By Donald Zuhn —

Yesterday, Sen. Steve Daines (R-MT) wrote to President Joseph Biden to share his concerns regarding the Biden Administration's support for waiving intellectual property protections for COVID-19 vaccines and urge the President to reconsider his position on the proposed waiver.  In his letter, Sen. Daines (at right) asserted that "[s]uspending World Trade Organization (WTO) obligations to protect IP on COVID-19 vaccines would not only fail to significantly speed up vaccine distribution to the rest of the world, but it would set a dangerous precedent on IP protection at the international level and undermine American innovation."  Sen. Daines also argued that the proposed waiver would "provide[] for a technological windfall for adversaries such as China and Russia by giving away IP that has taken years of hard work and ingenuity by American scientists, not to mention billions in American investment, to perfect."

Instead of a waiver, Sen. Daines suggested that the Administration should "prioritize fighting COVID-19 internationally by getting more shots in arms in countries who need them without transferring critical technologies and undermining our global leadership position."  He noted that as states decline additional doses of COVID-19 vaccines, "the U.S. should focus on increasing production and capacity to provide support for global vaccine supply and leading the world in vaccine manufacturing and distribution."  Sen. Daines concluded his letter by urging the Biden Administration to withdraw its support for waiving IP protections for COVID-19 vaccines and "terminate any plans to participate in negotiations at the WTO necessary to move this dangerous proposal forward."

By Donald Zuhn —

On Friday, Dr. Albert Bourla, the Chairman and Chief Executive Officer of Pfizer, sent an open letter to Pfizer employees regarding the U.S. Trade Representative's announcement last week that the Biden-Harris Administration would support waiving intellectual property protections for COVID-19 vaccines.  Dr. Bourla (at right) begins the letter by noting that the U.S. Trade Representative's announcement had "created some confusion" about whether Pfizer had "done enough to ensure fair and equitable distribution of our COVID-19 vaccine" and whether the proposed waiver was "going to bring solutions or create more problems."  The Pfizer CEO's letter sought to address these questions.

With respect to the global distribution of Pfizer's COVID-19 vaccine, Dr. Bourla declared that the "[f]air and equitable distribution [of its vaccine] was our North Star from day one," noting that there were two conditions that had to be met in order to ensure that every country would have access to its vaccine: (1) a price that anyone can afford, and (2) reliable manufacturing of enough vaccine for all.

With regard to pricing, Dr. Bourla explained that Pfizer had decided in June 2020 to offer its vaccine through tiered pricing, where "wealthier nations would have to pay in the range of about the cost of a takeaway meal and would offer [the vaccine] to their citizens for free . . . middle-income countries were offered doses at roughly half that price and . . . low-income countries were offered doses at cost."  He also noted that "[m]any of the poorest communities will receive their doses through donation," stating that "[e]quity doesn't mean we give everyone the same.  Equity means we give more to those that need more."

As for being able to manufacture "enough vaccine for all," Dr. Bourla acknowledged that while this second condition had been "much more challenging," the company was "getting there with remarkable speed."  Commending "the ingenuity and hard work of [Pfizer's] scientists, engineers and skilled workers," and pointing to "multibillion dollars of Pfizer investment," he noted that the company will provide more than 2.5 billion doses globally in 2021, and expected to provide 4 billion doses in 2022.  Dr. Bourla states that:

These doses are not for the rich or poor, not for the north or south.  These are doses for ALL.  We have concluded agreements to supply 116 countries and we are currently in advanced negotiations with many more for a total of approximately 2.7 billion doses in 2021.  Upon finalization of all agreements, we expect that 40% of them, or more than 1 billion doses, will go to middle- and low-income countries in 2021.

The Pfizer CEO acknowledges, however, that of the approximately 450 million doses that have been shipped to date, "the balance is more favorable to high income countries."  He explains that when Pfizer asked countries to place orders so the company could allocate doses, "the high-income countries reserved most of the doses."  He also explains that he "became personally concerned" with dose allocation and had "reached out to many heads of middle/low-income countries by letter, phone and even text to urge them to reserve doses because the supply was limited."  Unfortunately, most of these countries "decided to place orders with other vaccine makers either because mRNA technology was untested at that time or because they were offered local production options," and "other vaccine producers were not able to meet their supply commitments for varying technical reasons."  According to Dr. Bourla, Pfizer expects to be able to better supply its vaccine to middle- and low-income countries in the second half of 2021 and "to have virtually enough supply for all in 2022."

