Essentially, two vaccines are available to us today: Covishield, developed by AstraZeneca and produced under its license by the Serum Institute of India; and Covaxin, developed by Bharat Biotech. Serum Institute must pay half of the sale price to AstraZeneca as a royalty; or he has to pay Rs 75 as a royalty if he sells Covishield to the central government at Rs 150. Serum Institute says it is not economical for him to produce Covishield with the balance of Rs 75. For this reason, they offered to sell Covishield at Rs 300 for the States and at a higher price for private buyers. Thus, the States will buy Covishield at Rs 300 and subsidize the purchase by the Center at Rs 150. The Center, which should act as a parent of the States, acts rather as an opponent. This is, however, a minor problem.

The SII has to pay this huge royalty because we have accepted product patents under the World Trade Organization (WTO). Product patents state that another company will not produce a patented product even using an alternative process. Say that AstraZeneca patented a technique for heating an iron rod in order to flatten it; The product patents state that another company cannot flatten the iron rod by any other method, such as cold hammering.

Product patents

Product patents were accepted by us under the WTO agreement in 1995. Previously, we had process patents, which allowed anyone to make the same product by an alternative process. The result of product patents is that our companies cannot manufacture Covishield. This limits the manufacture of vaccines in India when vaccines are not available to our population. Indeed, this problem also applies to Covaxin from Bharat Biotech. Either way, this is the problem facing the whole world, which cannot manufacture the vaccines developed by some companies due to the incorporation of product patents in the WTO.

Bharat Biotech offered to sell Covaxin to the Center at Rs 150, possibly, following the steps of the SII.

The patent rules under the WTO contain a provision that the government can invoke the provision of “compulsory licenses” and allow other companies to manufacture the same product in national emergency situations, such as in the current time. The WTO allows countries to determine the grounds for compulsory licensing and to determine what constitutes a national emergency. However, the government may not have invoked this provision, fearing a backlash from multinationals and Western countries if this provision is invoked. In this case, the availability of foreign vaccines will be reduced and we risk falling from the pan into the fire. It is a question of evaluation and it is better to leave that to the discretion of the government.

WTO treaty

The question of the WTO itself remains. We were told in 1995, when the WTO treaty was signed, that the loss to us of royalties paid because of product patents would be more than offset by the benefits of free trade – agricultural products, in particular. It had to be a win-win proposition for developing countries. They would get the technology, as well as the export markets.

Twenty-five years later, it is clear that multinationals are charging prohibitive royalties such as 50 percent of the price of Covishield and that developed countries have not opened their markets to our agricultural exports. Thus, the WTO treaty has become a losing proposition. We don’t get the technology or access to their markets.

A number of arguments are made to maintain product patents even in the current pandemic. One of the arguments is that developing countries do not have the capacity to manufacture vaccines even if the patents were to be revoked. Manufacturers have certain technological details that are not disclosed in patent applications. Therefore, the opening of patents will not allow new entities to manufacture the vaccines. The second argument is that developing countries cannot complete the supply chain. They don’t have the raw materials and the machines to make the vaccines. Indeed, the SII said the United States was obstructing the supply of raw materials needed to manufacture vaccines.

Third, developing countries do not have the capacity to invest in these factories. Fourth, pharmaceutical companies must make a profit in order to invest in research for future pandemics. The first three arguments are not convincing for the reasons which we do not have to address here. Suffice it to say, if developing countries are unable to manufacture vaccines after revoking patents, what’s the harm in revoking them? The fourth argument also fails because new drugs, like penicillin, have been developed without a product patent. The task is to help companies around the world, “the common man”, so to speak, to get started in vaccine manufacturing by opening patents.

Vaccination strategy

We must also base our strategy on the fact that the Covid virus is mutating, as is the nature of all viruses. The influenza virus mutates frequently and new vaccines are developed to combat it almost every year. It is certain that the Covid virus is mutating and new vaccines will have to be manufactured in the future. In light of the above, our strategy should be as follows.

First, the government needs to make huge investments in vaccine development. The owner of Bharat Biotech lamented in a television program that foreign multinationals developed the vaccines after millions of dollars in support from their governments. Bharat Biotech got a paltry crore of Rs 65, according to information available on the net. He did in fact recently receive Rs 1,500 crore, but only after developing the vaccine on his own.

Second, the government must buy the patent from Bharat Biotech and open the process to the whole world so that different countries can make the vaccine and save themselves. This will hit the multinational market hard and “teach them a lesson”.

Third, we must help Bharat Biotech to speed up production of Covaxin, cancel product patents and, if necessary, exit the WTO.

The writer is former professor of economics, IIM Bengaluru