Punishing Success: the Biden Administration, Vaccines, and Intellectual Property

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The Biden administration has apparently learned the wrong lessons from the COVID-19 pandemic. In a recent statement, U.S. Trade Representative Katherine Tai announced the “Biden-Harris Administration’s” support for waiving intellectual-property protections for COVID-19 vaccines — a move that will destroy the innovative industry that made the pandemic-ending vaccines possible.

It is hard to overstate the pharmaceutical industry’s accomplishments of the past year. It normally takes ten years and billions of dollars to develop vaccines for new diseases caused by novel viruses. Yet only ten months after SARS-CoV-2 — the virus that causes COVID-19 — was identified, two new vaccines were developed, tested, and authorized for emergency use by the FDA. Two months later, Johnson & Johnson added a third vaccine, and now other entrants including AstraZeneca (already approved overseas) and smaller companies, Curevac and Novavax, are waiting in the wings.

These accomplishments stem from the patent protection, including temporary monopoly pricing, that incentivizes innovation and generates the profits to fund it. Innovative new medical products often lower the effective price of health care by providing previously unavailable treatments at patent-protected prices that fall as competing products, and eventually generics, come to market. While these patent-protected prices can initially be high, they often provide effective treatment and health that was previously unavailable at any price — the first drugs for HIV were expensive but lifesaving and prices declined as competing drugs and cheaper generics became available.

COVID-19 vaccines are the only path to ending the pandemic, and their value must be measured against the pandemic’s costs. The cost of efforts to slow the pandemic in the U.S. via a nationwide shutdown of “nonessential” economic activities approach $7 trillion per year (roughly $20 billion per day), even without accounting for medical expenditures and valuation of lives lost (roughly a $2.5 trillion valuation of the 580,000 deaths so far).

In fact, COVID-19 vaccine producers have already voluntarily waived the ordinarily high patent-protected prices and profits for their products: AstraZeneca and Johnson & Johnson have both pledged to provide their vaccines on a not-for-profit basis for the duration of the pandemic; Moderna and Pfizer are making a profit but only charging between $30–40 for a complete two-dose course, hardly exorbitant amounts for lifesaving products that were the first to market; and Novavax, which is expected to seek FDA authorization in the next few weeks, has agreed to charge only $3 a shot in Africa.

Ambassador Tai claims that “the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures.” But there is always a need for lifesaving medicines around the world. Just as there was debate 20 years ago about waiving intellectual-property rights for HIV medications — and as there is again today for COVID-19 vaccines — there will always be some new health emergency that ostensibly requires suspending IP rights.

Proponents of expropriating intellectual-property rights also justify a waiver by claiming that vaccine breakthroughs were made with taxpayer dollars. This claim, however, is only partially true. The billions of dollars in public–private partnerships undertaken through Operation Warp Speed undoubtedly hastened development and jump-started manufacturing facilities that would normally not be set up until FDA approval. But start-ups BioNTech and Moderna had been investing time and money for decades trying to perfect the new mRNA technology. Neither had an approved product, yet their years of hard work and investment prepared them for the pandemic. Within days of China sharing the genetic sequence of the new virus on January 11, both Moderna and BioNTech, with its partner Pfizer, had prototype vaccines ready to test. The government money came later.

In addition, there is little evidence the administration’s IP waiver will increase vaccine availability. These are not simple medicines to make. Unlike the typical generic medications made overseas, these new vaccines require specialized equipment, ingredients, and knowhow. Giving developing countries that are ill-equipped to produce the vaccines the IP without any other technical support is a recipe for the manufacture of potentially defective products that diverts scarce raw materials from established producers.

Moreover, why should the U.S. give away our hard-earned intellectual property to our chief economic and national-security competitors? The U.S. is already heavily reliant on drugs either directly sourced from China or made from intermediate chemicals called Active Pharmaceutical Ingredients (APIs), or their chemical precursors, manufactured in China. Ninety percent of the finished drugs Americans take are generics and most are manufactured in India and China. U.S. producers source 80 percent of their APIs overseas, primarily from China, and China is also the chief supplier of APIs for producers in other countries. Even India, the world’s largest generics producer, relies on China for 80 percent of the APIs it uses. This dominance is the direct result of Chinese government policies that are meant to undermine our manufacturers and steal our intellectual property. According to the U.S.–China Economic & Security Review Commission, China’s dominance is due to “Government subsidies, a robust chemical industry, IP theft, lax environmental protections, and regulations favoring domestic companies.” Gifting the mRNA intellectual property to China will allow it to undercut the companies that have invested so much to develop the technology and risks making us dependent on the Chinese government for lifesaving vaccines during the next pandemic and for other medicines that will be developed from the mRNA platform. In addition to national-security concerns, the Commission expressed unease over safety, quality, and oversight in the Chinese pharmaceutical industry.

If providing affordable vaccines worldwide is the goal, there are alternative methods of achieving it. The safest, most efficient way to do so — one that would preserve the incentives to innovate in the future — would be for wealthy countries to buy and distribute vaccines at below or no cost to poor countries. This could include the tens of millions of AstraZeneca doses that the U.S. has purchased but not yet approved for use here and the J&J doses that Americans are now hesitant to use because of the Biden administration’s ill-advised public pause of its use. Giving away the goose that lays the golden egg though, is the wrong way to go.