Hi,

The fracas which erupted between the European Union and AstraZeneca this past week could be an inflection point in this pandemic, some believe. This could not only lead to changes in manufacturing strategies to meet the demand for COVID-19 vaccines, but may blow the lid off the secrecy in these contracts. With total confirmed cases of infection from SAR-CoV-2 topping 100 million worldwide, we certainly hope so.

Stepping away from the action unfolding in Europe, we buried ourselves in prosaic legal questions facing large parts of the world.

Regulatory timelines are shrinking, as a result it hastens everything including legal processes involved in the introduction of these vaccines. There will be repercussions surely.

This week we take a close look at the proposed mechanism put in place by WHO and Gavi to address liability and indemnification issues around the introduction of COVID-19 vaccines in the developing world.

Write to us, and share your perspectives on these crucial and technical issues.

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1. Story of the week

THE COVAX FACILITY & THE LIABILITY QUESTION

Even as uncertainties around vaccines supply to much of the developing world remain, there are complex questions on liabilities awaiting downstream of this massive, global vaccination exercise. Authorities in Geneva claim that the yet unseen challenges on fixing liability issues have been addressed in the form of a no-fault compensation fund that will pay for claims arising out of the introduction of vaccines in the developing world.

This expansive analysis takes a close look at some of the technical, political and economic compulsions that have shaped liability discussions within the COVAX Facility.

Last week top officials of WHO told the Executive Board that the COVAX Facility will ensure that vaccines will begin rolling out in several low and middle income countries starting February 2021. Speaking at the Parliamentary Assembly of the Council of Europe (PACE) on the ethical, legal and practical considerations of COVID-19 vaccines, DG Tedros Adhanom Ghebreyesus said “COVAX is ready to deliver what it was created for”. So there is a certain urgency in understanding these dynamics around liabilities in the context of COVID-19 vaccines.

In this story we try to explore the basic questions, who will cover the costs, how and what could one expect in the future. We also look at how these questions on liability were addressed in the past, specifically during the H1N1 pandemic in 2009. Experts also told us how changing market dynamics in the COVID-19 vaccines business could influence liability and indemnification provisions in the coming months.

The reason this is important is, although vaccines will have secured relevant regulatory authorizations for their introduction, given the unusual and unprecedented speed, manufacturers will not get insurance to cover associated risks. Without this coverage, it could impede or delay the access to vaccines. As a result, countries must indemnify manufacturers against liability claims. But as we know, many countries do not have financial or judicial capacities to address such claims. Therefore the need for a global solution as applicable in the developing world, to address this pandemic. The question is, will it work?

Photo by Thirdman from Pexels

WHO ON THE LIABILITY AND INDEMNIFICATION ISSUES:

Despite reassurances from WHO, it is not entirely clear when COVID-19 vaccines sourced from The COVAX Facility will start making it to the ports in the developing world. Authorities suggest that many countries are ready to receive the vaccines and have legal mechanisms in place. On their part, WHO and Gavi – The Vaccine Alliance have put together a no-fault compensation fund.

According to WHO, a COVAX no-fault compensation programme for AMC-eligible economies is being established as a mechanism to compensate persons who might suffer a serious adverse event following the administration of a COVID-19 vaccine procured or distributed through the COVAX Facility. (These refer to 92 Gavi COVAX Advance Market Commitment (AMC)-eligible economies.)

In an update last week to WHO’s Executive Board, Bruce Aylward, advisor to the WHO DG, who also coordinates the activities of the ACT Accelerator, said that 88 of the 92 AMC countries had submitted their requests for vaccines. These also include a detailed report of readiness of countries. While 120 countries have completed their readiness assessment, more than 50 have put in place a vaccines deployment plans. These countries had systematically put in place processes to roll out vaccines, Aylward said. Countries have also put in place regulatory pathways for emergency use authorizations for these products.

“Perhaps one of the most challenging areas…is now being addressed…these are the areas of indemnification and liability because we will remember what we're doing today now is truly on the historic scale in terms of the rollout of an unlicensed product -  a product with emergency use listing which requires indemnification of companies in every country in which these are used as well as a no-fault compensation mechanism to facilitate the use of the compensation of any severe Adverse Events. These are very difficult mechanisms to put in place given that COVAX is working across a hundred and ninety countries,” Aylward said.

Model indemnification language has now been established for all products. This has been shared with all 92 AMC countries to facilitate the rapid establishment of the necessary indemnification agreements, he said.

“A no-fault compensation mechanism has been developed, will be concluded and rolled out in the coming weeks. This will not be a barrier to the introduction of vaccinations…,” Aylward informed members of WHO’s Executive Board.

