COMMENTARY

and medicines, and reduce their immi-

COVID-19 and IPR Waiver nent shortage.

An Indian Perspective Why an IPR Waiver?

The Government of India (GoI) is seek-
ing an IPR waiver under Sections 1 (cop-
Nilanjan Banik, Debashis Chakraborty yright and related rights), 4 (industrial
designs), 5 (patents), and 7 (protection

T
The Government of India is he 6th of May 2021 will go down of undisclosed information) of TRIPS.
seeking an intellectual property in history as a day that India Seeking an IPR waiver is based on the
would love to forget about. On presumption that it will allow more firms
rights waiver under Sections 1
that day, India reported 4,14,433 new to manufacture vaccines and medicines,
(copyright and related rights), 4 COVID-19 cases, accounting for one in thereby enhancing their availability at a
(industrial designs), 5 (patents), every two infections and one in every cheaper price. The importance of getting
and 7 (protection of undisclosed four deaths recorded worldwide (Our a wider section of the population vacci-
World in Data 2021). The scale and ex- nated has been underlined regularly. A
information) of the Agreement
tent of the second wave of the pandemic recent study from Mumbai indicates
on Trade-Related Aspects of took Indian policymakers by surprise. Not that people who are aged over 60 years
Intellectual Property Rights. long before, on 28 January 2021, in his ad- and have received at least one dose of
Seeking an IPR waiver is based dress to the Davos Dialogue, World Eco- the vaccine are more likely to survive in
nomic Forum, Prime Minister Narendra comparison to those who are unvacci-
on the presumption that it will
Modi had announced that India had suc- nated (Banaji 2021). Given the shortage
allow more firms to manufacture cessfully controlled COVID-19. The vaccine in supply relative to the demand, there
vaccines and medicines, thereby shortage, inevitable in a country of India’s is a concern that the private players sup-
enhancing their availability at size in the short run, was worsened by plying vaccines will charge higher prices,
the second wave. In April 2021, the Serum adversely affecting the poor and deprived
a cheaper price. However, IPR
Institute of India (SII) and Bharat Biotech, (Srinivasan and Rao 2021). Supply-side
waivers for COVID-19 vaccines and India’s only two vaccine manufacturers, disruptions such as border closures,
medicines are unlikely to make were producing around 3 million vaccine lockdown in the supply market, inter-
any difference. A more effective doses per day. To cover half the eligible ruption in vehicle movements and inter-
population (850 million Indians above 18 national trade, labour shortage, and the
approach is to use compulsory
years of age) by 31 October 2021, there is, maintaining of physical distance in
licences, and reduce tariffs and however, a requirement to manufacture manufacturing facilities and so on have
non-tariff measures. 4.6 million doses per day (Khan and led to some other challenges (Paul and
Razvi 2021). Chowdhury 2020). Imports can ease the
As a panacea for this supply shortage, shortage in the domestic market, liquid
India alongside South Africa is seeking oxygen being a case in point. During
for a waiver of the intellectual property April 2021, India witnessed an acute
rights (IPR) at the World Trade Organiza- shortage of oxygen supply, with a daily
The author acknowledges the support provided
by National Research Foundation of Korea
tion (WTO). The Agreement on Trade- demand of oxygen jumping to over 9,200
Grant funded by the Korean Government Related Aspects of Intellectual Property metric tonnes (MT) in comparison to
(NRF-2017S1A6A3A02079749). Rights (TRIPS) provisions require all pre-COVID-19 daily requirement of 700
Nilanjan Banik ([email protected]) teaches WTO members to grant patents with a min- MT (Raghunandan 2021). India was able
at the School of Management, Mahindra imum term of 20 years for inventions in to tide over this shortage by importing
University, Hyderabad. Debashis Chakraborty all fields of technology.1 In this article, over 5,000 MT of liquid oxygen. The
([email protected]) is with the Indian Institute we look at the merit of such an appeal to country did not have to pay any royalty
of Foreign Trade, Kolkata.
enhance the supply of COVID-19 vaccines fee, as liquid oxygen is not patented.
Economic & Political Weekly EPW august 28, 2021 vol lVi no 35 19
COMMENTARY

