COVID-19 Data Exclusivity Drug Regulation Innovation Overlaps in IP Trade Secret

Earning Royalties off Covaxin While Demanding IP Waiver at the WTO: Saviour on the Streets, Hypocrite in the Sheets


A frontline worker setting fire to funeral pyres at a cremation site.

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As news broke out on May 3, 20201 regarding the Indian Council of Medical Research (ICMR) earning royalties out of every dose of Covaxin sold, many were quick to chide the government for embarrassing itself by profiting off vaccines sold in its own country while seeking a waiver of all IPRs on patents, copyright, industrial design and undisclosed information pertaining to vaccines for Covid-19 (covered previously on the blog herehere and here) at the WTO. In this post, I focus on the differential pricing of vaccines and analyse the revelations made in the affidavit filed by the Central Government in the case titled, ‘In Re: Distribution of Essential Supplies and Services During Pandemic’ yesterday. I discuss the contents of the affidavit and argue that they reveal the Central government’s prioritization of vaccine profiteering and scoring political points, instead of any well thought out strategy to deal with a pandemic that has already escalated into a humanitarian catastrophe.

In my previous posts (here, here and here), I had argued that the government should assert IP ownership in Covaxin and waive all IP protection over it, in addition to making its knowhow available to other manufacturers in India and the rest of the developing world for faster dissemination and use of the vaccine among larger populations across the world.

The affidavit mentioned that support for one private industry and three public sector manufacturing facilities, was “under consideration”, to make them ready with enhanced capacities to support augmented vaccine production over the next 6-8 months (Central Govt. affidavit, para 35). However, though the affidavit talked about possibly upscaling Covaxin production, it contained nothing regarding waiver of IPRs in Covaxin.

A frontline worker standing in front of a Chennai Covid ward

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Funding

Pertinently, the affidavit noted that money was given for the production of Covaxin and Covishield, in the form of advance payment [not support or investment] of Rs. 1732.50 crores to Serum Institute of India (SII) for 11 crore doses of Covishield vaccine for the months of May, June and July and similarly, an advance payment of Rs. 787.50 crores was released to Bharat Biotech India Ltd (BBIL) for 05 crore Covaxin doses for the months of May, June and July (Central Govt. affidavit, para 32).

The Public Private Partnership between ICMR and BBIL stipulates a 5% royalty clause in favour of ICMR on net sale as well as clauses on prioritising in-country supplies (Central Govt. affidavit, para 33).

There was no government aid or assistance provided for any research and development costs of either Covaxin or Covishield (para 33). It is pertinent to note that Serum Institute had no research costs as it undertook no financial risk by conducting any protracted R&D. As Murali Neelkanthan has pointed out, SII was only a contract manufacturer that had received an advanced payment for the vaccines that it would be manufacturing. Similarly, the affidavit provides no figures regarding the ‘investment’ costs of BBIL, which should not be confused with working capital costs. Since IP protection is meant to enable ‘reasonable’ recoupment of your investment in innovation, it is worth interrogating these questions in the context of the pricing, particularly the differential pricing, of these vaccines.

March for our lives protest in New York in 2018 where a protestor's slogan reads: People over Profits

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The Exclusionary Effect of Relying on Private Negotiations

The affidavit cites ‘financial risk’ borne by vaccine manufacturers to justify private negotiations on price of the vaccines instead of utilising statutory provisions [Central Govt. affidavit, para 22 (vi)].

This is bizarre since it has been widely recognised now, even in the most capitalist countries such as the US, that pharmaceutical companies and their market-oriented incentives will not achieve the vaccination goals required to contain the pandemic. As this article titled, ‘Why Joe Biden Punched Big Pharma’ highlights, in developing countries particularly, pharmaceutical companies would impose high prices, leading to vaccine scarcity, ensuring only the elite can access these vaccines, because this is still more profitable than lowering the prices for everyone.

