Repackaging Pharmaceutical Monopolies

The global IP regime fueling the vaccine apartheid, while it may feel ubiquitous, was only consolidated in the 1990s with the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Spearheaded by a coalition of mostly US corporations, including Pfizer, TRIPS mandates that the WTO’s 164 member states (together responsible for 96 percent of global trade) recognize the exclusive rights of a patent, trademark, or copyright holder. Unlike many intergovernmental agreements, it is enforced through powerful disciplinary mechanisms: violating countries are liable for damages and face sanctions and trade retaliation.

Pharmaceutical companies have become gatekeepers to products that are, in reality, a sum of collective resources and knowledge. COVID-19 vaccines, for example, are built on existing technologies and data from public-sector workers and institutions, and developed with billions in public funding; governments and charitable trusts funded 97 percent of the AstraZeneca vaccine research while developers retained full ownership.

Before TRIPS, governments had the space to regulate their pharmaceutical industries to meet their people’s needs. Countries like India, for example, had banned the patenting of pharmaceutical products, which allowed them to foster a thriving generics industry that produced and even exported lifesaving proprietary drugs at low costs. With the introduction of TRIPS, governments are now beholden to a handful of companies, largely based in the Global North, which own and control a wealth of essential medical products.

For example, before the pandemic, five multinational pharmaceutical companies were responsible for 80 percent of global vaccine sales. When governments have attempted to use TRIPS’ “flexibilities,” which theoretically gives them the right to bypass patents and manufacture certain products when in the public interest (though with the payment of royalties), they are met with swift retaliation. This has ranged from pharmaceutical giant Gilead threatening to sue the Ukrainian government, to Abbot withholding new medicines from Thailand for its attempts to produce two patented HIV drugs, to wealthy countries obstructing the use of flexibilities through aggressive provisions in their bilateral and regional trade agreements.

As a result, low-income countries are not only priced out but also neglected, as pharmaceutical companies concentrate research and development on their biggest markets.

COVAX does little to bolster the power of governments relative to the few big companies monopolizing vaccine patents; unsurprisingly, civil society and governments in the Global South had little to no role in shaping it. While COVAX distributes vaccines to a wider group of countries than would otherwise have had access by pooling resources to negotiate with producers on their behalf, it does little to address the core problem: a handful of barely regulated for-profit companies control the world’s access to vaccines. These companies not only continue to act as vaccine gatekeepers but also reap profits through COVAX as doses are purchased above the cost of manufacturing.

While vaccines for low-income countries are subsidized by aid and the private sector, these countries are also expected to share in the costs, redirecting funds from vaccine rollout and pandemic recovery to companies like Moderna, which is expected to generate $18 billion in profit this year alone.

COVAX is also keeping the terms of its deals confidential. Refusing to disclose their negotiated prices allows pharmaceutical companies to maintain an upper hand over governments in bilateral negotiations, leading to disparities like the EU paying $2.19 per dose to AstraZeneca while South Africa pays $5.25.

As a result of its conciliatory approach to pharmaceutical monopolies, COVAX fails to address vaccine scarcity. The initiative claims to provide “investments and incentives” for manufacturers to increase production. This includes encouraging (but not requiring) patent-holding companies to voluntarily license other manufacturers to produce their vaccines, like AstraZeneca authorizing the Serum Institute of India to produce doses for ninety-two low-income countries via COVAX.

But as advocates point out, voluntary licensing is nowhere near sufficient to meet the sheer scale of global demand. AstraZeneca, for example, has issued only a few licenses to companies in India, Brazil, Argentina, China, and Indonesia, representing a small fraction of potential manufacturers that could currently be producing vaccines. Through these agreements, the patent holder also has the power to demand royalties from the companies it licenses to and restrict them to certain geographic areas, pushing up prices and undermining competition. While AstraZeneca pledged not to profit from its vaccine during the pandemic, this is impossible to verify due to a lack of transparency, and its licensing deals arbitrarily declare the pandemic over in two months, at which point it can charge any price.

The limited scale of production is particularly problematic when you consider COVAX is promoted as a supplement to the bilateral agreements rich countries are negotiating with pharmaceutical companies, or “insurance” if those deals fail to produce viable vaccines. Effectively, this means COVAX is competing with these bilateral deals for a limited pool of vaccines.

To account for these supply deficits, the number of doses countries can expect to receive through COVAX is capped at only 20 percent of their populations. So as long as pharmaceutical monopolies persist, for the eighty or so countries for which COVAX is their only means for accessing vaccines, achieving herd immunity would take years.

As well as being inadequate, COVAX also undermines more sweeping reforms that aim to limit the power of pharmaceutical monopolies, like the proposed TRIPS waiver. By contending that COVAX can meaningfully expand vaccine access by pooling resources, proponents imply that the marginalization of over 2.5 billion people is a technocratic problem simply requiring better coordination. This entrenches the patently false notion that, with some tweaks, pharmaceutical monopolies can be compatible with the well-being of people across the Global South. COVAX also generates vast sums of money around this notion, including $4 billion from the Biden administration, with a web of policy makers, bureaucrats, donors, experts, and NGOs all invested in refining but ultimately preserving the IP system.

