On May 5, local time, the Biden government made a major decision to support the exemption of COVID-19 's patent for vaccine, causing thousands of waves with one stone.

"the COVID-19 epidemic is a global health crisis and extraordinary measures are needed," US Trade Representative Katherine Tai wrote in a statement. The United States will actively participate in the relevant text negotiations held by the WTO to achieve the above goals, but "the negotiations will take time."

The proposed exemption means that other pharmaceutical companies can produce generic vaccines without having to worry about patent infringement lawsuits. In the short term, it may theoretically increase the supply of COVID-19 vaccine.

Affected by the news, the share prices of manufacturers who developed COVID-19 vaccine fell on the same day: Vaxart closed down nearly 16%, OCGN closed down 12.79%, Moderna Inc closed down 6.19%, and BioNTech closed down 3.45%.

However, after the decision, the vaccine manufacturer did not make it clear. Previously, the US government has been facing calls at home and abroad to exempt COVID-19 vaccine from intellectual property protection, and this change of attitude under pressure has also led to dissatisfaction from vaccine research and development companies.

The US Drug Research Institute and the Pharmaceutical Manufacturers Association said in a statement on the same day that the move will further weaken the pressurized supply chain and promote the spread of "fake vaccines," while failing to really solve the challenge of achieving more vaccinations. including "the last mile of distribution and limited raw material supply."

Some public health experts pointed out that intellectual property rules are only one of the bottlenecks in global vaccine production, and how to help developing countries increase their production capacity and convert relevant patented technologies into new vaccine manufacturing capacity is also facing challenges.

India and South Africa force the United States and Europe

The proposal by the United States to exempt the intellectual property protection of COVID-19 vaccine originated from India and South Africa.

In April, Indian Prime Minister Narendra Modi discussed with Biden the issue of removing patent protection for coronavirus vaccines. A proposal for patent exemption for COVID-19 vaccine jointly submitted by India and South Africa brought the matter to the table.

At the recent meeting of the Agreement on Trade-related aspects of intellectual property Rights (TRIPS) in WTO, India and South Africa submitted a proposal for a time-bound exemption from certain TRIPS obligations, including patents, copyrights and industrial designs, which was supported by 60 developing countries, including Kenya and Swatini.

The core requirement of the proposal is to recommend to the WTO that all WTO members be exempted from their obligations "as soon as possible" so that they do not have to implement some of the provisions of the TRIPS agreement in terms of "prevention, containment or treatment" involving COVID-19 's pandemic. However, at the meeting, developed members represented by the European Union and the United States opposed the exemption and questioned its applicability and effectiveness.

Tan Desai, director general of World Health Organization (WHO), said on social media: "WHO welcomes the recent proposal by South Africa and India to WTO to relax international and intellectual property agreements on COVID-19 vaccine, treatment and testing in order to provide treatment tools to all at an affordable price."

Subsequently, on May 3, Tan Desai and former British Prime Minister Brown jointly called for temporary exemption of intellectual property rights of COVID-19 vaccine. Tan Desai said that if the majority of adults are to be vaccinated to achieve mass immunization, the number of vaccines needed will be much higher than the existing quantity; in order to increase vaccine production, it is very important to temporarily exempt vaccine intellectual property rights, and this is not a "charity issue".

Behind the proposal are increasingly serious outbreaks in places such as India, as well as low vaccination rates in the region. At present, more than 300000 new cases are diagnosed in India every day, which has become the epicenter of the world epidemic and led the global epidemic to another peak. In addition, the vaccination rate in India is still less than 2 per cent, less than 1/15 in the United States.

Why did the United States readily agree?

Behind the Biden administration's willingness to agree, there are actually various factors working together.

First, there is no shortage of vaccines in the United States. At present, the total number of vaccinations worldwide has exceeded 1 billion, mainly in countries with high income and strong R & D capabilities, such as China, the United States and the United Kingdom. For example, in the United States, the number of vaccinations has exceeded 140 million, which is close to 50%.

Second, it is precisely because of the "vaccine nationalism" of the United States and the European Union that has indirectly led to another round of outbreaks in some poor countries.

Behind the high vaccination rate, developed countries use their market forces to buy the right to use vaccines in advance, and there is also the phenomenon of buying more and hoarding vaccines in some areas. Terry Fisher, a professor at Harvard Law School, calls it "vaccine nationalism".

For example, the US government has promised to provide vaccines to the world, but its actual action is still practicing the "America first" principle, even saying that it will not start to help other countries until all Americans have been vaccinated. Until recently, under the pressure of public opinion, White House Press Secretary Pusaki said a few days ago that the United States would "share" 60 million doses of AstraZeneca PLC vaccine with other countries in the next few weeks.

Notably, infectious disease experts have warned for months that allowing the virus to spread and mutate indefinitely in any country poses a threat to the world because the variants that emerge may become resistant to existing vaccines.

And if the epidemic continues to spread in major economies such as India and will block the global supply chain, it will continue to hit the global economy.

Is it really useful to give up patents?

After the United States gave up the patent for COVID-19 vaccine, most people applauded it loudly, but does exempting COVID-19 vaccine from intellectual property protection really contribute to the popularization of COVID-19 vaccine?

Industry insiders point out that abolishing intellectual property protection will not help improve vaccine production, as raw materials and vaccine production rights are also major obstacles.

Pfizer Inc spokesman Sharon Castillo said the company's vaccine needs 280components from 86 suppliers in 19 countries, as well as highly specialized equipment and personnel.She said it was unrealistic to think that the exemption of intellectual property rights would lead to a rapid increase in vaccine supply.

