Pfizer backs down over “unreasonable” terms in South Africa vaccine deal

Pfizer has backed down over its controversial demand that the South African government put up sovereign assets guaranteeing an indemnity against the cost of any future legal cases. During Covid-19 vaccine negotiations, the company sought indemnity against civil claims from citizens who had experienced adverse vaccine effects – meaning that the government would have to cover the costs instead.

On Wednesday, the South African health minister, Zweli Mkhize, voiced frustrations about “difficult and sometimes unreasonable” terms his country’s government had been presented with during contract negotiations with vaccine manufacturers including Pfizer.

In a briefing letter sent ahead of his appearance at the parliamentary health committee, Mkhize said one condition in particular demanded by Pfizer was “too risky” – that the country put up sovereign assets as potential collateral.

In its negotiations to provide vaccines to countries around the world, Pfizer has been asking governments for wide-ranging indemnity protection against any civil claims a citizen might file. This means that if Pfizer was to be sued by someone who had suffered a rare adverse effect from the vaccine then the government, not the company, would have to pay for legal costs and compensation. This would apply even if the case had been brought as a result of the company’s own acts of negligence, fraud or malice. In other negotiations, Pfizer went further.

The company required some Latin American governments to put up sovereign assets – which could include federal bank reserves, embassy buildings or military bases – as a guarantee against indemnifying the cost of future legal cases. This was reported by the Bureau in February and picked up by more than 100 media organisations worldwide.

Pfizer told the Bureau: “Pfizer and BioNTech have no intention of interfering with any country’s diplomatic, military, or culturally significant assets.”

Unredacted draft contracts between Pfizer and the Dominican Republic, Albania and Peru show that the company sought to be indemnified against problems at any step of the supply chain – including packaging, manufacturing and storage. Experts told the Bureau it was “unreasonable” to require governments to pick up the bill for any negligence by Pfizer.

In South Africa’s case, Mkhize said the clauses “posed a potential risk to our assets and fiscus [public purse]”. He described how Pfizer’s late demand caused delays in the discussions, which in turn put back the anticipated vaccine delivery dates.

Mkhize wrote that the government was “relieved” when Pfizer eventually conceded and removed the “problematic term”. He added: “As government we found ourselves in a precarious position of having to choose between saving our citizens’ lives and risking putting the country’s assets into private companies’ hands.”

Experts have raised concerns about the fact that Pfizer and some other big pharma companies have demanded complete confidentiality during the recent vaccine negotiations, which would prevent the public from knowing about issues including indemnity protection and price. In South Africa, there are fears that any such secrecy clauses could undo public trust built up by years of anti-corruption work.

“I think it is important that this [sovereign assets] clause has been taken out,” said Georg Neumann, of the not-for-profit organisation Open Contracting Partnership. “When contracts are negotiated in secret, companies have the power to dictate the terms. And I think what we're seeing here is that transparency – when contracts with other countries have been made public – has improved that balance and created a bit more of a level playing field.”

A contract for 30m doses of Pfizer vaccine, at $10 a dose, has now been signed. Nearly 2m doses are scheduled to arrive in South Africa in May and 2.5m in June. The government has made down-payments in its deals with both Pfizer and Johnson & Johnson that are not refundable under any circumstance. “This is another onerous term that we had to concede as manufacturers were not prepared for it to be removed,” Mkhize wrote.

Yousuf A Vawda, a professor at the University of KwaZulu-Natal’s law school, said: “While Pfizer appears to have dropped its demand on sovereign assets, it has still insisted on the indemnity and no-fault compensation commitments … Such conduct must be condemned in the strongest terms, as they are holding governments to ransom and delaying the rollout of vaccination.”

Pfizer told the Bureau: “Pfizer and BioNTech seek the same kind of indemnity and liability protections they have in the United States in all of the countries that have asked to purchase our vaccine, consistent with the local applicable laws.

“In markets that do not have the legal or legislative protections that are available in the United States, we work with governments to find mutually agreeable solutions, including contractual indemnity clauses.”

The delayed Pfizer deal arrives as South Africa is facing a third wave of Covid-19. In total, the country has recorded nearly 1.6m cases and more than 53,000 deaths.

Its response has been complicated by the fact that current vaccines appear to be less effective against the dominant variant circulating in the country. Less than a quarter of the country’s 1.2 million frontline health workers have been vaccinated using doses donated by Johnson & Johnson and its rollout has been suspended to investigate a potential link to blood clots.

South Africa decided to sell or donate 1.5m doses of the AstraZeneca/Oxford vaccine when a small study suggested the jab might not adequately prevent mild or moderate illnesses in patients with the country’s dominant variant.

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The health minister's letter in full