Is COVID Manufacturing Capacity actually limited or is Intellectual Property the problem?

Supply of the Moderna and BioNTech/Pfizer (and others) vaccines is likely not to keep up with the supply commitments made by both companies. News reports suggest that they are only working at approximately 50% of the pace needed to meet their commitments to the US Federal government, let alone other countries.[1] There are suggestions that they are working as close to full capacity as they can and that the limitations are around basic inputs and delivery tools rather than in the vaccine manufacture itself.[2] If true, then intellectual property is not the primary capacity limitation. However, the problem could also be that neither company had enabled access to the patents and know-how to a wide enough group of companies to ensure enough production, and what distribution agreements exist are for ‘exclusive distribution rights”.[3] This would be a natural and rational decision by companies holding IP: keeping control of who can manufacture your product so that you remain the primary producer and capture most of the market demand is a rational economic decision, even or especially in an emergency. But that is the opposite of what is needed. We need as many companies as possible manufacturing to ensure as many doses are available, and to lower the per dose cost by competing on price.[4] Moderna and Pfizer have a stranglehold on both the manufacturing AND the distribution/sale of their vaccines. They clearly are unable to meet the existing demand for the product. Why are they not licensing or enabling others to engage in production? To be fair, Moderna committed in October 2020 to not enforce its patents during the pandemic.[5] However, it’s not clear that it provided know how to enable others to engage in production of its vaccine and it continues to have issues around the actual scope, content and current licensing of patents involved in its technology.[6]

As noted above, one explanation is that the bottleneck is extrinsic to the vaccine itself: in shortages of ingredients, delivery vials etc. No amount of compulsory licensing of the vaccines themselves would solve that problem. What evidence do we have that this is the case?

A November 2020 article by Asher Mullard in Nature noted “Vaccine developers who have already reported promising phase III trial results against COVID-19 estimate that, between them, they can make sufficient doses for more than one-third of the world’s population by the end of 2021.”[7] A big chunk of that, however, has been designated to populations in developed countries already. The Duke study on which the article is based suggests that finite manufacturing capacity may be mostly used up, and that the distribution problem is pone of developed countries taking a larger portion of total production rather than limiting production overall.[8] On the other hand, it is not clear that India’s massive manufacturing capacity is being put to good use. In a panel discussion at Dukes Global Health Institute, Rajeev Sadanandan, the CEO of Health System Transformation Platform suggested that the key issues appears to be shortage of capital to expand manufacturing and delivery.[9]

Prashant Yadav notes that, as of January 26, 2021, three fifths of the largest firms with manufacturing capacity (Sanofi, Merck and GSK) were not engaged in COVID vaccine manufacturing[10], (although Sanofi has recently committed to produce the Pfizer/BioNTech vaccine,[11] Novartis will use it to finish and fill capacity for the same vaccine, and GSK has agreed to manufacture the CureVac vaccine.[12]) In part this unused capacity is due to the wait for results for their own or related vaccine candidates. Merck has recently discontinued development of its own vaccine candidates[13] and so may be able to retool for production of other firms vaccines provided that it is given access to knowledge and ability to sell into the market. Again, in the absence of regulation, there does not seem any incentive to the firms with existing approved vaccines to permit such high levels of production that demand is met or even over-supplied. Instead, it appears Merck has retooled to focus on drugs for treatment of late stage coronavirus[14] calculating that it is better off with an exclusive market for its own drugs rather than competing for production and manufacture in what is a ‘crowded market. Brook Baker, Professor of Law at Northeastern University notes with respect to the role of the Gates Foundation in supporting these types of exclusive deals, “Gates will talk about anything except IP. The world needs more supply, but supply is left in the hands of vaccine rightholders who pick and choose who they will allow to contract manufacture or license with restrictive geographic terms and freedom to tier price. India will manufacture, but the quantities discussed still seem way less than Low to Middle Income Countries need. The Foundation remains content that the vaccine originators will principally supply rich countries, COVAX will secure limited supplies mainly for LICs and L-MICs and that U-MICs will be left to fend for themselves.”

