In a previous post, one of us described why we need global cooperation to achieve massively scaled up production of COVID vaccines. The United States must play a key role in this process, because it has the ability to mobilize resources and powerful leverage over companies that have so far resisted serious participation in global efforts – especially Moderna, Pfizer, and J&J. Some commentators question whether the US has the power to compel this cooperation. Others have doubted the relevance of the demand coming from developing countries to temporarily waive the requirements of the World Trade Organization’s TRIPS Agreement to facilitate more manufacturing. In this post, we explain why existing US law gives the Biden Administration the power to mandate sharing and overcome IP barriers, and how the TRIPS waiver can contribute importantly to efforts to scale up production at a global scale.
First, can the US require companies like Pfizer, Moderna, and J&J to share manufacturing secrets with others? The recent deal the US government brokered between J&J and Merck provides a hint of an answer. With funding and support from the federal government, Merck will upgrade two of its facilities to help produce vaccines by its pharmaceutical rival, Johnson & Johnson. The deal requires precisely the kind of knowledge sharing that activists and advocacy groups have been calling for with respect to manufacturers at home and abroad in order to scale up global vaccine production. Though the US government said that deal was voluntary, it is unconventional for rivals to cooperate like this. A senior administration official told the press that the shadow of the Defense Production Act played a role, since the US knew that they could mandate the cooperation if the companies did not agree.
The DPA, in fact, offers powerful tools for requiring information sharing between companies. It gives the Biden Administration expansive authority to address national defense needs, defined broadly to include both “emergency preparedness” and “critical infrastructure protection” (which explicitly includes systems important to “national public health”). The risk of virus variants alone clearly makes global vaccination an issue of national security as defined by the Act.
There are three distinct provisions of the DPA that can be used, under the plain text of the statute, to mandate information sharing between companies and to enable the scaling up of manufacture.
First, Title I of the DPA allows the government to directly “allocate materials, services, and facilities” to meet national defense needs. The DPA’s definition of “materials” explicitly includes “products” and “commodities” and “any technical information and services ancillary to the use of any such” products and commodities. Know-how for manufacturing of needed vaccines is clearly exactly the kind of ancillary “technical information” contemplated here. A second provision in Title I allows the government to mandate that companies accept and prioritize contracts, and the government has been clear that this means accepting new contracts on the government’s terms. This “prioritization” authority could also be used to broker deals with companies for vaccines, and mandate sharing of information required to produce them. There are some procedural requirements for using the allocation and prioritization authorities, designed to ensure that the government action is really necessary (for example, certifying that the material is scarce), but they should easily be met here.
Title III of the DPA also gives the President robust powers to create and expand industrial resources and capabilities essential for national defense, including through loans and purchases. Again, the Act imposes certain procedural requirements, but they are simplified in a period of national emergency, like the ongoing one declared last year concerning the COVID-19 pandemic. This power would clearly authorize domestic production of vaccines, and the recently passed American Rescue Plan allocates ten billion dollars that can be used for this purpose, with explicit reference to the DPA. The Act also states that the President “shall take appropriate actions to ensure that…essential materials are available,” implying that the Executive can mandate information sharing under this authority too.
The Defense Production Act in general applies only to the US and its territories, and it is straightforward to use these powers to build vaccine supply lines within our borders. But manufacturing today often involves global supply chains. As we described in the last post, technology transfer abroad would enable scaleup of more robust and diversified vaccine supply, perhaps also at less direct cost to the US government. Can the US require the transfer of know-how from entities under its jurisdiction to entities outside? Yes, for example by either appropriately structuring contracts to require this under its “prioritization” authority, or by requiring the transfer to a government entity that then does trainings abroad. (An obvious candidate here would be the Biomedical Advanced Research and Development Authority, BARDA, which recently successfully ran a similar program to scale up influenza vaccine production abroad by supporting the construction of manufacturing facilities in lower income countries and training personnel from around the world.) Notably, Congress has defined “critical infrastructure assistance to any foreign nation” as part of the national defense under the Act, signaling its intent to incorporate foreign beneficiaries into the law.
The broad reach of the DPA, by the way, is not surprising, even in a country that celebrates markets. As one of us has written, US law is characterized by a “bell curve of property.” We do not rely on property law to allocate things that are either of very little value, or of very great value. For the former, it’s just not worth the cost. For the latter, the social implications are simply too grave. Markets predictably fail to meet our collective needs, particularly where essential goods are concerned, and in emergencies. The COVID-19 pandemic offers a vivid example.
The DPA is authority enough, but it would require compensation (both for vaccine doses procured, and to compensate companies for sharing know-how – the latter providing security against constitutional concerns about “taking” companies trade secrets). A second legal authority exists, however, and can be the basis for negotiations to exchange know-how to create new manufacturing lines, perhaps at significantly lower cost. The National Institutes of Health just weeks ago issued an important patent that covers the stabilized spike protein that many vaccines currently use to trigger an immune response. Of the major companies, only Pfizer appears to have a license – and the liability for a company like Moderna for patent infringement could be in the billions. This gives the US government an additional form of leverage – redundant with the DPA power, but more powerful in at least one key respect: because the patent is an asset, the government can exchange permission to use it for sharing of know-how, and minimize or even avoid paying for the know-how that companies like Moderna exchange. Contract law, moreover, is flexible. The US can include nearly anything in a contract giving companies permission to use this patent, including know-how sharing with other companies within or outside of the US.