Factories can upscale production only if the relevant IP barriers and know-how of vaccine manufacture do not act as impediments. It is appalling that we have to make this argument despite the Indian government (through ICMR) sharing IP ownership in the indigenously developed Covaxin. With only two vaccine candidates administered right now, produced by BBIL and SII, a severe shortage of vaccines, and no resort to price control measures, private negotiations will most likely fail in making access to vaccines inclusive and equitable. The Central Government’s affidavit itself admits that there is a ceiling price for drugs like paracetamol, as per the Drug Price Control (Order) 2013, even though there is no scarcity of paracetamol in the country, which has hundreds of manufacturers. However, the same affidavit doesn’t see the need for regulating vaccine prices, which it argues are best left to private negotiations, despite the acute shortage of these vaccines which constitute the only known way out of a pandemic that has caused 2,20,000 deaths in the country (even as per grossly underreported official records).

generic photo of Covid-19 vaccine vials

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Distribution Politics

According to the new vaccine policy, 50% of total manufactured vaccines were to be supplied to the Central Government which would vaccinate the most vulnerable group of the population (45+), and the remaining quantity would then be distributed amongst all States on a prorata basis. Out of the 50% allotted to the State, 50% will go to the State [calculated on pro-rata basis based upon the population of age group of 18-44 years] and the balance 50% will go to the private sector based upon the contracts between private sector and vaccine manufacturers. [Central Govt. affidavit, para 22 (vii)]. The Centre will procure both the vaccines at Rs 150 per dose from vaccine manufacturers while Covishield is being supplied to the States at Rs. 300 per dose, and Covaxin at Rs. 400 per dose. The significant difference in prices of the vaccines for the Central Government and the States are said to be a result of the Centre being a bulk purchaser, and hence being in a position to get a better price for the vaccines [Central Govt. affidavit, para 22 (v)]. It is worth asking that if the Centre has the power by virtue of its large orders or otherwise, to bargain for a better price, why is it not purchasing vaccines for the entire country? Since all the money being spent is taxpayers’ money at the end of the day, why are costs of vaccines and coverage of population not being minimised and maximised respectively via a prudent national immunization program?

The burden of ‘free’ vaccination has been passed onto states but not without the self-congratulation of acknowledging the Central Government’s “persuasion” which caused BBIL and SII to declare uniform prices for all State Governments [Central Govt. affidavit, para 22 (v)].

As per an analysis by IndiaSpend, India’s 8 most socioeconomically backward states would have to spend around 30% of their health budgets for the procurement of COVID-19 vaccines for their populations. These 8 states except Odisha have already reported a revenue deficit in their revised budget estimates for 2020-21, as per a PRS Legislative Research brief. The costs of vaccination will further swell up due to the addition of supply chain, training, transportation and follow-up process costs, which would compel states to shift their spending away from tuberculosis, malaria, maternal and child health and other focus areas. These 8 states are among the 20 states that have announced free vaccination. However, these promises are meaningless without any effective timelines and procurement plans in place. While states are struggling to make ends meet, and being financially pressured, the Central government, as of May, 2021 as per its own data, has spent only 8.5% of the INR 35,000 crore that it had allocated in the 2021-22 budget for vaccination, anticipating coverage of 37% of the population. At the rate of 150 per dose, the Central government has the capability to buy 2.1 billion doses, whereas India’s 18 plus population of 940 million requires only 1.88 billion doses. As per IndiaSpend, only 80% of the remaining funds (INR 32,000 crore) will be needed to procure two vaccine doses for vaccinating the entire adult population.

Currently, SII and BBIL are selling doses of Covishield and Covaxin to private hospitals at INR 600 per dose and at INR 1,200 per dose respectively. Thus, these companies are financially incentivised to divert greater stocks to private hospitals, at prices that will exclude a large part of the Indian population and worsen vaccine scarcity at a time when the Central government, despite having the money, has abdicated its responsibility of procurement for a large part of the population. With ICMR, funded by the Ministry of Health & Family Welfare, earning royalties for the Centre out of financially distressed states having to pay INR 400 per dose of Covaxin, this appears to be a case of obscene vaccine profiteering and politics at the cost of citizens’ lives.

