Last Wednesday, U.S. Trade Representative Katherine Tai announced that the United States would support a waiver of the World Trade Organization’s TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights) for COVID-19 vaccines during the pandemic. Although a waiver is no panacea, it would be an important step in the right direction on the most important public policy challenge now facing Planet Earth: vaccinating the world as swiftly as possible to save lives and restore economic health.
Not everybody is a fan. PhRMA, the drug makers’ lobby, unsurprisingly released a statement in opposition. But many other disinterested observers have criticized the announcement as well, dismissing a waiver as empty symbolism in the short run and undermining the development of new drugs over the longer term.
We believe the critics are wrong, but let’s start by giving them their due. It is true that a lack of technical know-how, manufacturing capacity, and access to raw materials is at present the bigger, more pressing obstacle to ramping up vaccinations globally than any frictions introduced by intellectual property. But opposition to a waiver ignores the full extent of what a waiver would cover (referring only to “patents” is a red flag) and how it would complement and facilitate the other steps that need to be taken to speed up vaccination worldwide.
We have already seen a host of regulatory waivers issued during the pandemic–allowing doctors to work across state lines, expanding the scope of practice of non-M.D. health professionals, and so on. A TRIPS waiver is a good idea for the same reason that these other waivers were needed: to clear regulatory red tape that may make sense in normal times but is dysfunctional in a crisis. And cutting the red tape created by intellectual property is itself nothing new: during wartime and even during non-crisis periods, the U.S. government has routinely exercised its compulsory licensing powers under Section 1498 to use whatever technology it needed and then compensate patent owners ex post in order to avoid the hassles and holdups associated with negotiating buyouts or other methods of acquiring rights.
Critics of the waiver focus narrowly on vaccine patents, but there’s a lot of other intellectual property out there that can slow down the development and rollout of vaccines and other treatments. There are countless patents on manufacturing techniques, ingredients, and production equipment, all of which creates possible points of friction that manufacturing nations around the world don’t have time to negotiate around.
And don’t forget about copyright law, also covered by TRIPS. Many countries do not recognize “data mining” journal articles, news sources, and other works, as fair use permitted under copyright law. This poses a serious barrier to researchers around the world trying to gain insights from these sources, and it’s a barrier that a TRIPS waiver could eliminate. Access to scientific literature normally hidden behind paywalls is valuable not just for researchers, but also public health officials and front-line healthcare practitioners.
Now let’s step back and look at the bigger picture, which is that the incentives created by intellectual property are by their nature incompatible with proper pandemic response policy. The basic bargain struck by IP is to expand the creation of good ideas over the long term by slowing down the diffusion of good ideas in the short term. That is, by awarding temporary monopolies to IP holders (which they can use to exclude competitors and raise prices), you give them heightened incentives to innovate. This decentralized system can work fine in normal times for new products like iPhones or Viagra, but not when time is of the essence.
A system based on creating veto points and slowing diffusion simply has no place in a public health emergency. Why would we want to grant anybody the power to withhold supply and charge above-market prices when doing either would be unconscionable? Furthermore, the use of regulatory exclusivity to boost drug firm profits (and thereby encourage them to develop new drugs down the road) is unnecessary when the buyer is the government and it’s willing to shell out beaucoup bucks to bring drugs to market rapidly and ensure that their producers earn a healthy return. Any premium paid to drug makers is a pittance compared to the crippling costs of the pandemic, so governments are well advised to pay through the nose.
This alternative model for drug development, in which the government acts as purchaser to stimulate innovation directly, is the one we’ve already used to spectacular effect with Operation Warp Speed. The key to that program’s success was the use of advance purchase contracts (APCs) to order large quantities of the vaccine beforehand at a predetermined price. These contracts mimic the effect of patents during “normal times”–allowing drug makers to charge above-market prices for a temporary period to justify the R&D investment plus a healthy rate of return–but do so in a way that maximizes rapid diffusion of the new technology. These contracts have also been paired with direct financing of vaccine R&D, in addition to the significant sums spent on research into coronaviruses in the decades before the present crisis, all of which reduce costs for drug makers and thus obviate the need for them to recoup those costs through asserting exclusive IP rights.
Operation Warp Speed has put us well on the way toward vaccinating the United States successfully, but in much of the rest of the world vaccination has barely gotten under way. Not only does this mean more lives lost abroad, as we see now with the horrific suffering occurring in India, but it increases the risk that new variants of the virus will emerge that aren’t stopped by current vaccines. America’s vaccine shield won’t really be secure until it’s expanded to cover the whole world.
So the pressing challenge now is to work with drug producers to expedite technology transfer and manufacturing capacity expansion so the rest of the world can catch up. The U.S. government and other world governments need to pony up to make this happen. With IP off the table, a waiver would ensure that drug producers are incentivized to cooperate.
Yes, there are bad reasons to support the TRIPS—namely, arguments advanced by left-leaning groups who see it as a blow against drug producer profits. Of course such attitudes are wrongheaded. We want drug companies to do well, both because they’ve performed an immensely valuable service and so they’re eager to come to the rescue again the next time we face a similar emergency. But we want drug companies to do well by doing good—to profit handsomely from vaccinating the world, not from the power to get in the way of that goal.