We are assuming here that know-how will be transferred to multiple entities to generate redundant supply chains, both inside and outside of the United States. But patents are a final possible stumbling block, and here’s where the TRIPS waiver comes in.
When the WTO was created in 1995, rich nations used their leverage in trade negotiations to coerce countries in the global South into adopting the strong intellectual property protections of the TRIPS Agreement. That agreement requires members to award patents in all fields of technology, and allows patents to be overridden only in specific circumstances and only after following sometimes onerous procedural requirements.
We do not yet know how much of a barrier patents could pose to COVID vaccine scale up in different countries around the world. That is, in a way, part of the point – to comprehensively map the patents that might bear on COVID vaccines would take enormous work, particularly on a global scale, and would not even reveal patents that are not yet published (applications are generally kept secret for 18 months). But there are plenty of reasons to think that patents would pose barriers. Even cursory searches turn up thousands of possible patents related to mRNA vaccines that companies are seeking to protect around the world. We also know that patents may be generating part of the bottlenecks in the mRNA supply chain. The lipid nanoparticles that encase the RNA in mRNA vaccines which are reportedly in short supply, for example, are subject to many patents, some of which are important enough that Moderna fought them in litigation. Patents also mean that the most popular means to “cap” the RNA strands in these vaccines can only be made by one company .
We have every reason to expect that lucrative vaccine candidates and platforms will be widely patented, and that is why, since early in the COVID pandemic, South Africa and India have been calling for a waiver of patent and other IP protections in the TRIPS Agreement, as applied to the COVID-19 pandemic. The waiver is quite limited: it would only temporarily ensure that international law does not stand in the way of efforts to manufacture, export, and import COVID vaccines and therapeutics. A minority of rich nations continue to block the proposal, including the United States. If they instead supported it, it would achieve three important things.
First, it would signal that countries would not face political retaliation for taking measures to scale up supply (which for some countries could work, albeit more slowly than with information sharing).
Second, it would help simplify the process of scaling up supply by giving countries more policy space to address patent barriers and other kinds of exclusivity claims. Article 31 of TRIPS allows countries to override patent rights, but they must follow certain procedural requirements – for example, going patent-by-patent rather than issuing a blanket license for all relevant IP. This kind of friction has no benefits in the current moment – it would slow things down without any compensating innovation benefit. These vaccines, as noted in a previous post, have been heavily subsidized by the public. And in general, rich country markets are all that matter to innovators, so waiving IP rights in low- and middle-income countries can benefit access with very little impact on incentives.
Third – and perhaps most importantly – the waiver would facilitate the process of importing vaccines or their component parts. It does not make sense to develop vaccine manufacturing in every country, but TRIPS initially forbade countries from issuing compulsory licenses to patents if the product was to be predominantly exported. This is a massive contradiction within the purported logic of the global trade system, predicated on the idea of “comparative advantage” that insists all countries benefit if goods are made in places that can supply them at the lowest cost. And while the earlier crisis in access to HIV/AIDS medicine led to a formal amendment that allows countries to circumvent this requirement, it is subject to a slew of intrusive procedural requirements. Some members who opposed the work-around, like the US and Europe, unilaterally agreed that they would never use it. Remarkably, as a result, international law forbids the US from doing something that we should do to scale up manufacturing of mRNA vaccines, either for domestic or global use. Let’s say that a new German company announces that it can make dramatically more lipids, for example, but first needs a compulsory license because patents exist on those components there. Article 31 of TRIPS, as amended, provides that Germany cannot override those patents to principally supply the US, and forbids the US from importing lipids produced under such a license.
A final point on US manufacturing: Patents are territorial, and even without mapping all the patents that might exist around the world, we know for sure that there are patents that could stand in the way of scaled up manufacturing even in the US. Fortunately, the US can rely not only on the DPA, but also on the government patent use power, which one of us has written extensively about. Codified as 28 U.S.C § 1498, it gives the federal government and its contractors the right to use any patented invention without permission, for only a royalty in exchange. This is a powerful tool to enable manufacturing here (and a TRIPS waiver, if it covered rich countries, would immunize the US from objections under international law.)
Biden himself endorsed the idea of a TRIPS waiver before he became President – and also endorsed the idea of sharing know-how with other countries so they could make their own vaccines. As he put it in a conversation with Ady Barkan, sharing vaccine technology with other countries and removing patent barriers is “the only humane thing in the world to do….And it’s not only a good thing to do, it’s overwhelmingly in our interest to do it.” We agree.
There no time to waste. It’s time for this Administration to live up to its promise. We can do our part by demanding that it act boldly to remedy the tragedy that is unfolding all around us at great speed.
We are grateful for Christopher Morten and Zain Rizvi for insights related to this post.
