Ed. Note: Prof. Sapna Kumar has been working on international intellectual property law issues for decades. In fact, I believe we were students in the same international IP course at the University of Chicago way back when, along with Prof. Rantanen. I asked Prof. Kumar to provide some of her thoughts on how our international IP system is responding to the COVID-19 Pandemic. A draft of her recent on-point article is available online: Compulsory Licensing of Patents During the Pandemic.
By Sapna Kumar, Law Foundation Professor of Law at the University of Houston Law Center
Due to the global nature of the COVID-19 pandemic, vaccines and treatments are in short supply and prohibitively expensive for many countries. For this reason, some scholars and foreign governments have argued that all IP rights should be suspended for such drugs for the duration of the pandemic. Others have made the more modest recommendation that countries be permitted to use compulsory licensing under TRIPS Article 31 to produce generic versions of needed drugs, in exchange for paying “adequate remuneration in the circumstances of each case” to the patent holder. This raises the question of whether patent rights are creating an impediment to getting people needed drugs during the pandemic.
The United States has not been particularly consistent in its attitude towards non-permissive government use of patented inventions and compulsory licensing. In the 1950s and 60s, it imported patented drugs from generic manufacturers to cut costs. During the anthrax scare in the early 2000s, after Canada licensed Bayer’s patented Cipro drug to a generic manufacturer, the U.S. government threatened to do the same to help negotiate a better price. Since 2010, there have been at least three cases of patent holders seeking compensation for the government’s unauthorized use of their defense-related inventions.
Notwithstanding the U.S. government’s regular unauthorized use of patented inventions, it has been quick to punish countries that use compulsory licensing to provide life-saving drugs to its citizens. When South Africa was suffering from the worst of the AIDS epidemic and seeking to import generic antiretroviral drugs, the Clinton administration placed South Africa on the Special 301 Report Watch List. Subsequent Democratic and Republican administrations have punished other countries seeking to utilize Article 31 to provide drugs to people who would otherwise go without treatment.
This brings us back to the current shortage of COVID-19 vaccines and treatments. Whether IP rights are harming patients and whether compulsory licensing can help depends, at least in part, on the type of drug at issue. Consider Gilead’s small-molecule drug remdesivir, which can be used as a COVID-19 treatment and was scarce during 2020. The Bangladeshi company Beximco was able to independently recreate remdesivir in just a few months. It began selling its generic equivalent in May, more than a month before any of the Gilead-licensed facilities began production. Other Bangladeshi companies soon began producing the generic, leading to a growing surplus that allowed Bangladesh to export to at least 21 other countries. As a Least-Developed Nation, Bangladesh is exempt from various TRIPS requirements, which allowed it to recreate the patented drug without retaliation.
Consequently, in the Summer of 2020, remdesivir was not scarce in Bangladesh, nor was it scarce in low- and middle-income countries that were able to buy from Gilead-licensed generic manufacturers beginning in late June. Yet during the same time period, the United States was facing an acute shortage and had to ration the drug. This tells us that the U.S. shortage was likely based on patent rights—Gilead failed to maximize all available production facilities and failed to grant countries like the United States access to drugs produced under license in countries like India. Had the government issued a compulsory license, it would have lessened the shortage.
Compulsory licensing, however, is not a cure-all for drug shortages. Biologics, including vaccines, can be difficult to recreate without know-how that is protected by trade secrecy. Issuing a compulsory license won’t force companies to divulge the optimal manufacturing conditions for producing the drug. Moreover, compulsory licensing won’t increase a supply of a needed drug if there is a shortage of raw materials or manufacturing capability—as is currently the case with various COVID-19 vaccines.
Consequently, for the current pandemic, compulsory licenses or other mechanisms for circumventing patent rights are only going to be useful for countries that will not be receiving an adequate vaccine supply in the near future and that have access to needed raw materials and manufacturing facilities. For countries like the United States that have pre-purchase agreements and the means to buy more vaccines, a compulsory license may not be helpful in the near term, given the amount of time it would take to recreate the drug. But for at least some low- and middle-income countries, compulsory licensing could make it possible to save lives, especially if revaccination is periodically required.
Any move that is taken with regard to IP rights during pandemics must be done with an eye towards not threatening drug development for future pandemic responses. Suspending all IP rights for the duration of the pandemic will give pharmaceutical companies little incentive to develop new drugs when the next pandemic arises, absent a change in how we incentivize drug development. But the same is not true for compulsory licensing and government use of patents. There is scant empirical evidence that the practice harms innovation, given that adequate remuneration must be paid under TRIPS. This is particularly true for licenses issued by low-income countries, which spend little on drugs compared to high-income countries.
One lesson from the pandemic is clear: the United States needs to reassess its inconsistent approach towards government use and compulsory licensing of drugs and should reassess the lack of concessions that it asks for when it pours billions of dollars into private pharmaceutical companies. Current U.S. law does not make it easy enough for a willing third-party manufacturer to petition for a license to a scarce drug, as several prior drug shortages have illustrated. U.S. agencies also need to expressly address know-how in their contracts when providing funding for research. Federal funding recipients that develop a drug or treatment should be required to utilize out-licensing to generic manufacturers to keep pace with demand after an initial grace period, in exchange for fair compensation.
Finally, the United States needs to join the European Union in revisiting its ugly practice of punishing low- and middle-income countries that utilize compulsory licensing to provide life-saving drugs to its citizens. If South Africa or other countries are forced to utilize compulsory licensing to produce COVID-19 drugs, will we repeat the mistakes we made during the AIDS epidemic? Or will we recognize that a global pandemic represents the kind of extenuating circumstance that TRIPS Article 31 was meant to address?