Moneycontrol Pro Panorama | Will patent waiver increase vaccine production? The jury is out.

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US President Joe Biden has reversed decades of American policy and supported a proposal to temporarily suspend patent protection for COVID-19 vaccines.

India and South Africa had moved this proposal last October at the World Trade Organisation (WTO) for waiving the so-called Trade Related Intellectual Property Rights (TRIPS) protection for COVID-19 vaccines. At that point, the Donald Trump administration and many from the developed world, including the UK and European Union, were not in favour of the move. We don’t know yet if they will take the lead from the US.

Unsurprisingly, the pharma industry is up in arms. It is afraid that this will set a bad precedent and kill innovation. Some in the US fear that new and protected technologies such as messenger RNA (the backbone of the Pfizer and Moderna jabs) will end up in the hands of rivals in China and Russia. Messenger RNA technology, in particular, is being tested to treat other diseases such as cancer and healthcare, and this move could put billions of dollars of future profit in jeopardy for these pharma companies.

Moreover, they claim that just waiving patents will not do any good because very few nations and companies have the know-how or expertise to produce vaccines, which are more complex than drugs. Essentially, they are saying that if you don’t have cooking chops, what will you do with the recipe?

The opposing side has some persuasive arguments, too. Nations have subsidised research and helped out pharma companies by placing huge advance orders – thus they are bound to share the technology. Writing in the Washington Post, Nobel laureate Joseph Stiglitz said the argument of developing nations not having the skill to manufacture COVID-19 vaccines “is self-serving and wrong”.

Ultimately, the fact is that unless global herd immunity is reached, the coronavirus might just hang about and keep mutating. Moreover, some of these mutants might be able to beat the vaccines and induce further waves of infections and lockdowns. The solution clearly is to increase vaccine production massively and quickly.

Will a patent waiver help that?

In theory, a TRIPS waiver means that any pharma company can make a version of the drug/vaccine without fear of getting sued.

But some say a patent waiver by itself won’t be enough. After all, Moderna had said last year that it won’t be enforcing its patents on the COVID jab. But as Doctors Without Borders pointed out, that is inadequate since know-how, technology, and other components of vaccine development and manufacturing can still be protected under IP rules.

“These components are also barriers for alternative manufacturers that want to make more affordable versions of Moderna’s vaccine and, if they remain in place, will likely keep vaccines out of the hands of people all over the world,” it said.

Then, there is the question of raw material supply. As the Financial Times has pointed out that vaccine production has been “constrained by various bottlenecks, including limited supplies of materials such as lipid nanoparticles and equipment such as bioreactor bags”.

To be sure, the raw material question is a near to medium term issue and could be still sorted. A complete waiver of all patents and know-how could still perhaps benefit the developing world in the medium to long run.

But the conclusion staring us in the face is this: There is unlikely to be a big increase in vaccine production from these moves at least in 2021. The US announcement (remember, it still has to get others such as the UK and the EU on board) is just the first step.

Stay safe and check out these reports from our independent equity research team:

Procter & Gamble Hygiene and Healthcare: Higher investment in brands, downtrading a near-term risk

What makes Mahindra CIE a buy idea despite near-term COVID challenges

Adani Ports & SEZ: No major impact on business, but valuation leaves little room for appreciation

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Our chartists’ technical calls for the day (Please note these calls are published before the markets open on trading days): Axis Bank, HPCL and Adani Enterprises

Ravi Krishnan

Moneycontrol Pro