Turning to the U.S. Trade Representative's announcement, Dr. Bourla writes that he recently had an opportunity to discuss distribution of the Pfizer vaccine with Ambassador Tai, and "explain why the suggested waiver of IP rights could only derail this progress."  His discussion with Ambassador Tai leads to the second question he raised at the start of his open letter — whether the proposed IP waiver was "going to bring solutions or create more problems."  And to this question, his answer is "categorically the latter."  Dr. Bourla explains that:

When we created our vaccine there was no manufacturing production of any mRNA vaccine or medicine anywhere in the world.  We had to create manufacturing infrastructure from scratch.  With 172 years of quality manufacturing tradition, substantial deployment of capital, and more importantly, an army of highly skilled scientists, engineers and manufacturing workers, we developed in record time the most efficient manufacturing machine of a life-saving vaccine that the world has ever seen.  Currently, infrastructure is not the bottleneck for us manufacturing faster.  The restriction is the scarcity of highly specialized raw materials needed to produce our vaccine.  These 280 different materials or components are produced by many suppliers in 19 different countries.  Many of them needed our substantial support (technical and financial) to ramp up their production.  Right now, virtually every single gram of raw material produced is shipped immediately into our manufacturing facilities and is converted immediately and reliably to vaccines that are shipped immediately around the world (91 countries to date.)  The proposed waiver for COVID-19 vaccines, threatens to disrupt the flow of raw materials.  It will unleash a scramble for the critical inputs we require in order to make a safe and effective vaccine.  Entities with little or no experience in manufacturing vaccines are likely to chase the very raw materials we require to scale our production, putting the safety and security of all at risk.

Aside from the manufacturing challenges, Dr. Bourla also suggests that "waiving of patent protection will disincentivize anyone else from taking a big risk."  He explains that Pfizer spent $2 billion before the company knew that it could successfully develop a vaccine because the company "understood what was at stake."  While acknowledging that "[t]he recent rhetoric will not discourage us from continuing investing in science," he is "not sure if the same is true for the thousands of small biotech innovators that are totally dependent on accessing capital from investors who invest only on the premise that their intellectual property will be protected."

Dr. Bourla concludes his letter by stating that "[e]nding the pandemic and vaccinating the world is a massive, but achievable undertaking," and that Pfizer remains "fully focused on getting high-quality, safe and effective vaccines to patients all over the world as quickly as possible and to putting an end to this deadly pandemic."

For additional information regarding this topic, please see:

• "If the Devil of the WTO IP Waiver Is in the Details, What Are the Details?" May 9, 2021
• "The Road to Hell Is Paved with What Everybody Knows," May 6, 2021
• "BIO & IPO Issue Statements on Biden Administration's Support for Proposed WTO Waiver," May 6, 2021
• "Biden Administration Supports Waiver of IP Protection for COVID-19 Vaccines," May 5, 2021
• "Suspending IP Protection: A Bad Idea (That Won't Achieve Its Desired Goals)," April 26, 2021
• "Sen. Tillis Asks Biden Administration to Oppose WTO Waiver Proposal," April 21, 2021
• "IP Organizations Support Continued Opposition to Waiver Proposal," April 5, 2021
• "Industry Coalition Supports Continued Efforts to Oppose Waiver Proposal," March 29, 2021
• "BIO and PhRMA Urge Biden Administration to Oppose Proposed WTO TRIPS Waiver," March 11, 2021
• "IPO Sends Letter on IP Law and Policy to President-Elect and Vice President-Elect," January 4, 2021

By Kevin E. Noonan —

While the details of the WTO patent waiver have not been determined (or more properly negotiated), it is important to consider the structure of the international trade regime in which the waiver will operate and the consequences of any agreement defining exactly what will be waived.

The GATT/TRIPS agreement is a treaty, which (of course) is an agreement between countries, and disputes and accommodations are between their governments.  The extent to which a private company's patent or other IP rights are protected under the terms of these agreements depends on actions of these governments in enforcing them on the company's behalf.  Thus, for protections like patents, a government can agree to "turn a blind eye" to infringement by companies in other countries (or other governments) by refusing to press the rightsholder's case before the WTO, to pressure the governments unilaterally (as in the Watch List and Special Watch List of the U.S. Trade Representative's Special 301 Report), or otherwise support a private company's private actions using an infringing country's legal system.  Such "passive" actions (i.e., refusing to enforce rights in violating or "scofflaw" countries) requires very little affirmative action by a government.  These are the types of de facto waivers that can be effective, for example, for patented drugs that can be produced by conventional drug production technology wherein description of an active pharmaceutical ingredient molecule.