Many thanks to Akshat Agrawal for his insightful inputs for this post.

13 comments.

  1. Congratulations

    Your heading is misleading, there is no connection between IPR waiver and royalty, royalty will still be paid even after waiver. Pure sensationalism! Also, I smell a lot of politics instead of sound logic based on principles of Centre-State finance, competition. Expecting something free itself is a problem, a domino effect, you provide contradictory arguments: on one hand you say Centre should fund for people’s vaccine and on the other hand you have objection on ICMR claiming a miniscule royalty for their R&D contribution- how will centre fund, do further R&D? Also, whilst it is good that centre is taking lead in all this, even trying to take the responsibility of vaccination of a large population, when health is a State subject and States should fund it, they have to put their house in order. Taxpayers money does not just go to consolidate d fund of India but also to states (rather a majority goes to the states). And why it should be free for all? It should be free for people who cannot afford it. You seemed to have a problem with even advance given to vaccine manufacturers, which I thought was a pro-active step. Good article though!

    Reply
    1. Anupriya Dhonchak Post author

      Hi, addressing your main issues here:
      1. IP Waivers and Royalties
      Royalties are payments that arise out of use of your IP, so they are obviously related. I have consistently argued (see my three posts linked in the piece) that the government should not assert IPRs in Covaxin at all.
      The ICMR is funded by the MoHFW and it should not be earning royalties where Covaxin’s technology has not been made available for free licensing and technology transfer. Centre funds Covid vaccines through the huge budgetary allocation it made in the latest budget. What is ICMR’s R&D contribution? How are the high prices of Covaxin justified? How is not freely licensing Covaxin’s IP and knowhow to other manufacturers justified in a scenario of extreme vaccine scarcity and no concrete plans to meet the country’s needs via procurement? The Centre in its affidavit has stated that it has NO projections regarding the availability of vaccines for the next 6 months (para 27.6).
      Statutory provisions like compulsory licensing (CL) or a subscription model of IP licensing (where government would pay the company a fixed amount per year for the use of its intellectual property, rather than a per dose royalty fee) are not needed for Covaxin since the government itself owns IP in it. I have explored both CL and waiver as potential options in my previous posts, but argued for a waiver of IP in Covaxin here- https://spicyip.com/2021/03/intellectual-property-rights-in-covaxin-part-1-waiver-of-iprs.html
      “The simplest way to ensure that patent rights do not hinder the free transfer of information on the drug would be for the government to ensure that all Covid projects funded by it will not claim IP rights in the first place by putting the outcomes of publicly funded research for Covid in the public domain, or to retain the patent rights purely as defensive patents, i.e., by not enforcing them. Another way of achieving a ‘waiver’ like status could be to operationalise section 157A of the Indian Patents Act (following on from Art 73(b) TRIPS) (as covered previously on the blog here).
      The waiver of intellectual property rights is in many ways superior to the alternative solution of compulsory licensing of drugs, which has been advocated by a number of countries that are opposed to the idea of a patent waiver. Firstly, compulsory licensing requires the payment of adequate compensation to the patent-holders, and the TRIPS does not clarify what counts as ‘adequate’ or how the quantum of such compensation is to be calculated which often leads to lengthy negotiations between the patent holder and the government. Secondly, manufacturers can only produce predefined quantities in compulsory license which hinders the objective of mass production of vaccines. Thirdly, large pharmaceutical corporations often retaliate against countries that impose compulsory licensing of drugs, leading to potential unemployment and a decline in investment. For instance, Abbott withdrew its products from Thailand after the imposition of a compulsory license. Developed countries, particularly the USA, have sometimes imposed trade sanctions on countries that have imposed compulsory licensing, outweighing the benefits derived from such licensing. A WTO waiver of obligations for all member states would preclude such targeting but it would be hypocritical if the countries that raised this demand do not waive similar IPRs on their vaccines, at least domestically.”

