COVID-19: State Intervention in Times of Vaccine Shortages

The European Union (“EU”) and its Member States are struggling with the pace of their vaccination programs. This is partly due to shortages of vaccine availability. Germany, like the rest of the EU, is scrambling to obtain vaccine doses as the pharmaceutical industry slows down deliveries due to manufacturing issues. Yet, time is of the essence when it comes to vaccine rollouts, particularly amid a surge in cases due in part to the emergence and potential future emergence of variants of SARS-CoV-2, the virus that causes COVID-19.

Against this backdrop, it comes as no surprise that certain political voices in Germany are calling for state intervention in the vaccine manufacturing process (see, i.e., the coverage by Central German Broadcasting, in German language). However, the idea that the state could take over production of highly complex vaccines or allow third parties to manufacture their competitors’ proprietary pharmaceuticals faces factual and legal challenges. 

In this article, we discuss whether German law provides the necessary means for state intervention in vaccine production and what stakeholders should bear in mind.

What would be the basis for state intervention in Germany?

The German legislator amended the German Infection Protection Act (Infektionsschutzgesetz – “GIPA”) at a very early stage of the pandemic, among other things to allow quicker decision‑making processes that will reduce requirements for participation of the German Federal Parliament (Bundestag). It thereby authorized the German Ministry of Health (Bundesministerium für Gesundheit – the “Ministry of Health”) to autonomously[1] take “measures to ensure the supply of medicinal products, including vaccines,” in an epidemic situation of national importance (sec. 5 (2) no. 4 GIPA).

The authorizations vested in the Ministry of Health are comprehensive. In the case that the German Federal Parliament declares an “epidemic situation of national importance,” the Ministry of Health can issue statutory decrees, e.g., to:

  • Allow exceptions from provisions of the German Medicines Act (“GMA”) with respect to manufacturing, labeling, approval, clinical testing, use, prescribing and dispensing, import and export, and transfer and liability;
  • Order the securing and the use of vaccines; or
  • Maintain, convert, open, or close production facilities or individual operating sites of enterprises producing the abovementioned products.

The aforementioned list in sec. 5 (2) no. 4 GIPA is exemplary and not exhaustive. Other measures are thinkable, too. In light of the extremely broad competences given to the Ministry of Health, such order could even encompass the manufacturing of vaccines by a new third‑party manufacturer to ensure continuous vaccine supply to the German population.

What are the requirements for such an order?

As the COVID-19 pandemic was already declared an “epidemic situation of national importance” in Germany on March 25, 2020, the only further requirement that would have to be fulfilled is that any of the listed measures would have to be proportionate to reach the purpose of ensuring the supply of the population with medicinal products as part of the maintenance of healthcare. The proportionally test involves three prongs. The question is whether the individual measure is suitable and necessary, as well as appropriate to reach this purpose.[2]

The suitability for the intended purpose already faces serious doubts, as it requires that the envisaged measure can at least facilitate such purpose, i.e., accelerate the production of vaccines as part of the maintenance of healthcare. The production of vaccines is an extremely complex process that cannot simply be assigned to any new third party. From a practical point of view, the transfer of vaccine production is highly complex and by no means a fast process. In an interview with the German newspaper Rheinische Post, Dr. Hans-Georg Feldmeier, the chair of the German Pharmaceutical Industry Association (“BPI”), states in this context: “[. . . ] out‑licensing to other manufacturers, regardless of the legal implications, according to our estimations would take at least 12 months or longer for vaccines to become available from this [third-party] manufacturing.” Against this backdrop, it is indeed questionable whether Germany can reach an acceleration in overall production capacity of vaccines by trying to integrate third parties into the process.

Even if the answer to this question would be yes, however, the next challenge will be to show the necessity of these measures. This may be difficult as there are likely equally effective options available to the Ministry of Health with fewer limitations of the fundamental rights of the stakeholders involved. First, when looking at the examples of Israel, the United States, and the UK, it is obvious that there are ways to carry out vaccination programs more effectively, short of direct government intervention into vaccine production. Second, it remains possible that simply undertaking higher spending for vaccine purchases now or funding of the establishment of additional production capacities would also be a viable path to resolve the problem. The EU and Germany have applied restrictive policies of vaccine purchases while others were willing to spend significantly more for early shipments (see here). Third, options to incentivize voluntary cooperation between vaccine developers and candidates for third-party manufacturing as a long-term plan should also be looked at and may be an alternative to unilateral government orders.