The details of COVID vaccine production have been set out in various news sources (see Neuberg et al., "Exploring the Supply Chain of the Pfizer/BioNTech and Moderna COVID-19 Vaccines"; Weiss et al., "A COVID-19 Vaccine Life Cycle: From DNA to Doses," USA Today, Feb. 7, 2021; King, "Why Manufacturing Covid Vaccine to at Scale Is Hard," Chemistry World, Mar. 23, 2021; Cott et al., "How Pfizer Makes Its Covid-19 Vaccine," New York Times, April 28, 2021).  But these are certainly not disclosed in the detail necessary for commercial production, and the complexities of production are illustrated in graphics from the Times article, wherein the DNA is prepared in Chesterfield, MO and shipped to Andover, MA for mRNA production; then the mRNA shipped back to Chesterfield or Kalamazoo, MI for packaging into the vaccine nanoparticles; and then sent back to Andover for testing before release.  While some of this complexity may be company-specific, it also represents the different technological requirements for preparing an effective vaccine.  It is unlikely that most of the countries in favor of the waiver (except India and South Africa) have the technological infrastructure for producing the vaccine.  And the company in India, the Serum Institute ("the largest vaccine maker in the world"), having the greatest likelihood of being able to reproduce the vaccine if the waiver is put in place recently was forced to "hand over its vaccines to the [Indian] government," according to an article in the New York Times (Schmall et al., "India and Its Vaccine Maker Stumble over Their Pandemic Promises," May 9, 2021).

It is evident that, in the almost total absence of patents involved in COVID vaccine preparation, the disclosure needed to reproduce these vaccines (no matter how difficult that may be in practice) are protected by trade secrets.  If the WTO imposes this waiver, the question will be whether the U.S. will compel disclosure of trade secret owned by U.S. companies, or have disclosed them to the extent such secrets are part of regulatory filings.  Either action would constitute a "taking" under the Fifth Amendment ("Nor shall private property be taken for public use, without just compensation"); see Epstein et al., "The Fifth Amendment Takings Clause," Interactive Constitution: Common Interpretation.  Seemingly simple and straightforward, almost every word in the clause is open to interpretation, none perhaps as much as determining what "just compensation" entails.  It is likely that, should the government act peremptorily with regard to takings of trade secrets justified by any WTO waiver clause, the effect on trade secrets will carry the greatest consequences and be the cause of most controversy.  Indeed, the prospects arising therefrom are likely some of the biggest impediments towards effectuating any waiver in a manner that could have any chance of achieving the stated goal of facilitating COVID vaccine production.

This prospect also raises the issue of how any such waiver will be implemented in the U.S. Treaties are not necessarily "self-executing" and need to become enforceable through an Act of Congress.  The distinguishing feature of such treaties are that "provisions in international agreements that would require the United States to exercise authority that the Constitution assigns to Congress exclusively must be deemed non-self-executing, and implementing legislation is required to give such provisions domestic legal effect."  See Mulligan, "International Law and Agreements: Their Effect upon U.S. Law," Congressional Research Service 7-5700, Sep. 19, 2018.  The necessity for Congress to act, although not having the heavy weight that entails approving treaties (i.e., a two-thirds majority vote in the Senate) nonetheless could be expected to face significant opposition should it be interpreted to permit the government to exercise a form of "eminent domain" over pharmaceutical companies' trade secrets.  In this regard such an act could readily be characterized as "forced technology transfer" and even IP theft, should, for example, such trade secrets be capable of use to weaponize rather than immunize against viral infections.

The administration's public position raises the likelihood of an infringement on private property unprecedented in the U.S.  It also has implications for other aspects of foreign policy; for example, at least some of the trade secrets belong to BioNTech, a German company.  Germany has not agreed to the waiver, and should the U.S disclose BioNTech's trade secrets, no doubt Germany would have cause to seek redress against America.  This is but one of the possible legal consequences that the recent capitulation to the purported global "kumbaya" of the WTO waiver is likely to create.

More complications will likely arise as the negotiations proceed.  Provided the Administration is properly advised and the waiver properly limited (e.g., to patents) these and other deleterious consequences may be avoided.  In view of the possibility of serious liability arising by improvident acquiescence to generally uninformed calls for a broad waiver, it might not be a bad idea for all those involved in innovation (universities, technology transfer offices, pharmaceutical companies, patent lawyers, and economists) counter these opinions with the facts and make their viewpoints known and voices heard.