Would it Make a Difference? policy” announced by the GoI and imple- Second, to tide over supply of vaccines
The IPR waivers for COVID-19 vaccines mented, starting 1 May 2021, the central and medicines, the GoI may exercise
and medicines are unlikely to make any government will purchase 50% of the Section 92 of the Indian Patent Act, 1970
difference in terms of augmenting the vaccine produced in the country directly and grant compulsory licences. WTO
supply and/or reducing the price, owing from the manufacturers. And 50% vac- members can
to the following reasons. cine doses shall continue to be adminis- grant compulsory licences (paragraph 5(b)),
First, out of the eight COVID-19 vaccines tered by the states and union territories wherein the government gives a third-party
approved in various countries, five are for vaccinating the population in the “45 authorization to override a patent. (Cohen
already licensed or being manufactured and above” age group, alongside the CO- et al 2005)
in India (Reddy and Pai 2021). For in- VID-19 front-line workers, free of cost. For TRIPS also allows for importation from
stance, SII was contracted by AstraZeneca. the remaining 50% of doses, vaccine overseas for those countries without do-
Likewise, other Indian manufacturers, manufacturers would be free to supply mestic manufacturing capacity (the so-
namely Dr Reddy’s Laboratories, Hetero to the state governments (state quota of called “paragraph 6 system,” which has
Healthcare, and Biological E, obtained 25%), and corporate houses and private only been used once to date, by Rwanda).
licences from Gamaleya Institute, No- hospitals (the remaining 25%), at a pre- Since 2001, several lower- and middle-
vavax, and Johnson & Johnson to pro- negotiated price. Further, in his address income countries have issued compulso-
duce vaccines in India. The GoI is in dis- to the nation on 7 June 2021, Modi an- ry licences (the majority for HIV medi-
cussion with Pfizer, leaving only Moder- nounced that the GoI will provide free cines), generally citing high prices as a
na and Sinovac Biotech, which presently vaccines to all citizens above 18 years of justification (Mohara et al 2012). India
do not have licences to produce in India. age. The GoI will now purchase 75% of used the compulsory licences provision
Moderna already stated that it will not the vaccine manufactured (increased only once in 2012 for granting the right
enforce its patent if any companies were from the earlier 50%) and provide to all to domestic pharmaceutical company,
to manufacture vaccines (Sagonowsky the states and union territories, free of Natco Pharma, to manufacture kidney
2020). Two other Indian firms, namely cost. With the states and union territories’ and liver cancer drug, sorafenib tosylate,
Gennova Biopharmaceuticals and Cadila quota of 25% now being procured by the the patent for which is with the German
Healthcare are in phase-3 of clinical trials central government, it implies that state multinational firm Bayer. Interestingly,
(Sharma 2021). For remdesivir, an im- governments and union territories will in recent times, Natco pharmaceutical
portant medicine for treating COVID-19 have to spend on vaccine procurement had applied for compulsory licences to
patients, seven Indian firms, namely Cipla, (Sharma 2021). manufacture Baricitinib, a COVID-19 drug,
Hetero Healthcare, Dr Reddy’s Laborato- Table 2 shows that the prices of vac- patent for which is with Incyte Holdings
ries, Cadila Healthcare, Jubilant Pharma, cines in the South Asian subcontinent Corporation with a licence to Eli Lilly, an
Mylan, and Syngene International ob- and in Africa varied between $3 and American multinational.
tained licence from the United States $6.75. Hence, the argument that patent- However, the GoI is not willing to
(US)-based Gilead Sciences. As Table 1 ed vaccine products will be far too costly grant compulsory licences. From an affi-
shows, with increased availability in the is not backed by strong evidence. Also, davit filed before the Supreme Court,
domestic market, prices have gradually even if India gets an IPR waiver, manu- the GoI has adopted a stance that issuance
fallen for this COVID-19 medicine. facturing vaccines for a new disease of compulsory licences will not help to
With the number of manufacturer- would be a complicated process. It re- increase the supply of COVID-19 drugs,
competitors rising, it is unlikely that any quires importing critical material inputs as the main constraints to increase supply
pharmaceutical company can afford to and sharing of “undisclosed informa- of remdesivir is unavailability of raw
earn supernormal profits using the patent tion” by the foreign manufacturers, which materials and essential inputs (Ranjan
provision. On the contrary, India is a may not come seamlessly. 2021). India’s domestic position of not
large market, and the GoI, as one of the
Table 2: Government Rate for Procuring COVID-19 Vaccines
largest buyers, dominates this market.2 As Supplier Vaccine Name Country/Region Reported
per the new “liberalised and accelerated Price per Dose ($)
AstraZeneca
Table 1: Remdesivir Price in Indian Rupees
(Maximum Retail Price [MRP] is for 100 mg vial) AstraZeneca/Serum Institute Covishield African Union 3
Indian Firm Brand MRP MRP AstraZeneca/Serum Institute Covishield Bangladesh 4
Name (Old Price) (New Price) AstraZeneca/Serum Institute Covishield India 3
Cadila Healthcare Remdac 2,800 899 AstraZeneca/Serum Institute AZD1222 European Commission 2.19–3.50
Syngene International RemWin 3,950 2,450 AstraZeneca/Serum Institute AZD1222 US 4
Jubilant Pharma Jubi-R 4,700 3,400
Bharat Biotech Covaxin India 4
Dr Reddy’s Laboratories Redyx 5,400 2,700
Pfizer/BioNTech BNT-162 African Union 6.75
Hetero Healthcare Covifor 5,400 3,490
European Commission 14.70
Mylan Desrem 4,800 3,400
US 19.50
Cipla Cipremi 4,000 3,000
Source: Ministry of Chemicals and Fertilizers, Government Gamaleya Research Institute Sputnik V Global (excluding Russia) 10
of India. Prices were revised on 17 April 2021. Source: Vaccines Pricing Data, UNICEF (2021), https://www.unicef.org/supply/vaccines-pricing-data.

