Who's On the Hook If Vaccines Go Wrong?

(Bloomberg Opinion) -- The Covid-19 vaccines are here and distribution has begun. But what if something goes wrong?

Whether it’s a loss of income, hefty medical bills or other serious adverse effects from getting a shot, someone has to pick up the tab, be it vaccine manufacturers or governments. In the past, so-called liability shields have given companies cover to produce effective treatments quickly without legal exposure. But it’s a risky endeavor for countries to absorb full responsibility for highly novel products, developed and licensed at lightning speed. Especially when every man, woman and, eventually, child will need to be injected.

Adar Poonawalla, the chief executive of Serum Institute of India Ltd., the world’s largest vaccine maker by volume, wants indemnity. Competitors tripping up one another by instigating frivolous civil suits isn’t a trivial risk for the likes of Poonawalla, who’s manufacturing the jab developed by AstraZeneca Plc and Oxford University. It could get messier still because some healthcare systems may experiment with dosage quantities and intervals to deal with mutations. Who will be responsible if there are serious adverse side events then? No insurer will underwrite the risk; the burden of compensation will fall on states or, in the case of poor countries, on Covax, a global initiative to ensure equitable distribution.

On current estimates, Covax can meet only a fifth of global demand by the end of the year. So countries that are striking direct agreements with producers will still have to worry about potential tort claims, which seek civil remedies — and not just for the next year or two. The virus may stick around even after universal immunization, with mutant strains creating an enduring market for jabs long after Covid has ceased to be a public health emergency. 

Manufacturers, distributors and other entities in the United States “are very likely to find their Covid-19 products and services moving across borders,” according to RAND Corporation researchers. Their legal exposure in foreign courts is thus uncertain, especially given the rapid pace of vaccine development and limited data about side effects and long-term consequences.

Going by past pandemics, this data won’t start showing up for a while. When it does, it will likely vary by country, which affects how liability is handled. In 2013, four years after swine flu hit the globe, the U.K. government reversed its stand on the safety of the Pandemrix jab made by GlaxoSmithKline Plc, after a major study showed that it was associated with narcolepsy. Affected individuals could apply for compensation. At the time, the health department noted that “the decision to recommend that children got this vaccine during the flu pandemic was based on evidence available at the time, along with the advice from the European Medicines Agency which approved its use.” It then said that the department keeps “all emerging evidence under review,” which is why usage stopped in 2011 for those under 20. The data evolves, muddying potential liability issues. 

It gets more complicated. Rich countries are buying up large doses of viable vaccines from Pfizer Inc.-BioNTech SE and Moderna Inc. Many are now weighing turning over a portion they have secured to low- and middle-income nations facing delays as Covax hasn't worked out as planned. The European Union, for instance, is considering donating 5% of its inoculations, Reuters reported. With altruistic gifts, it’s even harder to assign responsibility.

During the H1N1 pandemic of 2009, the World Heath Organization came up with a multi-country liability shield, as RAND researchers describe it, or a global legal framework. Recipient countries had to sign a letter of agreement that basically allowed donors to wash their hands of liability, or indemnify donors, as long as they followed WHO standards. The issues were knotty and some countries didn't have the resources to interpret them. Eventually, of the 94 countries that were interested in donations, 87 signed the agreement and only 78 completed the preconditions in the agreement for vaccine supply. 

The complexity of the current situation and the sheer scale of production mean a new agreement will be required. National governments will need to negotiate, consider and approve various requirements – all long processes. If disparities between countries crop up, manufacturers will face barriers to production and distribution. The alternative is national compensation funds, which honor claims for those who have suffered adverse effects from the vaccines. Many countries simply can’t afford these, further reinforcing the resource and investment imbalance.

Previous widespread illnesses like small pox and other influenzas show that liability issues can hinder progress of new vaccines, even domestically. In 1976, as the Ford administration took on an ambitious program to vaccinate millions against an anticipated outbreak of swine flu, insurers and manufacturers balked. Their concerns around legal exposure prompted Congress to pass a law waiving liability. Through legislation, the U.S. was substituted as the defendant in lawsuits against any vaccine manufacturer, distributor or American entity providing free inoculation. Although that flu scare didn’t evolve into a full-blown pandemic, firms in the U.S. are now effectively protected. Such a legal setup isn’t standard in most other places.

An additional challenge this time around is the space race-type international competition in vaccine development. China and Russia are promoting inoculations with little or no data validating their effectiveness in large studies. India has licensed an indigenous product developed by local firm Bharat Biotech International Ltd. “in clinical trial mode” — those receiving the shots will be tracked and that will supposedly prove its efficacy. That’s because phase three experimental data, which do exactly that, aren't yet available.

All this is too breathtaking a pace for scientists. Policy makers in developing nations may not have a choice but to take what they can get — easily, cheaply and quickly. But in so doing, they might just be storing up legal troubles for later.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

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