It is impossible to compare the deployment of COVID-19 vaccines with that of normally licensed vaccines: COVAX will deploy recently licensed vaccines for which, due to the scale and scope of the deployment of these vaccines and the unprecedented nature of the current crisis, normal tools to address potential liability such as product liability insurance are not available from the outset, a WHO spokesperson told Geneva Health Files separately in response to queries.

But it is not entirely clear when the system will gear into action. The compensation programme will be managed and administered by an independent claims administrator, and it is expected to become operational towards the end of the first quarter of 2021, the spokesperson added.

Experts say that the origins of such a fund is from the U.S., where a parallel system of compensation was set up outside of the main judicial system. A few decades ago, vaccine manufacturers were hit by claims and threatened to leave the market. A separate system was carved out for faster compensation of claims. It will remain to be seen if such a solution will work in the current context.

Alain Asalhani, Vaccines and Special Projects Pharmacist at Médecins Sans Frontières (MSF), told Geneva Health Files in an extensive interview, “Gavi and WHO, are putting in place what they consider a very pragmatic system within the existing realities where there is a desperate demand for new vaccines. The thinking at their level is that in many of the AMC countries, the judiciary system may not be able to cope with the potential claims arising out of administering new vaccines. Courts in these countries may not be sufficiently responsive to claims. By having a no-fault compensation fund outside of these countries, claims can be settled more efficiently.”

HOW SUCH A FUND WILL WORK: GAVI’S PLANS

Authorities have to address the need for indemnification while addressing the financial obligations this may impose on AMC-eligible economies. And hence the no-fault compensation fund.

The fund is expected to be financed by a levy on every vaccine dose headed to the AMC countries. This levy will be paid for by donors. The COVAX Facility also expects potential contributions from the manufacturers that would benefit from the indemnification, and  contributions from AMC countries that would benefit from the compensation mechanism.

In a briefing note, Gavi says that “…. a no-fault compensation mechanism will be established whereby any person receiving a Vaccine in any of the 92 countries in the AMC Group, who suffers an unexpected SAE found to be associated with such Vaccine will receive a no-fault, lump-sum compensation for that event in full and final settlement of any claims.”

A Gavi spokesperson told us: “We are working with our stakeholders to develop a comprehensive solution to address any indemnification and liability issues that may arise from the deployment of COVID-19 vaccines through the COVAX Facility. This includes negotiating a common template agreement, agreed by all manufacturers in the COVAX portfolio of vaccines, that will apply for the benefit of all AMC-eligible economies. For AMC-eligible economies, there will also be a no-fault compensation fund made available, funded by donors in the form of a levy charged by Gavi on each dose distributed to AMC economies through COVAX and which will apply to such doses. The intention is to have this no-fault compensation fund in place in time for the first shipments of doses.”

Health Policy Watch reported earlier this week that the fund will be financed “from a $0.10 per dose levy charged by GAVI on the doses to be distributed to AMC countries through the COVAX Facility,” citing a GAVI spokesperson.

In a briefing note classified as a working draft under discussion, on indemnification of COVAX AMC participants, Gavi lays out how “the facility will address potential liability, and compensation in the event of unexpected serious adverse events (SAE), arising from the manufacture, storage, transportation and administration of COVID-19 vaccines for AMC Countries.”

In this document released November 2020, Gavi says:

On Indemnification:

In light of the fact that normal liability insurance coverage will not be available to manufacturers from the outset, each country receiving COVID-19 Vaccines through the COVAX Facility, whether distributed under an emergency use authorization or recently licensed will be required to indemnify manufacturers, donors, distributors, and other stakeholders (the “Indemnified Entities”) against any losses they incur from the deployment and use of those Vaccines (as was the case at the time of the H1N1 pandemic)

Gavi explains that all countries without exception will be required to pay any legal awards in that regard against the Indemnified Entities.

On Compensation:

The level of compensation will be (i) established based on the nature and severity of the harm or injury and adjusted in accordance with the GDP per capita of the country where the unexpected SAE occurs, and (ii) designed to disincentivize claims in court to the greatest extent possible.”

“…The compensation mechanism would not preclude persons suffering harm or injury from bringing a case under their local laws. For example, if they are not satisfied with the compensation provided through the no-fault mechanism, they may decline that compensation and seek a remedy through the local courts. The compensation mechanism, however, will be designed to significantly reduce instances where such cases are brought. It is intended that claims resolved through the no-fault, lump-sum compensation will be in full and final settlement of all claims for the unexpected SAE in question and will thus not require any indemnification by countries.”

On Backstopping Guarantees

Finally, in the event that claimants win claims in the domestic legal system, or if a country is unable to pay the awards issued by a court, Gavi is putting in measures to backstop such financial exposures.