Evidence from an Opensource map developed by the Third World Newtork (http://vaxmap.org/) looking at manufacturing capacity suggest that there is likely unused capacity in the following countries (places with capacity but no existing COVID19 licensing or manufacturing agreements: Argentina, Japan, South Korea, China (PRC) (not clear how much is occupied by Sinovac vaccine), Taiwan, Singapore, India among others.

There are manufacturers out there with capacity who are not being used by Moderna and Pfizer or the Oxford/AstraZeneca vaccine. The evidence suggests that these firms have made deals with developed countries and are barely able to meet the demand from those countries who have pushed their way to the front of the line. It also suggests that, even if developing countries were able to put in orders, the firms’ current limited capacity would leave developing countries at the back of a line to receive supplies only in late 2022 at the earliest and most likely in 2024 and later.[15] The supply problem is real. The number of manufacturers is too low and while some part of the delay can be explained by lack of inputs and ancillary supplies, much of the delay is also explained by the failure to enable mass manufacturing by other companies across the world. This requires a rapid regulatory response, one that ensures not just access to patents but to know how and methods. It requires that once we have a threshold number of vaccine candidates, including those suitable for warm weather countries with low cold-chain capacity, all manufacturing capacity be directed to those rather than to continuing to develop other candidates. It requires encouraging over-production and competition among firms on price but we are nowhere near that. What then should we do? There is a need for cooperative and incentive based structures for cooperation such as the WHO COVID 19 Technology Access Pool[16], but we also need some sticks at the country level to push firms to enable sharing of know-how and technology. These can include using procurement processes to require companies to share technology and know-how, (probably on a common but closed platform) for the purpose of meeting the demand and size of orders and for developed countries to leverage their purchasing power, in cooperation with developing countries to agree on purchases. This cooperation might be enabled through the COVAX facility but the initial agreement establishing it would have to be modified to implement such requirements. While it seems that the bargaining power during this emergency lies with the firms, it is precisely that fact that we are in an emergency that voluntarism is not an appropriate response and that regulatory mechanisms can be justified.

Cite as Dalindyebo Shabalala “Is COVID Manufacturing Capacity actually limited or is Intellectual Property the problem?” IP& (2 February 2021.

[1] https://www.cnbc.com/2021/01/22/countries-look-to-acquire-the-ip-of-vaccine-makers-to-fight-pandemic.html

[2] See https://www.cidrap.umn.edu/news-perspective/2020/11/gao-highlights-covid-vaccine-supply-chain-drug-transparency-issues. Also, https://poole.ncsu.edu/thought-leadership/the-covid-19-vaccine-supply-chain-potential-problems-and-bottlenecks/ and https://khn.org/news/article/ramping-up-covid-vaccine-production-could-take-months-even-with-bidens-best-tool-to-pressure-companies/

[3] This is true even of Astrazenca which had promised to be open access.

[4] As argued by Acharya and Reddy in Foreign Policy (December 2020) – https://foreignpolicy.com/2020/12/29/its-time-to-use-eminent-domain-on-the-coronavirus-vaccines/

[5] https://www.msn.com/en-us/money/markets/countries-worldwide-look-to-acquire-the-ip-of-covid-19-vaccine-makers-to-fight-the-pandemic/ar-BB1cZZOD?li=BBnba9O

[6] See https://www.ipwatchdog.com/2020/11/11/breaking-modernas-covid-19-patent-pledge/id=127224/

[7] https://www.nature.com/articles/d41586-020-03370-6

[8] https://globalhealth.duke.edu/news/will-low-income-countries-be-left-behind-when-covid-19-vaccines-arrive

[9] https://globalhealth.duke.edu/news/ensuring-everyone-world-gets-covid-vaccine

[10] https://twitter.com/Yadav_supplychn/status/1354179151511642119

[11] https://www.reuters.com/article/us-health-coronavirus-vaccines-sanofi-idUSKBN29V23Y