Pharmaceutical giant Janssen/Johnson & Johnson (J&J) and generic manufacturer Serum Institute of India (SII) charged the South African government more than the European Union for COVID-19 vaccines – and South Africa assumed all the risk in ‘take-it-or-leave-it’ contracts with Pfizer, J&J and SII.

This is according to an analysis of the contracts led by Health Justice Initiative (HJI), a South African NGO that won a court challenge last month to get access to all South Africa’s COVID-19 vaccine contracts.

J&J charged South Africa $10 a dose, 15% more than the company charged the European Union (EU), and the government was required to pay a non-refundable down payment of $27.5 million.

Pfizer also charged $10 a dose, which is 32.5% more than the $6.75 “cost price” it reportedly charged the African Union. South Africa was required to pay $40 million in advance, only half of which was refundable.

SII was to have charged South Africa $5.35 a dose for Covishield, its generic version of  AstraZeneca – which was 2.5 times more than it charged the EU. However, South Africa suspended its order over safety concerns related to the vaccine.

This is according to a media release issued on Tuesday by HJI and a group of medicines access advocates that analysed the first batch of contracts given to HJI since the court judgment.

Meanwhile, the exact price of vaccines supplied via the global COVID-19 vaccine access programme, COVAX, administered by Gavi, was “unclear” according to the group, but COVAX’s “all-inclusive weighted average estimated cost per dose” was $10.55.

In total, South Africa would have been liable for $734 million for COVID-19 vaccines including advance payments of $ 94 million.

‘Ransom negotiations’

“The terms and conditions in these contracts and agreements are so one-sided, and so in favour of multinational corporations that they beggar belief,” said HJI director Fatima Hassan at a media briefing on Tuesday. 

“[The contracts] has placed governments, including South Africa and other countries in the Global South, in the unenviable position of having to secure scarce supplies in a global emergency in a manner which basically can only be described as a set of ransom negotiations,” added Hassan. 

“There was so much secrecy, no transparency, and very little leverage against late or no delivery of supplies when South Africa was really waiting for supplies and needing them.”

Vague delivery terms for J&J 

Jay Kruuse, director of South Africa’s Public Service Accountability Monitor (PSAM), said that the J&J vaccine contracts – which also involved Belgian company Janssen – were characterised by “very vague delivery terms”, which meant that South Africa had “very little leverage over the arrival time of doses”.

In addition, there were “extensive confidentiality conditions” and indemnity clauses, said Kruuse. 

The J&J vaccines were the first vaccines South Africa was able to buy and were prioritised for health workers and delivered via a mass clinical trial before the vaccine was authorised in the country.

Pfizer’s ‘sweeping indemnity provisions’

Addressing the Pfizer contract, Canadian professor Mathew Herder said that the provisions “shift virtually all of the risk, all of the cost, and 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”.

Herder, who directs the Health Law Institute at Dalhousie University, described some of the contract’s provisions as “extreme” and “far more in Pfizer’s favour compared to some of the other deals I’m familiar with”.

“The contract does not guarantee that Pfizer will actually deliver any vaccines to South Africa and in the event that they don’t actually deliver, the most the South African government can recoup is 50% of the advance payment they were required to make under the contract,” said Herder. 

The contract refers to Pfizer making “commercially reasonable efforts” to deliver the vaccine whereas EU agreements refer to “best reasonable standard”, which is a higher standard to be met. 

“Why? Because the commercially reasonable thing to do is the most profitable thing to do so if it generates more returns to deliver elsewhere first, that is perfectly fine under the Pfizer-SA contract,” said Herder.

“Sweeping indemnification provisions” required the South African government to hold Pfizer ‘harmless of any and all claims against it’ and to “bear the costs of any product recalls if that needed to happen down the road”, said Herder. 

Pfizer also required the South African government to “set up a vaccine injury compensation programme as a condition precedent for delivering any of the vaccines that were contracted for”, he added. 

