflect the freedom of people to lead the kind of life that they value. From a human development standpoint, freedom comprises the opportunities that are available for individuals to achieve valued outcomes, as well as the processes and conditions that allow them to exercise agency.⁷⁰ Development is therefore concerned with social, economic, and political institutions that impact on capabilities that people value or have reason to value. Amartya Sen has been critical of economic planning and policies that value people essentially as means of advancing market expansion and real income, arguing instead that the goal of economic growth should be the expansion of people’s capabilities and freedoms. Freedoms not only create a means for development, but should also shape its ends. Martha Nussbaum explains that by focusing on capabilities rather than functioning, we are better able to consider a range of possible ways of life from which people can choose.⁷¹

While a goal of TRIPS was to facilitate technology transfer, especially from the Global North to the Global South, there is still a large and widening gap in the capability of people and sovereign states to draw on scientific and technological knowledge and tools to achieve health and general well-being. Where the COVID-19 pandemic is concerned, vaccine technological platforms are limited to a handful of mostly high-income jurisdictions. Of these platforms, the novel mRNA technology is confined to corporations that operate in the United States and European Union. With the capability approach, TRIPS has not adequately ensured that scientific advancement and innovation expand the real freedoms of people so that they have the opportunity to achieve a state of being that they value. In theory, the TRIPS flexibilities should have helped to address these concerns, but none of them were invoked during the pandemic. Moving forward, it will be instructive to understand why this has been the case, but the basic problem remains: how do we ensure that the international IP rights and global health regimes ensure that sovereign states and their peoples have the technological capability to mount a basic response to an epidemic or pandemic at the point of its emergence. The TRIPS waiver suggest some degree of recognition that there should be a sufficient level of technological capability across all health systems.⁷²

For Sen, market expansion, raising real incomes, and economic growth should be placed squarely in the category of means that must be applied to advance the freedom of people.⁷³ By a similar reasoning, scientific advancement and technological innovation should be means to advance the freedom of people, rather than as ends in themselves. While not necessarily the best and most effective response to the shortage of mRNA vaccines, mRNA technology transfer hubs seek to address capability concerns and would, as an initiative, better represent (or be represented by) the capability approach. These hubs enhance freedoms not only in terms of meeting the more immediate health needs of the COVID-19 pandemic, but seek to enable their host states to address existing and future health challenges by means of this new technological platform. As many of the states that host these technology recipients are low- and middle-income countries (and some with limited technological means at their disposal), these hubs further help to reduce the capability gap between technologically advanced states and those that are less so.

The capability approach encourages a more relational approach because it firmly places IP rights and even science and technology as means to expand human freedoms. It goes without saying that the availability of safe and effective vaccines, diagnostics, and therapeutics is crucial during a pandemic, but working within the status quo (as ACT-A arguably sought to do) has not proven to be an effective strategy, at least in terms of the equitable distribution of vaccines. In a world of multiple crises (of pandemics and climate change occurring all at once), a stronger focus on human agency could be achieved by adopting a “people-centered” approach, where participation and collaboration are emphasized in making policy choices and advancing development goals. People’s capabilities can be enhanced by public policy, just as participation by people can improve policy.⁷⁴ ACT-A sought to mount a rapid and efficient response to the pandemic by putting science, technology, and market-based mechanisms at center stage. Developments that followed show that efficiency is not the only value that should be prioritized; other values like human rights, solidarity, and justice are just as important, particularly since power (including IP rights) tends to be held by corporations or institutions. After all, the principles of human rights and justice are action-guiding, seeking to enable and sustain social cooperation. Relations of reciprocity must in turn be present for one party to assert claims to fair sharing of the goods that social cooperation makes available. Over the years, TRIPS has been the subject of much controversy, particularly when applied in ways that limit access to health products such as vaccines. Even if the closer engagement among the WIPO, the WTO, and the WHO in responding to the COVID-19 pandemic is a promising development, the binary of exclusivity or free-for-all through the TRIPS flexibilities or the TRIPS waiver is unlikely to be helpful in meeting future pandemic challenges. Crucially, the TRIPS provisions might have been applied too broadly to prioritize reward for inventors or innovators, whereas initiatives like the mRNA technology transfer hubs suggest that the international IP regime could better enable technology transfer to empower health systems and global health.⁷⁵