20 august 28, 2021 vol lVi no 35 EPW Economic & Political Weekly
 COMMENTARY

using the compulsory licences route to With the pandemic continuing, reduc- underlines the extent of reforms in a
override IPR for COVID-19 vaccines and tion and elimination of tariffs and NTMs better manner.
medicines is contradictory to its own are desirable to facilitate the smoother For observing the temporal perspec-
stance, that of seeking an IPR waiver in availability of medicinal goods in the tive, the weighted average tariff rates in
the WTO forums. domestic market. both the active pharmaceutical ingredi-
Over the last two decades, average ents (API) and formulation segments are
Trade Policy Framework global tariffs on medicines have fallen compared over four periods, namely
A shortage in the domestic market can from 4.9% in 2001 to 3.2% in 2018. This is 2001–05, 2006–10, 2011–15 and 2016–19,
be tied over through trade. Trade in lower in comparison to the global average respectively. While in the first period,
COVID-19 vaccines and medicines are tariffs for non-agricultural products, India adopted a cautious attitude by
critically influenced by tariffs and non- which stood at around 7.6%. Although gradually embracing the product patent
tariff measures (NTMs). Import tariffs India has overseen Figure 1: Distribution of NTMs Imposed by India, 2020
are the chief trade barriers responsible the biggest decrease 60

for inflating end prices as such border in its average tariff 50

surcharges are amplified and com- in percentage terms

Number of NTB measures

pounded as a product moves down the since 2001, Nigeria, 40

distribution chain (Bauer 2017). Like- Ghana, Chile, Mon- 30

wise, NTMs which are defined as policy golia, Israel, and
measures, other than custom tariffs, can Bahrain have re- 20