“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 from reading the contract says as a group, that it was a very one-sided endeavour in the company’s favour.

COVAX ‘failed’ South Africa

“The COVAX programme was set up to equalise access and to be equal it needed to be both timely and in sufficient quantity. And if we look at what happened with Gavi’s COVAX programme, we would say that, particularly in South Africa, it failed in virtually every respect,” said US professor Brook Baker from Northeastern University School of Law, and  senior policy analyst at Health GAP Global Access Project.

“South Africa was one of the first countries to recognise the urgency and even promoted the TRIPS waiver proposal at the WTO to try to expand the number of manufacturers and overcome the monopoly barriers that companies had on products,” he added.

“That urgency was met with protracted delay. Gavi had promised or at least projected – I guess we should say projected because Gavi never really made wholly committed promises –  to supply 20 million doses by the end of 2021, and it fell far, far short. At the end of the day, South Africa got somewhat over a million doses from COVAX. That was all that it was actually able to deliver.”

Challenge for pandemic accord negotiations

Nic Dearden, director of the UK-based Global Justice Now, said that had global COVID-19 vaccine negotiations been conducted openly and the terms of contracts been disclosed, such inequitable terms “would not have happened”.

“How can it possibly have been that South Africa was charged two and a half times what my country, the UK, and many European governments were paying for what was effectively the same AstraZeneca Serum Institute dose? That cannot be right, it shouldn’t have been allowed to happen,” said Dearden.

The group stressed that the problem of one-sided contracts favouring pharmaceutical companies requires a regional and global solution.

’Unless acted upon with clear, legally binding international agreement, we will arrive at the next pandemic with little more to enforce fair terms than platitudes and scathing press statements from the [health] minister and president in South Africa and other world leaders in the Global South,” the group asserted.

“This must be deliberated upon in pandemic accord negotiations and revisions of the International Health Regulations currently underway and at the upcoming United Nations General Assembly (UNGA).”

Meanwhile, Baker added that, if equitable access to vaccines and other pandemic-related medicines is to be achieved in future, the terms of contracts with pharmaceutical companies have to change.

Currently, “we give intellectual property monopolies to companies that maximise their commercial interests and profiteer to the maximum”, said Baker.

“It gives them the right to artificially control supplies because they don’t share the technology with other producers. We let them unilaterally set prices and different prices for different countries – sometimes more advantageous to some and less advantageous to others, and they get to decide who they distribute to and when.

Baker added that “when you invest all of their power over essential public goods in the hands of private companies, with no governments, other multi-stakeholders or international institutions that can override those commercial decisions,  you get exactly what we got in this pandemic”.

“Unless the pandemic accord is willing to address intellectual property monopolies and power over the supply price and distribution, we will have exactly the same thing in the future,” he added.

Lives were saved

The South African Department of Health responded to the HJI analysis saying it had “entered into these agreements to secure vaccine doses to protect the lives of South Africans against the deadly virus which claimed more than 100,000 lives in South Africa, and almost seven million globally”.

“There is no argument that low and middle-income countries around the world, including South Africa, had limited bargaining power to secure vaccine doses and negotiate the price of vaccines due to a number of reasons including the limited number of manufacturers and vaccine hoarding and nationalism by high and upper middle-income countries. The unequal distribution of vaccines has undoubtedly contributed to more deaths which could have been prevented.

“Given the uncertain circumstances at the time, the government took a difficult decision and prioritised saving the lives of the citizens. There is no doubt that this decision to make vaccines available despite the difficulties has saved lives.”

The department added that South Africa had recently deliberated with a number of local and global organisations – including the Africa Centre for Disease Control and Prevention – “on a potential African Union and BRICS framework of cooperation for pandemic, preparedness, prevention, resource and recovery” to address future inequity of access and distribution of pandemic products.

This story was updated to include the response from the South African Department of Health.

Image Credits: Western Cape government.