Big Pharma 'bullying' exposed in South African COVID-19 contracts

South Africa faced “hefty demands and conditions” in securing COVID-19 supplies, based on secret contracts that the government was forced to publicly disclose following a recent court ruling, according to a group that analyzed them. Contracts with some manufacturers included requirements that prevented the South African government from imposing export bans and donating doses to other countries without the companies’ permission. Some of the contracts also had broad indemnification clauses that left much of the liabilities to the government, while companies faced no penalties for late vaccine deliveries. The contracts also confirm media reports that South Africa paid much more for some of the vaccines than wealthier countries in Europe. The contracts show the country paid the Serum Institute of India $5.25 per dose of the generic version of the AstraZeneca vaccine, 2.5 times more than the price paid by the EU for essentially the same vaccine. It also paid $10 a dose for the Pfizer vaccine, more than the $6.75 cost price the African Union reportedly paid for. The contracts also showed South Africa was charged $10 per dose for the Johnson & Johnson COVID-19 vaccine, whereas the EU reportedly only paid $8.50 for it. But in an emailed response to Devex, J&J wrote that the vaccine it supplied to South Africa was given at “our final global price of $7.50 per dose.” “What the released papers show is that when secrecy is allowed to rule … the pharmaceutical corporations involved gain tremendous amounts of power. And they use that power to undermine global equity, and to undermine the public interest,” said Nick Dearden, the director of Global Justice Now. The contracts were made public after the High Court in Gauteng, South Africa, ordered the National Department of Health to disclose copies of all its COVID-19 vaccine contracts, memoranda of understanding and agreements, as well as negotiation minutes and correspondence to Health Justice Initiative, a public health and law initiative based in South Africa. The activist group had requested the documents in 2021, but the health department wouldn’t share them citing confidentiality. In 2022, the initiative filed a case in court for the disclosure of the documents, arguing that they were in the public interest. “These provisions shift virtually all of the risk, all of the cost, all of the burden onto the South African government. … It was a very one-sided endeavor.” --— Matthew Herder, director of Health Law Institute, Dalhousie University Lack of transparency was one of the big issues many groups raised during the COVID-19 global health emergency amid an unequal distribution of scarce vaccines. Even COVAX, the global initiative designed to enable equitable access to COVID-19 vaccines, didn’t have a clear indication of how much supply there was, where vaccines were going and when, which it said made it difficult to address gaps in the equitable distribution of the vaccines. The group of academics, lawyers, and researchers that analyzed the contracts upon their release, led by Health Justice Initiative, said had there been more transparency on pricing and supplies, countries such as South Africa would not have had to pay more for vaccines than European countries, or left waiting at the back of the queue for doses. They described the contracts as "pharmaceutical bullying," with heavily one-sided terms. They said this should provide lessons for how differently things should be done in a future pandemic and are hoping more transparency will be covered in a future pandemic accord. “Unless the pandemic accord is willing to address intellectual property monopolies, and [pharmaceutical] power over supply, price and distribution, we will have exactly the same thing in the future,” said Brook Baker, senior policy analyst for Health GAP. Additional documents are expected by the end of the month. Concerns and outstanding questions According to the analysis, the contract with J&J stated that the country cannot claim a refund of its downpayment of $27.5 million if the J&J vaccine did not receive regulatory approval or if its development was unsuccessful. It can only file for a refund if it determined the vaccine was “not safe and/or efficacious” for its population or in the event of “willful default” by the company. The agreement between the government and J&J also prevented the former from introducing any export restrictions on any of the company’s supplies, including those filled and finished in the country. This took place while other higher-income countries were freely doing so. Both South Africa’s contracts with J&J and Pfizer, the main suppliers of COVID-19 vaccines to the country, also included clauses that required the companies’ permission if the government decided to resell or donate the vaccines outside of the country. They didn’t include specific delivery dates and did not impose penalties on the companies for late deliveries. The contracts also have broad indemnification clauses — protecting the companies from a range of claims and leaving much of the liability to the government. The documents confirm media reports that Pfizer required the government to set up an indemnification and compensation fund in exchange for supplies. In the event that Pfizer fails to deliver agreed