For example, in India, the hardest-hit area of the epidemic, although the country is the world's largest vaccine manufacturer and India's Serology Institute is also the world's largest vaccine manufacturer, India is not a strong country in vaccine research and development, relying on "imitation". The upper reaches of the vaccine industry chain is basically controlled by European and American enterprises, without independent technology, equipment, materials, etc., even with patents can not immediately produce vaccines. At the same time, India is also caught in the bottleneck of raw materials needed for vaccine production.

Dongxing Securities believes that the bottleneck restricting the current global vaccine supply shortage is still production capacity. India, which proposed the bill to WTO, already has the authorization of adenovirus vector vaccine, but due to export restrictions in the United States, there is still a lack of relevant production materials, imitation production of mRNA vaccine will also face the same problem, and the key process is not public, and the timing of the imitation process is uncertain.

Yu Wenxin of Haitong Medicine also believes that one of the core barriers to the ️mRNA vaccine is the delivery system, and even if the patent waiver is eventually realized, it will only be the abandonment of the mRNA sequence patent, with limited impact. In addition, there are still barriers to mRNA production technology, which is difficult to be fully mastered by other pharmaceutical companies in a short period of time.

Of course, for many countries, it is always better to liberalize patent restrictions than not to do so. Moreover, some pharmaceutical companies say that production capacity may be resolved in the future by training technicians, corporate alliances, purchasing rare raw materials and strengthening quality inspections.

Previously, according to a McKinsey report in July 2020, it usually took 18 to 30 months for manufacturers to adapt to the technology needed to make seedlings. However, the time after patent exemption can be reduced to only six months.

However, the United States also faces a difficult dilemma in giving up patents. Yu Wenxin believes that this decision is only a temporary statement by the government, and it still needs to be passed by Congress, but it may be resisted by drug companies and opposition members in Congress.

Opening up patents, the disaster of vaccine research and development?

Even if some developing countries are calling for patent exemptions, the Biden government has implemented patent exemptions, but for the pharmaceutical industry, its high R & D cycle, high investment and high failure rate mean that if innovation is to be sustainable, patents must be protected.

Previously, drugmakers and governments in the US, UK and Europe were strongly opposed to exempting vaccine patents, arguing that cutting companies' returns would be bad for innovation, with or without any compensation.

Nikolai Petrovsky, technology leader of vaccine development company Vaxine, also said that protecting intellectual property rights helps make vaccine research economically viable and that the reason for controlling patents is to reward people for their efforts to develop new technologies.

"if we invest 20 years of effort and money to develop a new vaccine, but everyone can benefit from it, it will be unfair and imitators may drive us out of the market," he said. "

It is worth noting that Guotai Junan believes that British and American vaccine manufacturers may lose huge profits as a result, or even unable to make up for the high R & D investment in the previous period.

Even so, Tan Desai points out that vaccine manufacturers will still be compensated. He believes that the temporary abandonment of patents does not mean that developers will lose profit opportunities. As in the AIDS crisis or war, products made by drug companies will receive royalties.

Deborah Gleeson, associate professor of public health at La Trobe University, also said that the idea that patents enable vaccine development companies to remain economically viable is not necessarily correct, and this logic does not hold true in the event of an epidemic, because COVID-19 Vaccine Research and Development Company has received a lot of financial support from the government. In the second half of last year, some institutions estimated that the six projects of COVID-19 's vaccine research had received US $12 billion in public funding during the epidemic.

Therefore, the intellectual property exemption of vaccine itself involves the double game of "moral kidnapping" or "philanthropy". But in any case, maintaining the incentives for vaccine innovation and humanitarianism under the epidemic is a major problem facing governments around the world today.

What will happen in the future?

As for how the COVID-19 vaccine exemption in the United States will be fermented, Guotai Junan Qin Han analyzed the possibilities of the follow-up to the event from three dimensions.

First of all, there are many obstacles to exempting intellectual property rights of vaccines.

At present, governments and health experts have put forward two sets of solutions: one is to set up a patent license trading platform and build a new "patent pool" for sharing technology, intellectual property rights, and data; the other is to suspend intellectual property protection of COVID-19 vaccine during the epidemic.

However, both of these plans are strongly opposed by vaccine manufacturers, and the Biden administration will face dual lobbying from the Republican Party and the pharmaceutical industry. American vaccine manufacturers are mostly private companies, and asking them to exempt patents is itself a challenge to the authority of intellectual property rights. who will bear the huge sunk costs of drug companies? How to make up for the efforts made to develop a vaccine? Therefore, there are still many uncertainties about whether, when and how the vaccine patent exemption can be landed.

Second, it will take time for global vaccine production capacity to increase after patent exemption.

Although other countries around the world can produce generic vaccines quickly after exemption, the construction of vaccine production lines and supply chains still need to overcome time and technical tests. Patent exemption does not mean that any pharmaceutical company has the technology and ability to immediately put into production of mRNA vaccine.

Therefore, even if intellectual property rights are liberalized, the increase in global vaccine production capacity is still a long-term thing.

Finally, patent exemptions could accelerate expectations of a global monetary easing exit.

The impact of patent exemption on the capital market is two-sided, and the expected strengthening of universal immunity will increase the risk appetite of the capital market, but it may accelerate the process of global austerity in the short term. For example, the epidemic in Brazil is still severe, but inflation is rising and prices are soaring. This led the Brazilian central bank to raise interest rates for the second time this year, raising the benchmark interest rate by 75 basis points to 3.5% on May 5. Under the impact of the severe epidemic, the improvement of vaccine capacity still takes time, and the currency is forced to collect water, patent exemption may mean double killing of stocks and debts in the hardest-hit areas of the epidemic.