potentially have an economic effect on moved them alto-

10
international trade in goods (UNCTAD gether (Stevens and
2016). Some prominent NTMs are sani- Banik 2020). 0
Labelling and TBT require- Distribution Port-specific Product SPS
tary and phytosanitary (SPS) measures, Table 3 summa- packaging ments and traceability entry quality or requirements
technical barriers to trade (TBT), port- rises the import requirements requirements require- performance
ments requirements
specific entry requirement, distribution tariff scenario in Source: Constructed by authors from Market Access Map data, International Trade Centre
and traceability requirement, and pack- India for select ma- (https://www.intracen.org/).
aging and labelling requirements. Many jor pharma products, which over the last regime (from 1 January 2005), in the
of the COVID-19-related vaccines and one year faced export restrictions occa- second period, the country emerged as a
medicines are imported, and NTMs by sionally (Ahmad et al 2020). Trade- major exporter of generic medicines.
restricting market access may impact weighted average tariff is reported in- The last two phases witnessed consoli-
their availability and, thereby, price. stead of simple average, as the former dation of the manufacturing sector in
Table 3: Tariff (%) and Trade Balance ($ million) Scenario in Pharmaceutical Sector the country, initially with the “Make in
Sl HS Code Product Weighted Average Tariff Trade Balance India” scheme, followed by “Atmanirb-
No Scenario
2001–05 2006–10 2011–15 2016–19 2016–20 Feb 21 har Bharat Abhiyan,” both of which
1 292229 Paracetamol 27 9.6 7.5 7.4 -31.6 -1.6 helped in propelling the pharma export
2 293329 Tinidazole and metronidazole 27 9.6 7.5 7.4 92.2 15.5 growth. During the last phase, India has
3 293339 Hydroxychloroquine 27 9.6 7.5 7.3 317.6 43.1 undertaken a series of reforms covering
4 293349 Hydroxychloroquine 25 9.6 7.5 7.4 91 3 both procedural and trade policy issues.
5 293359 Acyclovir 27 9.6 7.5 7.4 63.6 13.3
It is evident from the data that to en-
6 293399 Hydroxychloroquine 25 9.1 7.5 6. 6 174 8.8
courage domestic manufacture of medi-
7 293499 Remdesivir API 25 9.3 7.5 6.4 73.7 -3.5
cines, average tariffs on APIs were re-
8 293622 Vitamin B1 27 9.6 7.5 6.8 -9.8 -1
9 293625 Vitamin B6 27 9.6 7.5 6.8 -9.7 -0.6
duced drastically. While during the
10 293626 Vitamin B12 27 9.6 7.5 7.4 -39.8 -4.4 2001–05 period, the average tariffs for
11 293723 Progesterone 25 9.6 7.5 7.4 -42.8 -2.4 both API s and formulations remained at
12 294140 Chloramphenicol 27 9.6 7.5 7.3 -0.35 0 around 25%–27%, a marked difference
13 294150 Erythromycin salts 27 9.6 7.5 7.4 -6.4 -1.9 emerged from 2006 onwards. It is ob-
14 294190 Neomycin and clindamycin salts 26.6 9.5 7.5 7.4 -62.1 -20.8 served that the average tariff on APIs
15 294200 Ornidazole 27 9.5 7.5 7.3 677.6 65.5 (classified under HS Code 29) declined at
16 300420 Formulations made of chloramphenicol, a relatively sharper rate, enabling Indian
erythromycin and clindamycin salts 27 11 10 10 999.7 77.1
formulation (classified under HS Code 30)
17 300439 Formulations made of progesterone 27 11 10 9.6 13.5 5.9
18 300450 Formulations made of vitamin B1, B6, B12 27 11 10 8.8 240.2 22.8
exporters to obtain cheaper access to in-
19 300490 Formulations made of neomycin, ornidazole, termediate inputs. The higher effective
paracetamol, metronidazole, tinidazole, rate of protection, resulting from this
acyclovir, remdesivir, amphotericin B, tariff escalation, enabled India to con-
hydroxychloroquine, etc 27 11 10 9.64 10593.1 1,142.10
Source: Computed by authors from WITS (https://wits.worldbank.org/) and Ministry of Commerce, Government of India
solidate trade balance in the formulation
(https://commerce.gov.in/trade-statistics/export-import-data-bank-monthly/) data. segment significantly. For instance, India’s
Economic & Political Weekly EPW august 28, 2021 vol lVi no 35 21
COMMENTARY

export in the medicament segment (HS could have used the compulsory licenc- https://www.thequint.com/voices/opinion/
covid-19-pandemic-mumbai-trends-deaths-
Code 3004) increased from $2.45 billion es, a legitimate WTO provision. Interest- cases-numbers-senior-citizens-young-popula-
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Doha Declaration and Increasing Access to
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APIs turned to deficit in February 2021, the IPR waiver. There is another way to states-will-now-jostle-for-vac-
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22 august 28, 2021 vol lVi no 35 EPW Economic & Political Weekly