doses, the government can only recoup 50% of what it paid in advance. “These provisions shift virtually all of the risk, all of the cost, all of the burden onto the South African government, which at the time this deal was struck back in early 2021 had virtually no vaccines for the country's people. So that certainly feeds into this very strong impression we have … that it was a very one-sided endeavor,” said professor Matthew Herder, the director of Dalhousie University's Health Law Institute in Canada. J&J emphasized that it “supported and worked closely with South Africa in every phase of our response to the pandemic.” It also entered into a licensing deal that allowed Aspen Pharmacare to be involved in the final stage of the company’s COVID-19 vaccine manufacturing process, which includes filling vaccine vials and packaging them for distribution and that later on enabled Aspen to manufacture and sell the vaccine under its own branding, Aspenovax. Aspen however never sold any doses of its vaccine as the focus shifted to messenger RNA vaccines and demand for COVID-19 vaccines started waning. SII declined to comment for this story. Devex also reached out to Pfizer but had not received a response at the time of publication. COVAX in question The group also reviewed the government’s contract with COVAX from which the government committed to procure 12 million doses. They found the government didn’t receive guarantees on the number of doses, actual pricing, or when the doses would be delivered. The contract also did not include penalties for late or nondelivery of doses. However, the government remained liable to pay for them. A spokesperson from the vaccine alliance Gavi confirmed to Devex that South Africa, as part of its commitment agreement, had access to 12 million COVAX doses but only ordered about 1.4 million doses. It clarified that South Africa “is under no obligation to purchase the 10.6 million doses it did not order.” But it had to pay for “manufacturer costs” for those doses. “Its payments to date cover costs related to the nearly 1.4 million (1,392,300) doses it ordered through this agreement, plus operating expenditure and manufacturer costs for unordered doses,” said the spokesperson. COVAX also supplied South Africa with 8 million doses “free of charge.” The spokesperson said COVAX was set up at a time of “extreme uncertainty.” At that time, it was unclear if there would be an effective COVID-19 vaccine and when it would be available. “In this context, COVAX worked with manufacturers to provide investments and incentives for manufacturers to be ready to produce the doses needed as soon as a vaccine was approved. Some of the investments made were derived from the payments (“COVAX Facility Payments”) made by [self-financing participants]. Contractually and to ensure continued access of vaccines to lower-income countries, these payments cannot be waived,” the spokesperson said. However, the spokesperson said that COVAX self-financing countries may receive funds from the facility in “2024 and beyond.” “[F]ollowing a process of re-sizing its agreements with manufacturers initiated in 2022, Gavi has been and will continue to channel funds back to self-financing participant (SFP) countries, including South Africa once these contracts are closed. SFPs will also be eligible to receive any surplus funds from the Facility during the course of 2024 and beyond – with the timing of the majority of these rebates to be determined after the SFPs contracts are formally closed out and final accounts completed,” said the spokesperson. All COVAX contracts with self-financing participants followed a similar template, which is accessible on the Gavi website, according to the spokesperson. The importance of the pandemic accord The multistakeholder group that reviewed the contracts said high-income countries can take the lead in ensuring there’s transparency in future contracts by imposing such requirements in their research and development funding agreements. Several high-income countries, including the U.S., invested billions of dollars in the development of several COVID-19 vaccines, including Moderna. It should also be included in a future pandemic accord, they said, noting that COVID-19 won’t be the last. The zero draft of the accord asks countries to make manufacturers disclose information on medical products that received public funding, including product pricing and contract terms for public procurement during a pandemic. However, there are concerns ongoing negotiations may dilute that provision. Fatima Hassan, founder and director of Health Justice Initiative, said a global solution is needed to address the “pernicious power” of pharmaceutical companies. “Our sovereignty was taken away at the behest of very powerful pharmaceutical companies who are unelected, and basically hold no public office in our country. And this should never happen again,” she said. Baker said governments should also be held accountable for their actions, saying trade secrets are “rights granted by governments on self-defined issues of what is confidential information.” “Why there is a price on … every jar of peanut butter in the United States, but South Africans couldn't find out what the price of their vaccines were in the middle of a global pandemic is an example of how trade secrets have run amok,” he said.