13 May 2021

Bulldozing intellectual property rights for Covid vaccines will make the world poorer and less healthy

By

America’s decision to support the suspension of patents on Covid-19 vaccines is being hailed by some as victory for public health – but it is also a win for copyright pirates, misguided NGOs, and other vested interests that have long sought to undermine property rights. Waiving the WTO’s Trade Related Intellectual Property Rights (TRIPS) will set back industry in developing countries and harm our ability to fight future pandemics. Rather than helping get the world’s poorest vaccinated, this move by the Biden administration will serve only to make rich Westerners feel good about themselves.

For background, intellectual property rights were first included in WTO agreements during the Uruguay Round of trade negotiations in 1994 (the Trade Related Intellectual Property Rights Agreement or TRIPs). This was welcomed enthusiastically by those of us who believe that property rights are fundamental to the competitive market system that has propelled growth since 1947, and that protecting them is critical to stimulating innovation and creating global prosperity. But immediately following the conclusion of the summits, opponents of free and fair trade began working to unpick what was agreed.

These include some NGOs which have a historic opposition to IPRs generally, believing wrongly that they only benefit developed countries. But also those who directly benefit from a reduction of IPR protection, such as the pharmaceutical copycat companies that emerged in Argentina and India in the 1980s and 1990s ripping off the patents of research based companies. These companies share a commercial interest with copyright pirates who have worrying connections to human trafficking, smuggling of nuclear weapons, terrorist financing and other illicit activities, as Moisés Naím details in his book Illicit: How Smugglers, Traffickers and Copycats are Hijacking the Global Economy. Since the 2000s a well-resourced and politically well-connected alliance of businesses that profit from other people’s work and NGOs have been pressuring governments into whittling down IPR. Now they are exploiting Covid-19 to get the camel’s nose under the tent.

Arguments against IPR tend not only to be self-interested, but based on a fundamental misunderstanding of the economic nature of patents, and the role they play in generating prosperity – particularly in developing countries with integrated supply chains. As i wrote 20 years ago in the Brooklyn Journal of International Law patents are a property right not, as some say, a temporary monopoly granted by the government. Copy based companies threaten the fundamental incentives for innovation. In terms of price effects, patented products often compete with each other to keep price down (indeed this is what’s happening with many Covid-19 vaccines being developed). There is no evidence that the distribution problems which plague developing countries in the roll out of vaccines will be impacted at all by waiving these fundamental rights. Those problems have much more to do with barriers caused by laws that protect local distributors and generally a significantly anti-competitive distribution sector.

Waiving TRIPs rights only makes sense if you think all the diseases for which patented drugs exist have already been discovered – something that Covid painfully reminds us is not true. Where will the research come from for the diseases of the future? There is also a clear link between patent protection in developing countries and foreign direct investment, as well as the creation of a venture capital industry which supports innovation and growth. All this will be lost if the patent right is weakened. India is a case in point which has failed to match its intellectual output (2-3% of the world’s scientific papers) to its industrial research. Indeed between 1977 and 1982, when industrial research was booming, the number of scientists engaged in such research in India was stagnant. Incentives matter.

The astronomical cost of new drug development is also regularly underestimated. Laughably, some NGOs think that Hollywood movie stars have paid for Covid vaccines and so the firms involved should not make a profit. Dolly Parton’s $1m donation has been cited frequently. Welcome though any philanthropy is, from whatever source, the cost of a new drug is typically $1bn (much more if, as in the case of Covid, development has to be accelerated), and most of this cost is for failure. Only one in 4,000 or so chemical entities are eventually marketed. It is obviously absurd to think that these philanthropic donations have really contributed at all to research efforts, many of which were substantially in train long before Covid-19 emerged.

A TRIPs waiver will serve only those illicit organisations that benefit from a weakening of IPRs generally. It will not help get vaccines to poor people in poor countries. It will disincentivise any research into these and future diseases.  It is a fundamentally ill-conceived policy choice, a knee jerk reaction to a misunderstood problem which will ultimately make the world a substantially more dangerous and less healthy place.

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Shanker Singham is CEO of Competere

Columns are the author's own opinion and do not necessarily reflect the views of CapX.