      2. You smell a lot of politics, because unfortunately, vaccine pricing and distribution has been based on just that.
      States are being forced to procure at extremely high prices, with quotas fixed by the Centre that are insufficient for so many of them. “At least nine states have said they will float global tenders for Covid-19 vaccines.” – https://www.hindustantimes.com/india-news/states-can-procure-only-20-million-covid-19-jabs-for-18-in-may-101620760611347.html States are forced to appeal to the world for help while the Centre refuses to pay heed despite having the money to buy in bulk for the entire country. All of this is taxpayers’ money if the Centre can buy at a lower price, why is it not? See also https://www.ndtv.com/india-news/coronavirus-bharat-biotech-has-refused-to-supply-covaxin-citing-government-directives-limited-availability-alleges-delhi-government-2440056?browserpush=true and https://www.thenewsminute.com/article/why-did-gujarat-have-60-all-18-44-vaccinations-may-1-jairam-ramesh-questions-148251 (check Gujarat’s share of vaccine doses v. Tamil Nadu’s).
      “While Indian central governments have traditionally tended to encroach on the states’ turf, the present dispensation seems to have abdicated what was its most important role: to ensure that the states do not lack financial resources as their health infrastructure becomes stressed at a time of crisis.” On Centre dressing up liquidity measures as stimulus/relief packages, not releasing GST dues to States, encroaching on subjects of state and concurrent lists etc. https://caravanmagazine.in/perspectives/the-central-problem

      3. Regarding your point that vaccination should be free ONLY for people who cannot afford it:
      This doesn’t work when you don’t have enough doses or any procurement plans for the population’s needs. It just means that those who can afford to pay, are the only ones who get the doses, defeating the entire purpose of a vaccination program.
      Pricing out entire populations by making vaccines available at the prices at which they are available right now, at a time of extreme vaccine shortage where many States have had to shut down vaccination Centres due to the Central government’s directives to manufacturers, means that vaccine stock will be diverted to private hospitals to ensure profit maximisation leading to the eventual exclusion of those who cannot afford these vaccines. The affidavit states that the new Vaccination strategy “aims at liberalised vaccine pricing and scaling up of vaccine coverage to incentivise vaccine manufacturers to rapidly scale up their production and to attract new vaccine manufacturers… Herein, differential pricing is based on the concept of creating an incentivised demand for the private vaccine manufacturers in order to instil a competitive market resulting in higher production of vaccines and market-driven affordable pices for the same” (para 28)
      “the justification given for the differential pricing is contrary to the Vaccine Policy, 2011 which clearly states that central procurement, multiple vendors and one price is the best procurement strategy. WHO and all its supported projects and every other country has now adopted this. Where there are multiple markets with multiple prices, supply will naturally go to where there is most profit. We are already seeing that vaccines are available for Rs2000 in some private hospitals but nothing is available in government hospitals” as noted in more detail here- https://www.livelaw.in/top-stories/rational-equitable-experts-analyze-centres-affidavit-which-defends-covid-vaccination-policy-174000

