To protect the health of their people during the COVID-19 outbreak, many countries have imposed trade restrictions, such as export bans, on key goods.
This isolationist cycle is generating tensions between the free movement of goods and domestic health protection, and may prove detrimental to countries that need to import critical healthcare products for their own fight against the virus.
At the same time, public and private global organisations have responded like never before to try to find treatments and cures, not only individually but also as part of an inspiring collaborative effort.
This piece discusses the current situation in Europe and the US, considering both the trend towards isolation and the intellectual property issues that arise from the global collaboration efforts.
Free movement of goods – the basics
The right to free movement of goods in member states is one of the EU’s four fundamental freedoms (the others being capital, people and services).
The EU prohibits export quotas (or measures with equivalent effect) between member states unless they can be justified on specific grounds, such as the protection of human health and life.
Free movement put to the test
The shortage of personal protective equipment (PPE) has sparked mutual suspicion among states and has led to an increase in trade protectionism globally, as nations focus on the health of their own citizens.
Germany and France were among the first member states to introduce export bans or restrictions on medical equipment and hand sanitizer outside their frontiers. In a communication (PDF) dated 13 March, the EU Commission highlighted the need for solidarity, proportionality and co-ordination, saying that simple export bans would not be proportionate as they would not ensure that goods reach the people who need them most. However, this was in relation to trade within the EU.
To address member states’ concerns regarding EU shortages, on 14 March the Commission introduced a regulation (later extended until 26 May but now expired) setting out export authorisation requirements for exports of PPE outside of the bloc (and the UK, until the end of the Brexit transition period).
The Commission has published details of the export requests made (PDF), including the source and destination countries, which makes for interesting reading.
These measures seem to have eased nations’ fears, as countries like Germany lifted their unilateral export restrictions.
However, certain national restrictions remain in place:
- The UK government has published regularly updated guidance on medicines that cannot be exported out of the UK or hoarded, as well as a list of medicines subject to those restrictions – the lopinavir/ritonavir combination (used in the treatment and prevention of HIV/AIDS and thought of as a treatment option for COVID-19) features among many others.
- Germany’s Federal Ministry for Economic Affairs and Energy imposed an export ban for PPE via a general decree (Allgemeinverfügung) dated 4 March 2020, which was repealed and amended on 12 March 2020 (see the text in German here). After the EU introduced the export authorisation requirements referred to above, Germany lifted national export bans on medical equipment.
- In Austria, a regulation on safeguarding the supply of medicinal products (PDF, in German) came into force on 1 April 2020. In accordance with the terms of that regulation, the Federal Office for Health Care Safety maintains a list of prescription drugs (in German) that are in short supply and cannot be exported outside Austria.
The Federal Emergency Management Agency (FEMA) put in place a temporary rule (PDF), effective from 7 April to 10 August 2020, so that five types of PPE (N-95 filtering facepiece respirators; other filtering facepiece respirators; elastomeric, air-purifying respirators and appropriate particulate filters/cartridges; PPE surgical masks; and PPE gloves or surgical gloves) cannot be exported from the US without explicit FEMA approval.
The FEMA rule came in the wake of President Trump’s memoranda (of 2 April and 3 April 2020) invoking the Defense Production Act, 50 U.S.C. § 4501 et seq., to allocate certain PPE to domestic use.
In addition, the US Export-Import Bank adopted a resolution (effective until 30 September 2020) temporarily withdrawing all financing support for exports of PPE and other critical medical supplies.
Future challenges of isolation
With China and India producing large quantities of active pharmaceutical ingredients for use worldwide, nervousness about the fragility of the global drug supply system has re-emerged. Indeed, there are signs in the US that the federal government is seeking to 'bring home’ some drug manufacturing
Similarly, in the UK, NHS leaders and medical charities have called for the government to bring more drug manufacturing to the UK, while a suggestion that Sanofi would prioritise the US for the supply of a vaccine sparked controversy in France (in French).
In Austria, there have also been discussions (in German) about increasing domestic production of medical supplies and strengthening domestic research institutes (in German).
As for the Netherlands, the government supports the initiative (in Dutch) to make the EU less dependent on third countries supplying drugs.
An approved vaccine is unlikely to become available before mid-2021 (although clinical trials have shown promising results so far).
Once a vaccine is available, global demand will – at least initially – outstrip supply. And even when production is in full swing, equitable distribution will remain a challenge
Despite these moves to isolation, there have been major steps towards global collaboration.
On 24 April 2020, the World Health Organization launched its Access to COVID-19 Tools Accelerator, a collaboration to progress the development of coronavirus vaccines and therapeutics.
The EU responded to this call to action by joining forces with Canada, Norway and the UK (among others) to host the Coronavirus Global Response Initiative, which aims to attract funding for the development of, and ensure equitable access to, therapeutics and vaccines around the world.
These initiatives are an important development, but they also raise important questions on intellectual property that have yet to be answered. For example, if both public and private organisations are doing jointly funded R&D work, who will own the output?
This brings into sharp focus the traditional tension between:
- incentivising the development of medicines through intellectual property rights (patents, and market and data exclusivities) as well as rights to confidential information; and
- allowing fair and equitable access to those medicines once developed.
The EU Commission has been rather vague in its response to the ownership issue: 'Business partners will in principle not be required to forgo their intellectual property, but funding pledged will be accompanied by commitments from donors in support of global access and fair deployment of new diagnostics, treatment and vaccines against coronavirus'.
Companies entering into global R&D agreements will already be alive to the potential pitfalls associated with large-scale collaborations and the need to ensure that robust agreements and processes relating to ownership, rights of use, information-sharing and the protection of confidential information are in place.
At the same time as responding to the urgent public health demand, pharmaceutical companies need to put in place procedures (possibly including information barriers) to monitor and, if necessary, document how information received through global initiatives has been used (and how it has not).
Ultimately, pharmaceutical companies need to shield themselves from the risk of their intellectual property rights being challenged – particularly in respect of home-grown inventions that are independent from global collaboration – if they are to continue to thrive once the immediate challenge has been overcome.