By design, the ACT-A is not an organization with its own legal status or central governing body, but has a complex, continuously evolving set of arrangements for governance, decision-making, and accountability.⁷⁶ While its structure and key actors are clearly set out, there is a lack of transparency over how decisions are made and why.⁷⁷ It has been unclear if a consultative process has been put in place to solicit inputs from its stakeholders and the wider global publics on its activities, policies, decisions, achievements, and struggles, or how it should and could be held accountable to governments, which are ultimately responsible for protecting public health within their jurisdictions.⁷⁸ As a public–private partnership, the involvement and role of industry (vaccine developers and producers where COVAX is concerned) have not been clear, since they tend to be set out in contractual agreements that are not publicly available. At a basic level, the issue of a TRIPS waiver arose in the absence of a transparent and accountable governance framework for innovation and access. More fundamentally, the failings of COVAX emphasize that all health systems, whether on their own or through collaborative engagement, should have the capability to be self-reliant. It does not auger well for global health justice if the majority of health systems have to rely on the goodwill of a few health systems, or worse, a few corporations and private organizations that are accountable only to their shareholders or sponsors. The COVID-19 pandemic has invigorated cooperation among key international organizations (particularly the WHO, the WTO, and the WIPO) along with their partners, and this momentum will need to be sustained if gains in the technological capability of underresourced health systems are to be consolidated at a higher level of pandemic preparedness and more equitable access to vaccines. The legal basis of initiatives like the one-off TRIPS waiver and the mRNA technology transfer hubs will benefit from clarification in terms of where they stand in relation to the TRIPS provisions and flexibilities. Crucially, the association between TRIPS and the global health regime will need careful calibration and management (perhaps dynamically) to ensure that IP rights (and the underlying technological innovations) and global health initiatives such as ACT-A continue to serve as means to secure human rights and freedoms, especially during an epidemic or pandemic.

4 Conclusion

As a species of property law institution, IP law comprises relatively stable and internally coherent categories of rights that are in turn governed by precise rules and clear standards. It is also subject to continuous evaluation and refinement through legislative, adjudicative, and administrative decisions and/or processes. In theory, there should be no inherent tension between IP law and the capability approach in their goals of securing agency and human flourishing through collective action. However, recent developments on the global health stage that we have considered in this chapter show the limitations of instituting market- or property-based mechanisms as the dominant paradigm in global health. In August 2022, Moderna filed lawsuits against Pfizer and BioNTech in the United States and in Germany for infringement of three patents on modifications to mRNA technology that allow for larger doses to be delivered and on the design of the spike protein.⁷⁹ Moderna developed its full-length spike protein technology when working on Middle East Respiratory Syndrome (MERS). Earlier on, in July 2022, BioNTech was sued by CureVac, another German biotech company, while Moderna was sued by Alnylam Pharmaceuticals, Arbutus Biopharma, and Genevant Sciences, which claim that their patent rights over the delivery mechanism used by Moderna were infringed. Possible outcomes from these disputes could result in Moderna’s domination of the mRNA market if it succeeds in asserting its patent claims over the technology, or a more intricate web of cross-licenses will emerge. Either way, the cost and access implications are unlikely to be positive.

Meanwhile, ACT-A has reportedly been winding down its activities, although the COVAX facility could be moved to Gavi.⁸⁰ Whereas wealthy jurisdictions have achieved high rates of distribution and administration of vaccines, this has not been the case for underresourced countries. Only 20.9 percent of people in low-income countries have received at least one dose of COVID-19 vaccination,⁸¹ compared to 67.7 percent of the world population. Hampered by a funding gap of $1.85 billion, according to the ACT-A Commitment Tracker, and waning global interest in the pandemic,⁸² it is unlikely that access to COVID-19 vaccines will drastically improve via this route. The different WHO-based mRNA technology transfer hubs established around the world, facilities established by Moderna and the Pfizer–BioNTech partnership, and still other mRNA vaccines that are in the development pipeline are likely to take over the supply of mRNA vaccines.⁸³ The lack of coordination among these facilities, and – as I have noted – the contest over IP rights to the mRNA technology platform will need to be addressed at a global level, and ideally under a legally binding treaty on pandemic preparedness.⁸⁴ As Larry Gostin has observed more recently, COVID-19 highlighted the centrality of research and development, and to prepare for the next pandemic we cannot keep to the status quo but need to remake society to be more equitable, to have stronger safety nets, and to enable a new politics for global health security.⁸⁵ It is important for individual countries and industry stakeholders to overcome IP barriers, but as long as these efforts remain disjointed, equitable access to vaccines and other pandemic countermeasures among the world’s poorest remains at stake.⁸⁶

The capability approach provides a conceptual framework to reimagine global health governance and how IP rights should be situated in the shaping of technological development, production, and distribution, in terms of the product (for example, vaccine) and the technical means (for example, capability to contribute to the production of vaccine). In the short term, there will of course be challenges that are linked to raw materials, production facilities, human capital, as well as infrastructural and practical constraints.⁸⁷ However, deeper relationality in the capability approach requires that all health systems should be able to participate meaningfully in technological development, production, and distribution, unlike the current COVID-19 vaccines situation where a handful of (mainly high-income) countries provide vaccines to relatively “passive” (and mainly low-income) countries. The status quo reflects the technological divide between the “Global North” and the “Global South,” which is in many ways sustained by the international IP regime as it is designed and implemented. The world will remain unprepared for the next pandemic unless we depart from the status quo by identifying, under the capability approach, for instance, stronger freedom-enhancing routes that are based on a wider set of principles and considerations.⁸⁸