      Reply
  2. Congratulations

    You responded but there was no need. Thanks. Your response on the first point is completely unrelated to the point. I simply mentioned that vaccine waiver demand before WTO and question of royalty payment are two different thing, you cannot juxtapose one with the other as royalties would still be payable. All other responses are only articles written by many journalists, politics, but nothing on law or legal principles, commercial realties. Centre is not obligated to buy vaccines for the State, in face they should not, still they procured and the current vaccination drive is by them. They kick-started the process, are managing it for everyone for adequate allocation on stock pro rata to the population. They got better price because they gave a bigger order, simple. States want to have the cake and eat it too, health is their responsibility, they have the money allocated, but they want centre to fund their responsibility, no basis. For example, Bengal does not want centre’s health care grant, but it wants free vaccine from the centre. Logic? Haven’t states been allocated their cut from the central funds? So it is States which are running away from their constitutional responsibility and by asking questions to centre they just want to create an impression that it centre’s responsibility. It is like lockdown, when centre imposed it, they asked them why it is interfering and when centre left it on states, they say centre has left its responsibility. State governments in India have failed to uphold their constitutional responsibility of public health management due to budgetary, institutional and capacity mis-management. Central government has a role in designing health policies and programm to be implemented by states based on the budget allocated. Give things free to people who don’t need it, waive loans to win elections and then cry I have no money left to keep the same people alive. That is my legal and policy argument, rest everything is politics.

    Reply
  3. Congratulations

    Just on what is ICMR’s contribution:
    15

    NEWS NATIONAL
    NATIONAL
    ICMR to get royalty from Covaxin sale

    Jacob Koshy
    NEW DELHI 03 MAY 2021 22:41 IST
    UPDATED: 03 MAY 2021 22:41 IST

    Intellectual property governing use of vaccine jointly developed by Bharat Biotech and ICMR is ‘shared’
    The intellectual property governing the use of Covaxin, jointly developed by Bharat Biotech and the Indian Council of Medical Research, was “shared” and the ICMR would receive royalty payments, the organisation confirmed to The Hindu.

    “The Public-Private Partnership was executed under a formal Memorandum of Understanding (MoU) between the ICMR and the BBIL which includes a royalty clause for the ICMR on net sales and other clauses like prioritisation of in-country supplies. The product IP is shared. It is also agreed that the name of ICMR-National Institute of Virology (NIV) will be printed on the vaccine boxes. The same is being done now,” ICMR Director-General Balram Bhargava said in an email.

    However he didn’t say how much money was spent.

    Advertising

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    12 activities
    The partnership between the two organisations involves 12 activities that include clinical and preclinical studies. Five of these were funded entirely by Bharat Biotech: Candidate vaccine development, preclinical safety and toxicity studies in small animals (rats, mice and rabbits), phase-1 clinical trials including funding of sites, hiring Clinical Research Organisation (CRO) for trial monitoring, insurance, laboratory testing; phase 2 clinical trials including funding of sites, hiring CRO for trial monitoring, insurance, laboratory testing and all other logistics and hiring a CRO for phase-3 trial monitoring, insurance and laboratory testing.

    The activities funded by the ICMR were: Isolating the SARS-CoV-2 virus from a “huge number” of clinical samples, passage testing and confirmation; BSL-3 facility validation of BBIL for Covaxin production; vaccine strain characterisation by ELISA tests, electron microscopy, next generation sequencing; testing serum samples from preclinical studies in small animals; preclinical safety and efficacy in golden Syrian hamsters and preclinical safety and efficacy studies in rhesus macaques (monkeys); testing sera of Covaxin vaccinated individuals for U.K. strain, Brazil strain, South African strain and double mutant strain of SARS-CoV-2; U.K. variant virus isolation and characterisation, titration, sequencing from clinical specimens and funding the site for the phase 3 clinical trial. I am not an expert, just picked it from the Hindu. And as a lawyer I am not capable of “what is ICMR’l’s R&D contribution”!

    Reply
  4. Mohan

    Are there any patents (granted or pending) for Covid-19 vaccines?. If yes, how is it possible since virus appeared in 2019 only..

    Reply
  5. Ravikiran Upadya

    Firstly, well written.

    Now, I’ve a basic question. I know quite a few people, (it was 17 when I stopped keeping count) who have been re-infected. Some after a gap of 6 -7 months, some within 2 months. When an actual infection is unable to build immunity to prevent re-infection, how is the vaccine going to help other than giving conference boost?

