Suspending COVID-related patents won’t solve poverty   

It’s no page-turner, but a report issued last week by the U.S. International Trade Commission (USITC) is getting a lot of attention in capitals around the world.  

The much-anticipated report is about the pros and cons of allowing developing countries to suspend intellectual property at the World Trade Organization (WTO) to fight the recent pandemic. 

Yet even a cursory read makes two things clear cut. First, if it weren’t for patents, developing countries wouldn’t have any COVID-19 medicines or treatments, and second, developing countries lack equitable access to COVID-related technologies because of poverty, not patents. 

The backstory is that in June 2022, the WTO implemented a “waiver” to help developing countries use compulsory licenses on vaccines. Compulsory licenses were already permitted under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), but the waiver made additional allowances to make their use even easier and is thus referred to as the “TRIPs waiver.”  

Originally, the TRIPs waiver also covered COVID-related diagnostics and therapeutics. In the face of opposition, however, these were stripped out and left for a vote that had been scheduled for last December. At the last minute, the Office of the United States Trade Representative said it needed more time to study the issues and asked the USITC for a report. This is the report. 

The report does not offer recommendations. In her instructions to the USITC, U.S. Trade Representative Katherine Tai said she was “not asking the commission to draw any policy conclusions,” but rather, “seeking a robust record with respect to these issues.”  

To frame these issues, Tai posed a number of questions about how to define COVID-related diagnostics and therapeutics, how they’re made and distributed, and how they’re priced, for example. She asked few questions about intellectual property or about the impact of compulsory licenses on innovation. 

The USITC heard a lot about these issues in hearings held for this report. Firms of all sizes, from Gilead Sciences to SAB Biotherapeutics, testified that compulsory licenses chill investments in biopharmaceuticals. In fact, the CEO of a New Jersey life sciences trade association told USTIC that companies making COVID-related medications and diagnostics saw their stock prices decline by 73 percent more than companies focused on different therapeutic areas. 

Confronted with these data, the USITC nonetheless goes out of its way to ask whether compulsory licenses can help innovation. The report hints that it’s possible, referencing a study of post-World War I patenting by German companies forced to license their ideas to American companies under the U.S. Trading with the Enemy Act of 1917. The study finds that, despite compulsory licenses, German patenting actually increased in the targeted industries. 

It’s important not to read too much into this finding. The compulsory licenses in question would have been seen as one-off bouts of expropriation, and not as the new normal. This is important. As the authors of the study explain, “firms may invest less in R&D if they expect repeated episodes of compulsory licensing.” 

That’s exactly what is expected today. Companies like Gilead Sciences and SAB Biotherapeutics know there will be future pandemics. They know that there are calls for the WTO to waive intellectual property on everything from green technology to agriculture. And they know that compulsory licenses have been in vogue since the WTO’s 2001 Doha Declaration, which a recent study found actually hurt innovation. 

The report goes on to inventory the challenges developing countries face in using compulsory licenses. The list is highly correlated with poverty and includes a lack of domestic generic producers, high tariffs on essential inputs and fragile distribution systems, for example. 

But nowhere does the report demonstrate that intellectual property belongs on this list. This shouldn’t be surprising. The vast majority of developing countries aren’t required to implement any TRIPs obligations until 2034, if ever.  

The report is right to call attention to the inequities in access to medicines, even though the pandemic is now squarely in the rearview mirror. But the problem was always poverty, not patents. 

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University, and a Global Fellow at the Wilson Center’s Wahba Institute for Strategic Competition. Follow him on X @marclbusch.