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Sanjay Kumar

Counsel, J. Sagar Associates

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Waiver Of Indemnity Claims By Vaccine Manufacturers

A strong pharmacovigilance system is required to ensure the continuous monitoring and evaluation of the new safety data generated under real-world conditions writes Sanjay Kumar, Counsel, J. Sagar Associates.

The recent buzz in the news on vaccine supply ran thus: “Pfizer wants vaccine disputes only in US Courts apart from indemnity waiver in case of adverse effects”; “Vaccine manufacturers Moderna and Pfizer are ready to supply their COVID-19 vaccines to India provided the Government of India gives them indemnity against any liabilities from the usage of their vaccines.” This trend has spurred us to analyze the scope of indemnity waiver in product liability cases. 

It is a given that no degree of care and caution at the pre-clinical and clinical testing stages can guarantee absolute safety when a product is marketed and prescribed in large populations where prevailing conditions are different from those of the clinical trials. Thus, a strong pharmacovigilance system is required to ensure the continuous monitoring and evaluation of the new safety data generated under real-world conditions.

Understanding Indemnity  

Section 124 of the Indian Contract Act, 1872 defines the Contract of Indemnity as an agreement by which one party guarantees to save the other person from loss caused to him by the action of the guarantor himself, or by the action of any other person, including Negligence, Wilful/intentional conduct, Breach of agreement, Failure to comply with law, Breach of representation, Breach of warranty, Injury, Death, and Disease. 

Whilst there is no express statutory bar in India against contractually excluding or limiting liability for damages, Section 23 of the Contract Act, 1872 provides that the consideration or object of an agreement is unlawful, inter alia, if it is of such a nature that, in the event, it is permitted, it would defeat the provisions of any law or if the court regards it as immoral or opposed to public policy. An agreement deems any unlawful object or consideration to be void, as upheld by the Delhi HC1

This has been reiterated in the Consumer Protection Act, 2019 (“CPA”), which prevents parties from entering into any contract with the consumers that puts the latter at a disadvantage. 

Liabilities

Various vaccines were granted approval for emergency use in India by way of notifications issued by the Central Drugs Standard Control Organization (CDSCO), which deemed it necessary to determine the scope of liability of the manufacturers as well as the governments. The limited-time allowed to manufacturers for drug development justifies the ADR (Adverse Drug Reactions) with regard to human populations. While some life-threatening side effects such as blood clots in the case of AstraZeneca/Covishield vaccine have been manifested, other long-term adverse effects and risks associated with the accelerated development timeline could also emerge later. . The "indemnity clause" is reportedly one of the main reasons why Pfizer and Moderna (vaccine manufacturers) were reluctant to supply their vaccines to India.  

The statutory liability of manufacturers and sellers of vaccines has been specifically provided for in the Drug laws and NDCT Rules, 2019. A manufacturer is liable if harm is caused due to (i) a manufacturing defect, (ii) deviations from specifications, or (iii) inadequate usage instructions. Compensation that is sought post-trial is covered by the principle of product liability under the CPA, 2019. 

In the absence of well-defined legislation in this regard, liability for claims is meant to be borne by the manufacturer who neither undertakes testing nor has the prescribed approval of the vaccines and where the government does not share responsibility for this lapse.   

Claims for Waiver

Given the nature of emergency approvals and to prevent deterrence from the required manufacture and supply of vaccines, the manufacturers seek an indemnity clause in their contracts with the government in place of the existing clause placing liability for any claim for compensation on them.  

 In 2009, GlaxoSmithKline modified its proven vaccine for the H5N1 virus to combat swine flu to meet the exigencies of the emergency situation. The new vaccine was marketed to the UK and other European countries. But a year later, people were diagnosed with narcolepsy. Not only did the government indemnify GSK against potential product liability claims, given that testing and licensing had to be expedited, but this support has also been extended by WHO in further agreements in terms of the vaccine deployment initiative.  

International Perspective

The United States has enacted the Public Readiness and Emergency Preparedness Act 2005 (PREP Act) to authorize the government to limit legal liability during a public health crisis. 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 Program2

European governments also pay claims above an agreed limit against AstraZeneca over potential claims of side effects.  

Meanwhile, Russia has said it would share the legal liability should anything go amiss with the vaccine developed by Moscow’s Gamaleya Institute4.

Securing the Future

In terms of contractual indemnity, the Government of India is free to grant manufacturers indemnity towards any cause of action arising from the supply of vaccines, although statutory liability of the manufacturers, as provided for under Chapter VII of the CPA, 2019 (product liability), is a matter best determined on a case-to-case basis by the courts in sync with Art. 294(4) of the Indian Constitution. The Government needs to refrain from granting the manufacturers blanket immunity against liability while determining the scope of the liability waivers that it offers by way of indemnity to the manufacturers.  

Further, criminal liabilities arising out of defective products, or gross negligence that causes the recipients to suffer adverse reactions, cannot be waived, as criminal acts violate rights against society and not merely commercial or contractual rights against individuals. 

 The views expressed in this publication are personal and are not the views of the firm. 


References:  

1. Simplex Concrete Piles (India) Limited v. Union of India, ILR (2010) II Delhi 699.

2 https://ghiaa.org/mapguide-home/liability-and-indemnity-obligations-in-early-covid-19-vaccine-agreements/ 

3..https://www.reuters.com/article/health-coronavirus-eu-astrazeneca-idUSKCN26G0O0 

4. https://www.reuters.com/article/health-coronavirus-eu-astrazeneca-idUSKCN26G0O0 

 

 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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