Last June, the United States, along with the other members of the World Trade Organization, agreed to the largest government-sponsored theft of intellectual property.
It’s called the “TRIPS waiver” because for five years it suspends certain patent obligations under the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property. The original draft of the waiver included COVID-19 diagnostics and therapeutics, but these were stripped from the text to curry political support. WTO members agreed to revisit this decision in December, but at the last minute, the Biden administration said it wanted more time to look into expanding the waiver.
The International Trade Commission was given the task of assessing the costs and benefits of waiving patents on diagnostics and therapeutics. To this end, the commission held two days of hearings in March. A long list of witnesses testified for and against expanding the TRIPS waiver. I was one of those witnesses. I found the hearings frustrating and encouraging.
The hearings were frustrating in that proponents and critics of the waiver are talking past each other. Proponents take innovation as a given and focus their attention on the price of technologies that exist. Critics argue that all the action is in innovation, without which there’s nothing to price. Count me among the critics. I testified it’s impossible to create a generic out of nothing.
The hearings were also encouraging. It was quite evident that proponents and critics alike want to increase patient access to medicines everywhere. They just disagree on how to get there.
Here’s what I heard at the hearings.
Proponents of the waiver insisted that intellectual property results in unequal access to COVID-19 technologies. They argued that patents, which grant exclusive rights for a limited period on the commercial use of an idea, necessarily keep prices high and out of the hands of patients in developing countries. From this view, waiving IP means more generics and thus greater access to medicines.
Critics of the waiver argued that generics are not free, and can actually be more expensive than patented drugs secured via international government procurement mechanisms. Moreover, even where vaccines are free, this doesn’t always translate into more jabs in arms.
For example, the Congo was forced to get rid of 1.7 million vaccines it had received at a big discount, or obtained from donors free because they weren’t used by their expiration dates. Nigeria had to destroy 1 million vaccines for the same reason. This suggests that so-called last-mile problems like distribution and the fragility of healthcare systems loom much larger than price.
The International Trade Commission had a front-row seat to this debate. What it saw, however, was that proponents and critics have vastly different views. Proponents black box innovation, which allows them to make wild claims about pricing. Critics start from the vantage point that pricing is only interesting if the technology actually exists and has to account for the costly reality of this innovation.
This tension was evident in the discussion of “compulsory licenses,” or CLs. These licenses involve a government forcing a patent holder to license its invention to generics providers (local or otherwise) for a royalty fee. Proponents wanted to have their cake and eat it too. Many said CLs don’t work because they’re too complicated, time-consuming and fraught with politics. That said, they also insisted that CLs don’t chill innovation, and are the way to go. Most notably, Oxfam testified that CLs “have encouraged innovation,” while the Third World Network held the view that CLs are not only better than voluntary licenses (VLs), but better than doing tiered pricing for poor countries.
Critics of the waiver agreed that the WTO already allows for CLs, but that VLs are far more effective. The Information Technology & Innovation Foundation testified, for example, that there are currently 140 VLs in effect, 91 percent of which have a technology transfer clause. Moreover, as the Alliance for Trade Enforcement explained, there’s good evidence that when governments follow through on CLs, this undermines the viability of VLs, and compromises the sharing of essential knowhow. The reason CLs are rarely used mechanisms is that there’s no need, and threats of CLs are often used improperly to implement industrial policy or as undue leverage in pricing negotiations. Put simply, VLs deliver even more.
Gilead Sciences, the inventor of remdesivir, gave some of the most compelling testimony, explaining that intellectual property “is a prerequisite to access, not a barrier, so a TRIPS Waiver is not the answer.”
It wasn’t just large companies that made this point. Small start-ups were as adamant — if not more so — that, without enforcement of IPRs, they couldn’t possibly innovate new drugs, or contribute to the various large families of patents that made COVID-19 vaccines so quickly available.
In Q&A, I stated that the International Trade Commission can’t afford the luxury of taking innovation as a given. We cannot undermine incentives to innovate and expect that industry will respond in the same remarkable and rapid fashion that it did for the COVID-19 pandemic. Next time, if the proponents win the day, there may be no vaccines, diagnostics and therapeutics to price.