Liability and Indemnification Provisions in COVID-19 Vaccine Supply Agreements
Since early 2020, vaccine developers have been racing to develop effective vaccines against COVID-19. In the face of the pandemic, national governments and pan-national organizations have sought to secure access to vaccine doses even before the vaccines have received the regulatory approvals usually required to authorize use outside of clinical trial settings. In efforts to end the pandemic and curb deaths and hospitalizations, regulatory authorities have instead issued emergency use and conditional use authorizations that allow vaccines to be rolled out to populations whilst testing is still ongoing.
In these unusual circumstances, the relative leverage between the vaccine supplier and the purchaser can be altered. One area where this is particularly evident is in indemnity and liability provisions. In a ‘business as usual’ situation, where a vaccine has received marketing authorization from the relevant regulatory authorities, a supply agreement would normally require the supplier to bear at least some liability (as impacted by national legislation) for the safety of the vaccine, and indemnify the purchaser against any injury or death claims related to administration of the vaccine. This means that it is the supplier who must pay the compensation and legal costs arising from any such claims.
Vaccine developers would usually accept the risk of these liability and indemnity requirements because they would have spent 5 to 10 years assessing the safety and efficacy of their product before entering into the supply agreement. In the case of emergency use, developers have not had the time to complete this testing (although they must still have data demonstrating safety and efficacy through phase I – III clinical trials). Consequently, they demanded that the risk of liabilities be shifted in part or as a whole to other stakeholders. Conversely, the governments and other organizations seeking to purchase vaccines recognize the need to balance the risk of potential side-effects against the potential for vaccines to save lives and bring the pandemic to an end.
Based on review of the COVID-19 vaccine supply agreements in the MAPGuideⓇ, GHIAA has identified a range of approaches to liability and indemnification provisions:
1. The purchaser indemnifies against any and all claims
This example has been identified in the Binding Term Sheet between the Dominican Republic (represented by its Ministry of Public Health and Social Assistance, or MISPAS) and Pfizer & BioNTech (“Suppliers”). This term sheet was written as the basis for a subsequent Definitive Agreement, and it sets out the full indemnity and liability provision language to be included in that agreement (as of the time of writing, it is not clear if a Definitive Agreement has been executed).
The provision states that MISPAS will “indemnify, defend and hold harmless Pfizer, BioNTech [and their affiliates and third parties] from and against any and all suits, claims, actions, demands, losses, damages, liabilities, settlements, penalties, fines, costs and expenses […] arising out of, relating to or resulting from the Vaccine, including but not limited to any stage of design, development, investigation, formulation testing, clinical testing, manufacture, labeling, packaging, transport, storage, distribution, marketing, promotion, sale, purchase, licensing, donation, dispensing, prescribing, administration, provision or use of the Vaccine.”
Notably, there are no limitations on availability of the indemnification in the event of negligence or fraud on the part of the Suppliers. The term sheet also includes a representation from MISPAS that it has adequate authority and funding to fulfill the indemnification obligations. MISPAS is required to “satisfactorily demonstrate this in Suppliers’ sole discretion, with true and complete documentary support”.
At the time of writing, GHIAA is not aware of any other publicly available agreements containing similar terms. However, an article published in STAT suggests that other Latin American countries negotiating vaccine supply agreements have been asked to accept indemnification terms going beyond what would usually be expected. The article also notes that the Brazilian and Argentine governments were asked to put up sovereign assets as collateral against potential future claims. Those countries did not conclude national supply agreements with Pfizer.
2. The purchaser indemnifies against liability for use and administration of the vaccine, but with some limitations
This approach appears to broadly apply to agreements entered into by the European Commission (“EC”) on behalf of its Member States. The clearest example may be the Advance Purchase Agreement between the EC and AstraZeneca, as the indemnification provision in this agreement has not been redacted. The Member States indemnify AstraZeneca against “any and all damages and liabilities […] relating to or arising from the use or administration of the Vaccine”. However, the indemnification is not available if losses are the result of wilful misconduct or AstraZeneca’s failure to comply with Good Manufacturing Practices or EMA pharmacovigilance regulations.
The EC has also signed vaccine purchase agreements with CureVac, Sanofi/GSK, Janssen, Pfizer/BioNTech and Moderna. The agreements with Curevac and Sanofi/GSK recognize that the use of the vaccine is under epidemic conditions, and the suppliers are indemnified against liabilities ‘normally borne’ by the Member States in relation to use or deployment of the vaccine. The indemnity is not available under certain conditions, however the language describing those conditions has been redacted. The indemnification clauses of the agreements with Pfizer/BioNTech and Moderna have been substantially redacted.
The EC has emphasised that it is providing renewable one-year Conditional Marketing Authorizations, not Emergency Use Authorizations. The difference between the two is that the holder of a conditional authorisation is liable for use of the product, whereas EU legislation requires Member States to remove both administrative and civil liability in the event of emergency use.
Publicly available copies of agreements entered into by the UK Government all have substantial redactions to the liability provisions. However, a report published by the UK National Audit Office notes that the government agreed to provide indemnity in certain (undisclosed) circumstances, including against risks that a supplier might normally be expected to bear. This appears to be a similar approach to the EC in that some liability protection is provided, but with limitations.
3. Invoking national legislation to provide liability protection for suppliers
In the case of supply agreements concluded by the US Department of Defense, Department of Health and Human Services, and other related governmental entities, liability obligations are addressed through the Public Readiness and Emergency Preparedness (PREP) Act. Examples of this approach can be seen in the agreements with Moderna, Sanofi, and Janssen which confirm that the contracted activities fall within the scope of the PREP Act Declaration for Medical Countermeasures Against COVID-19.
The PREP Act provides vaccine manufacturers and distributors with liability immunity against claims for death, injury or other loss. The only exception to this immunity is in the case of wilful misconduct. Individuals who suffer serious injury from a COVID-19 vaccine can make compensation claims through the Countermeasures Injury Compensation Program.
This commentaries has identified some different ways of addressing indemnity requirements in COVID-19 vaccine supply agreements. However, it has not been possible to assess the full range of approaches, as the political and commercial sensitivity around disclosure of COVID-19-related agreements has led to substantial redactions to publicly available documents. Based on the information that is available, it is clear that, at least in the absence of a full marketing authorization, suppliers have not been willing to accept the terms that might be considered ‘usual’. GHIAA will monitor the development of the provisions in future supply agreements as regulatory approvals are granted.