“…the COVAX Facility is exploring arrangements through which a third party would initially pay the award made by the court on behalf of the country. It is contemplated that the third party would then have the right to seek reimbursement of that payment directly from the country. For example, the COVAX Facility is in discussions with MIGA (The Multilateral Investment Guarantee Agency) to establish a vehicle to pay indemnification obligations on behalf of an AMC country or territory as required and separately work out a way for the MIGA payment to be reimbursed to them.”

POSSIBLE FACTORS INFLUENCING NEGOTIATIONS ON LIABILITIES

Although the every participating country in the COVAX Facility has to indemnify manufacturers and other entities, Gavi explicitly states that “High and upper-middle income economies are considered to have the financial means to provide adequate compensation to individuals who sustain unexpected SAEs and to adequately indemnify manufacturers and other stakeholders.”

Deeper pockets of high-income countries in addressing liability challenges may also have influenced these discussions globally, experts say. AMC countries are expected to resort to the no-fault compensation but they still have to sign the commitment to compensate companies in case of litigation.

During their bilateral negotiations, some high income countries ended up agreeing to a lower threshold on liability provisions with companies because countries have been under pressure to finalise agreements with manufacturers. Companies have cited delivering vaccines in record time and have demanded higher indemnification protection.

Politico reported that AstraZeneca, for example, “was granted far greater indemnification protections than its rivals, meaning governments would help pay parts of the legal costs should problems arise with the vaccine.” (EU’s first contract was in August 2020 with AstraZeneca, see indemnification provisions in the contract published today by the European Commission.)

(Do also note that EU negotiators did try hard to make companies responsible for liability issues around COVID-19 vaccines. See this complex story by Politico: How Europe fell behind on vaccines)

However, these discussions on liability and indemnification is an evolving picture and may change going forward. Experts say much will depend on the country in question. India, for example, has decided that vaccine makers will be held liable.

It is not clear to what extent these accommodations made on liability provisions in bilateral deals might have influenced similar negotiations between the COVAX Facility and vaccine manufacturers.

What is also not clear is how these liability provisions will apply in the context of “donated” doses. If history is any guide, the response to the H1N1 pandemic illustrates this.

Remember that even though the COVAX Facility continues to negotiate with manufacturers for more doses, it is also pushing for donation doses for AMC countries, from rich countries which have hoarded vaccines. (Will there be separate rules on liability and indemnification that will apply to AMC countries when using donated doses, or those made available through the COVAX Exchange?)

It is likely that if AMC countries want to accept these donations, they would have to sign a document where they say clearly that they will take full responsibility.

HOW WERE LIABILITY ISSUES ADDRESSED IN THE PAST?

Indemnity and liability is an issue that arose during the H1N1 pandemic and is a concern shared by COVAX partners as well as organizations involved in the transport, storage and administration of vaccines, a WHO spokesperson said on email.

During the H1N1 pandemic in 2009, countries hoarded vaccine doses, which were later donated. At the time, receiving countries were asked to sign on documentation which made them responsible for accepting the vaccine doses with full responsibility.

A source alerted us to this WHO report on H1N1 in 2011.

Source: PANDEMIC INFLUENZA (H1N1) Donor Report 1 March 2011: WHO

Although majority of the countries sent a letter of acceptance (during H1N1 in 2009-2010), the WHO report from 2011 acknowledges that “many countries found it difficult to quickly countersign the LOA. The legally binding nature of the LOA and the requirement that countries indemnify donors from liability may have contributed to this.”

But WHO had protected itself. One of the clauses in the agreement included:

Agreement to indemnify and hold WHO and the manufacturer of the vaccine harmless from any claims and liabilities arising from any bodily injury, illness, suffering, disease or death caused by use of the vaccine in the country

Cut to 2021.

Gavi has set out terms and conditions associated with vaccine request for AMC countries. These include conditions that declare  Gavi and partners “do not make any assessment, representation or warranty as to the safety, efficacy or suitability of the Approved Vaccine which is allocated to the Country.” As a result they do not bear any liability and further that countries must indemnify Gavi and partners in the event of harm from the use or administration of the vaccines, equipment or supplies. (Rephrased, simplified language, see link below)

Here is the liability provision in the COVAX AMC Vaccine Request form which protects Gavi and COVAX partners:

“LIABILITY: 

To the fullest extent permitted by law, neither Gavi, any other COVAX Partner, nor any Procurement Agency will be liable to the Country, and the Country shall not bring a claim or action against Gavi, any other COVAX Partner, nor any Procurement Agency for any claim or loss of whatever nature relating to the use or administration of any Approved Vaccine or programme(s) described in the Application, including without limitation, any financial loss, reliance claims, any harm to property, or personal injury or death. The Country is solely responsible for all aspects of managing and implementing the programme(s) described in its Application.”