    Other observations about this past 14-15 months:
    1. People working around me (I work in a continuously operating manufacturing unit with about 1500 employees) rarely wear a mask.
    2. People of all age group are here.
    3. Some, who got infected, recovered quite quickly and there has not been any fatalities, amongst employees or their family. This is not to say that there has not been any fatalities in our town/district.

    In view of above observations, is vaccine really needed? Isn’t improving immunity the need of the hour? Further how long will vaccine derived immunity actually last?

    Reply
  6. Sadly, No!

    This is bizarre since it has been widely recognised now, even in the most capitalist countries such as the US, that pharmaceutical companies and their market-oriented incentives will not achieve the vaccination goals required to contain the pandemic.

    It would be extremely interesting to know where and how exactly this has been “recognised”? Even Indian Vx manufacturers will tell you that shortages of supplies are one of the most critical challenges in increasing production of Vx. The current US administration may well try to pretend to take the high road by coming out in favor of a patent waiver for Vx, but in the current world it’s very difficult to see how this will have any significant impact. One would think that a blog that has covered the US’ export ban for certain materials, and its impact, would know this. Besides — unless you can find non-pharmaceutical companies to manufacture Vx it’s inane on the face of it to argue that pharmaceutical companies as a whole are a problem.

    But perhaps more to the point you raised about the “market-oriented incentives” getting in the way of hitting vaccination goals required to contain the pandemic:

    * AstraZeneca is working with 25 partners in 15 countries to produce the AZ/Oxford Vx. AZ has pledged to sell the Vx at cost. From the prices listed above for the India-developed Vx, it would even appear that AZ’s Vx is actually cheaper than the purely domestic innovation.

    * J&J has also pledged to sell its (single shot) Vx at cost, and is looking to have 10 manufacturing partners by the end of the year.

    * Moderna has pledged 500 Mio doses of its Vx to COVAX.

    * Pfizer/BioNTech’s agreement for orders of their vaccine are at a not-for-profit price. More generally, Pfizer is pursuing a tiered pricing approach for its Vx, including a tier of free for African countries.

    * CureVac is in talks with COVAX for its as-of-yet unapproved Vx.

    One can be frustrated with the limited availability of Vx in most of the world — but it would serve you well not to default to the position of market incentives and the pharmaceutical industries are inherently bad that is the default assumption of so much of the writing here. Especially when that prevents you from considering anything else as an explanation.

    Reply
  7. Ramu

    Brazen, political rant sought to be passed off as academic commentary. And the sensationalist headline did not quite carry through. Sounds quite vapid, really. Try harder next time, dear author. Shame on SpicyIP for publishing this polemical piece.

    Wish the author had discussed the former US administration’s OPERATION WARP SPEED, which provided grants and funding to private sector pharma companies — even going to the extent of the US govt waiving its IPRs, if press reports are to be believed. The brief was: get the vaccines. Fast. And produce enough in double-quick time. And the pharma companies delivered. And the miracle is happening! And corona is receding. In the US, UK and Israel, where substantial numbers have been vaccinated. So much for the author’s disgust at “market-oriented incentives”.

    President Biden might try to claim credit for the successful vaccination roll-out in the USA. But please keep in mind the covid vaccines did not drop from the sky on Jan 20th when he took over! Give credit where credit is due. And seeing the political taint of the article, giving Trump any credit for the vaccines would be a bit too much — for the mainstream press it would be like drinking poison.

    Coming back to your vitriolic article: you state the following:

    “There was no government aid or assistance provided for any research and development costs of either Covaxin or Covishield (para 33).”

    If the above is actually true, then on what ground royalty is being claimed for Covaxin?

    Finally, paying Rs 250/- for my vaccine shot — this was the least I could do as a conscientious citizen. Why should the govt bear this for persons who can afford to pay? Like the middle class. That’s less than the price of a plate of daal khichri or chicken fried rice in the metros — something which the middle class so gladly indulges ever so frequently.

    Reply

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