The Biden administration’s recent support for the waiver is unlikely to change this. If other holdouts like the EU, UK, and Australia follow suit — something Angela Merkel and Emmanuel Macron have expressed resistance to — the waiver will move to text-based negotiations. Here, it will live or die (or be refashioned into a shallow, toothless version of itself) on the willingness of countries to maintain provisions that substantively limit the power and profits of pharmaceutical companies.

To effectively expand global production, governments also need to facilitate technology transfer alongside the waiver. With the WHO’s technology transfer platform — known as C-TAP — so far attracting zero contributions, this may require compelling pharmaceutical companies through conditional funding, for example. Considering the sheer power of pharmaceutical lobbies, which channeled money to more than two-thirds of Congress last year alone, good-faith negotiations of the United States can hardly be taken for granted.

Activist Sangeeta Shashikant of Third World Network expects pharmaceutical companies to play an obstructive role during text-based negotiations, working to limit the scope and duration of the waiver. The narrative that COVAX is an effective redistributive tool has a potentially critical role to play: it offers cover for those who profit from pharmaceutical patents — from the companies themselves to the politicians they lobby — to kneecap the waiver during negotiations and continue denying much of the world access to vaccines while still conveying a nebulous sense of benevolence.

Toward Vaccine Justice

Vaccine justice is an expansive agenda that goes beyond removing IP barriers so countries around the world can freely utilize their factories to begin manufacturing vaccines. The pandemic has highlighted how much of this unused manufacturing capacity is concentrated in a few countries and regions.

India is one. After being compelled to introduce product patents to comply with TRIPS, their generics industry adapted to largely produce drugs in the public domain and through voluntary licensing agreements. In Africa, pharmaceutical manufacturing is largely concentrated in North Africa, South Africa, Nigeria, Kenya, and Ethiopia, and, as of 2017, there are only eight vaccine manufacturers on the continent.

The removal of IP barriers is a moral imperative, but this uneven manufacturing capacity suggests it’s a baseline rather than a ceiling. Many countries, while much better off under the TRIPS waiver, would still be in the somewhat precarious position of being reliant on pharmaceutical imports. This has been made evident repeatedly during the pandemic, with hoarding, export restrictions, and global supply chain disruptions seeing many importing countries face extreme shortages.

In early April, a spike in domestic cases saw India suspend the export of AstraZeneca vaccines being produced by the Serum Institute, reneging on its agreement to supply ninety-two low-income countries. IP is undoubtedly to blame: where AstraZeneca contracted only one company in India to supply more than half the world, a patent waiver would have allowed other manufacturers to begin production and meet demand.

But the situation also demonstrates the vulnerability of the importing countries at the mercy of exporters that are ultimately accountable to their own domestic interests. Even when vaccines are made available, sending countries have used them to shore up foreign policy interests. Israel, for example, planned to send excess doses to allies that support its contested claim to Jerusalem as its capital. At the same time, they have failed to supply vaccines to Palestinians in Gaza and the West Bank in contravention of their obligations as an occupying power.

Recognizing the risk of dependence on importing critical pharmaceuticals, some wealthy countries repatriated the production of key active ingredients that were previously outsourced. Several African countries also started locally producing COVID-19 testing kits, PPE, and hand sanitizer, often by repurposing existing factories. However, many countries lack the necessary infrastructure to do the same, particularly with vaccines.

TRIPS is deeply implicated in this lack of infrastructure, having eliminated what were once critical public policy mechanisms for fostering domestic pharmaceutical industries, like regulations that require foreign companies to share technology and use local suppliers. This is grounded in the broader political and economic project of “free” trade, in which South countries are coerced into structuring their economies around producing and exporting a narrow set of products and made dependent on importing critical goods like medicines and vaccines.

In this context, vaccine justice means addressing the broader structures preventing so many countries from developing and expanding their domestic capacity to manufacture pharmaceuticals. Global bodies like the United Nations (UN) Conference on Trade and Development and regional bodies like the UN Economic Commission for Africa recognize that domestic pharmaceutical industries are critical for ensuring access to health in low-income countries. Early postindependence governments in Africa went further, seeing the domestic production of essential goods as fundamental to sovereignty, as dependence acts as an entry point for political and economic encroachment. Toward this end, they nurtured infant industries through subsidies and tariffs, state-owned enterprises, investment in necessary infrastructure, direct credit allocation, and more — policies now obstructed by agreements like TRIPS.

As COVAX struggles to contend with supply deficits, a former WHO official characterized the initiative as “overly idealistic and ambitious.” After being leveraged by high-income countries and pharmaceutical companies to fend off existential threats to the IP regime, the failures of COVAX are now seemingly being used to limit our collective imagination and reach. Ultimately, building a just global system for vaccine production and distribution requires more idealism and ambition than a mechanism that preserves pharmaceutical monopolies.