HOW A POTENTIAL OVERSUPPLY CAN AFFECT LIABILITY DISCUSSIONS:

The dynamics on liability discussions are likely going to change, and not only because of the events between AstraZeneca and the EU this past week. Unbelievable as it may sound now, possibly due to an oversupply of vaccines within a few months, experts say.

According to the UNICEF supply division dashboard which tracks vaccines production for COVID-19 in real-time, the reported global vaccine production volumes could be 19 billion doses by the end of 2021. By the end of 2022 it is projected to touch 27 billion doses.

At least 35 companies have announced some production capacity this year for a total of 19 billion doses. (Do note that this information will likely change as a result of unforeseen manufacturing delays or even vaccines not reaching licensure, experts caution).

It is understood that big developing country manufacturers account for a third of the projected number of doses in 2021. But this will not change anything in the first six months where only high income countries and BRICS with local production (India, China, Russia and to a lesser extent Brazil) will be getting meaningful amounts of doses.

MSF’s Asalhani is also a part of a working group on manufacturing, affiliated with Gavi’s COVAX Facility, focusing on the humanitarian buffer for COVID-19 vaccines, said, “As a general trend, it seems that the production capacity will be increasing steadily this year and will be reaching a plateau next year. How much of this will materialize is still to be seen, but the trend of exponential production increase seems to be there.”

Companies do not increase production capacity before knowing whether the vaccine is going to work. Now we are at the end of this first phase where vaccines are starting to show interesting results, but the production capacity is not there yet, he said.

However, towards the end of this year, there is likely going to be enough supply, and if the manufacturing trends announced by manufacturers continue and UNICEF’s figures are confirmed the world may actually end up having more vaccine than what can be used by end of next year. That being said, it is more likely that the market will reach a steady state and eventually supply will be regulated to meet the level of demand.

“We will have a stable market very quickly. As a result, the discussions on liability will also change. Governments and regulators will be moving from a situation with very little data, to a situation with a lot more evidence on vaccines. In the next few months, with millions of people in high income countries getting vaccinated, there will be a lot of data on safety, efficacy, adverse events and other indicators,” Asalhani said.

With a large number of successful vaccine candidates going forward, it will impact negotiating power of companies. The market dynamics will change significantly from what is currently being witnessed.

In addition, with a range of different platforms for vaccines, some may prove to be more useful than others in specific country contexts. Some countries for example, are not likely to invest millions of dollars on cold chain facilities if they find a better, cheaper alternative. (This also speaks to the COVAX Facility’s alleged hesitation with vaccines requiring cold chain infrastructures)

With respect to liability discussions, initially companies have had to manufacture at great speed and introduce vaccines into markets without enough information. However, once there is enough evidence emerging in the coming months, companies will have to take greater responsibility.

It is understood that there have been some discussions on what this “threshold” going to be, when companies take higher responsibility.

“At which point do you consider that the vaccines go through a normal regime when they are no longer in the  experimental or investigational stage? It will not make sense from a scientific point of view after gathering all the safety data, to continue arguing for indemnification protection” Asalhani said.

Gavi has defined the scope of coverage end point – essentially a date until when the claims will be compensated. While this can be extended, it is now proposed as 30 June 2022.

It says:

“The compensation mechanism will operate to provide no-fault, lump sum compensation for unexpected SAEs found to be associated with a vaccine administered prior to the point at which it is deemed by the COVAX Facility that either adequate insurance is available to the manufacturer in the market, or the manufacturer can self-insure, but in any event no later than 30 June 2022, which date may be extended by the COVAX Facility based on periodic reviews (the “Scope of Coverage End Point”). For a Vaccine administered after the Scope of Coverage End Point for that Vaccine, coverage for unexpected SAEs under the compensation mechanism will no longer apply.

As a consequence, Gavi clarifies:

“…In addition, for a Vaccine put into circulation after the Scope of Coverage End Point for that Vaccine, there will no longer be an indemnification requirement, and the manufacturer in question will either need to obtain the necessary liability insurance or self-insure against injuries which may be found to be caused by the Vaccine…”

With countries still waiting for vaccines, it is anyone’s guess how these issues will be addressed on the ground. The vaccines must first arrive.

Last week, Gavi suggested that its supply forecast for vaccines for the pandemic in 2021 is subject to certain caveats. Gavi has said that the “timing of delivery will depend on various factors, including local regulatory approval, country readiness, logistics, indemnification and liability in place, in-country distribution etc.”

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