In an age of an unprecedented global health-care crisis, the role of multilateral institutions as a critical conduit facilitating solutions has been amplified. The coronavirus pandemic, which is affecting all nations rich and poor, has required collaboration and solidarity on a scale not seen since the rise of the Bretton Woods institutions.
The main multilateral agency at the centre of finding solutions to the crisis, the World Health Organisation (WHO), has sought to facilitate equitable access to vaccines through the Covax facility. The primary aim of Covax is to enable countries to pool resources to find solutions to the crisis.
The key variable of the solution — finding a vaccine — has largely been achieved as more clinical trials have succeeded and vaccines been approved. The main challenge for Covax was always going to be the question of how to manage the procurement, financing and distribution of the vaccines.
The need to roll out vaccines rapidly and equitably across the globe requires the collaboration and competence of multiple role players with varying and often conflicting interests. For pharmaceutical companies aiming to generate the best financial outcomes from successful vaccines, prioritising wealthy countries that can afford to pay is the natural business instinct.
While the business rationale behind that approach is clear, the need to question whether a pandemic of this nature requires a different approach is unavoidable. Historically, getting drugs from research to the market takes the better part of 10 years. The success rate of drugs, even those that get regulatory approval, is notoriously low, which means a lot of investment in research can yield no direct financial return.
As a result, the investment needs to be recovered from the successful drugs. The one way to ensure such returns materialise is to protect a successful company’s right to produce it without competition. Such protection — primarily through patents — is a key incentive for innovation and investment by pharmaceutical companies. The effect of this is the creation of a natural monopoly in relation to the successful drug.
The problem with this approach in a time of emergency is that production facilities have capacity limitations that lead to delayed rollouts. The common rules of engagement see the drug companies partnering with particular manufacturers and distributors under exclusive agreements. Countries that have the capacity to produce but no licence to do so are left as idle bystanders.
In relation to the need to ramp up production of the Covid-19 vaccines beyond the capacity of the production facilities that have been licensed by various drug companies, countries such as SA and India have lobbied for the temporary waiver of the rules to enable countries that have the appropriate facilities to produce vaccines.
The Agreement on Trade-Related Intellectual Property Rights (Trips) is administered by the World Trade Organisation and protects patents and copyrights, including those relating to new vaccines. Under this agreement, manufacturers that produce a successful drug are guaranteed protection, including the right to be an exclusive manufacturer for a period. During such time the ability to charge high prices is aided by the lack of competition.
The emergence of various competing alternatives for the Covid-19 vaccine provides an unusual opportunity for price competition in relation to a new drug. While this will enable relatively poor countries to direct resources towards cheaper drugs and thereby acquire greater volumes, the question of production capacity will remain a stumbling block.
In the proposed waiver, countries that have capacity to produce locally will be able to do so without having to secure exclusivity agreements with patent owners. The anxiety shared by rich countries — that this would set a bad precedent that would lead to a decline in innovation and risk-taking by drug companies — has merit. However, it must be contrasted against the reality that if the pandemic is not managed, the effect may be the decimation of the very market the companies seek to serve.
• Sithole (@coruscakhaya) is an accountant, academic and activist.
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