Regarding the appropriateness of the described measures, it is clear that the vaccine proprietor will suffer extensive interferences with their fundamental rights (i.e., property rights) if they are ordered to enable a new third party to help with the production. For such interferences to be appropriate, the achievement of the pursued purpose of the measure must be highly likely. Yet, it is questionable whether an order by the Ministry of Health could effectively reach the purpose of swiftly ramping up production capacities by involving new third‑party manufacturers. This is because the latter will need to have access to the specific composition and formula of the vaccines. Albeit, this information is part of the dossier that must be filed with the competent authority in the marketing authorization process. This part of the dossier is subject to confidentiality requirements, the so-called data exclusivity. Whether the Ministry of Health could legally base a demand for disclosure of such information simply on sec. 5 (2) no. 4 GIPA may be doubtful. However, even if a general provision like sec. 5 (2) no. 4 GIPA the Ministry of Health could justify such a severe interference with the vaccine proprietors constitutionally protected property rights, the Ministry of Health would face additional factual hurdles. In particular, with regard to the newly developed mRNA-vaccines, specific manufacturing know-how may be required. If such manufacturing know-how was not disclosed as part of the marketing authorization application dossier (e.g., because it has never been put to writing), it is again questionable if sec. 5 (2) no. 4 GIPA will be able to justify a request for disclosure of such confidential information from the vaccine proprietor.

What impact does patent protection have in this respect?

In context of state intervention relating to vaccine manufacturing, patent law exemptions are often praised as salvation. And indeed, as previously reported, sec. 5 (5) GIPA[3] authorizes the Ministry of Health to issue administrative orders to use patented technology relating to COVID-19-relevant pharmaceuticals and medical devices. Of course, these instruments will likely be necessary means to circumvent vaccine proprietor’s patent protection relating to the general technology underlying their vaccine (e.g., a type of general mRNA‑related technology). Yet, with respect to the COVID-19 vaccine’s specific features, sec. 5 (5) GIPA orders may not be necessary, at least, if the respective patents are still in the application stage. This is because patent applications do not exclude third parties from using their relevant discoveries and until publication do not even trigger compensation claims.

Will the affected party be compensated?

The Ministry of Health is required to provide for a compensation to be paid to the affected party for any measure that results in expropriation or expropriation-like interference with the affected party’s rights. Such compensation is to be obtained directly from the government and not from third parties authorized by the Ministry of Health or its subordinates to produce or sell the vaccine. The Ministry of Health must lay down the type and scope of such compensation in the underlying statutory decree. Above all, however, the compensation will need to be appropriate. It will be subject to discussion what “appropriate” in this context means. As a statutory decree ordering the manufacturing of a vaccine proprietor’s product by a third party (even if not or not yet protected by patent right) is very similar to the order of a compulsory license to a pharmaceutical patent, it seems worth thinking about adapting the established case law of the German Federal Patent Court (Bundespatentgericht) on drawing upon the concept of an average license fee.  

Who will be liable for damages caused by the vaccine?

If third-party manufacturers operating under an order of a state authority cause harm to others, the question of liability arises. So far, no case law directly relevant to the constellation described herein exists, but it is likely that the competent German Civil Courts will assess damage claims based on the assumption that these manufacturers are so-called “administrative assistants.” In this scenario, if manufacturers cause damages following the Ministry of Health’s order, they cannot be held liable personally; instead, claims must be brought directly against the Ministry of Health (sec. 823 (1) of the German Civil Code and Article 34 of the German Basic Law).

How can an order based on a sec. 5 (4)no. 4 GIPA statutory decree be challenged?

Challenges against an order that is based on the Ministry of Health’s statutory decree issued in accordance with sec. 5 (2) no. 4 GIPA must be brought before the German Administrative Courts. In order to reach a suspending effect, the affected party will need to file for a specific order for interim relief as sec. 5 (4) sentence 5 GIPA provides for the immediate enforceability of any measure ordered by the Ministry of Health. Challenges of the inadequacy of compensation must be brought before the German Civil Courts.

Outlook

It seems as though sec. 5 (2) no. 4 GIPA can pave the way for the Ministry of Health to procure production of COVID-19 vaccines by new third-party manufacturers. However, at a closer look, the complexity and duration of the transfer of production as well as the available alternative means to accelerate the production and availability of vaccines cast serious doubts as to the likelihood and legality of such measures. Yet, as it has always been the case with state intervention, the mere existence of the possibility of a sovereign to intervene can be a persuasive means to leverage market players into increasing their capacities for delivery. If the pandemic has shown one thing so far, it is that cooperation is a key factor in successfully combating the virus and that the stakeholders in the pharma industry are principally willing to work together to deliver on their promises. Thus, it can be expected that an incentive-based strategy would likely lead to increased level of cooperation among key players and subsequently to a higher availability of vaccines while simultaneously protecting the rights of the stakeholders. Either way, now may be a good time for pharmaceutical manufacturers to hold prospective vaccine production capacities out and to brace themselves for potential negotiations and engagement in the production of vaccines, either based on a state order or on licensing deals with vaccine proprietor’s or current manufacturers of COVID-19 vaccines.   



[1] Due to the impact on commerce, these statutory decrees are issued in consultation with the Federal Ministry of Health for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie).

[2] It must be noted that sec. 5 (2) no. 4 GIPA has already been used by the Ministry of Health to enact a number of administrative decrees during the pandemic, which, e.g., allow for facilitated procurement of medicinal products or order hospital pharmacies to stockpile such products for intensive medical care.

[3] In conjunction with Section 13 of the German Patent Act (Patentgesetz).