President Biden’s administration is making a major mistake by its top trade advisor, Katherine Tai, advocating a waiver of patent rights for Covid-19 vaccines.
While all who are involved, or would like to be, should move heaven and earth to increase Covid-19 vaccine supply until everybody worldwide who wants to be vaccinated has been vaccinated, undermining patent rights will not help but only hinder achieving that objective.
Patents are not recipes and do not provide the knowledge and expertise needed for production
All evidence is that the limiting factor is in vaccine supply—not in patent-licensing costs. The pressing need is to remove constraints—such as export bans that block ingredient supply chains— and to increase manufacturing capacity. Production supervision and training from those with the expert knowledge in operating such facilities who can ensure high-quality output reliably and on a massive scale are also required.
Instead of stripping Covid-19 patent owners of their core assets and rights, incentives to license patents and owners’ wider range of intellectual property—also including vital trade secrets such as how to make the vaccines with manufacturing process know-how—should be retained.
Vaccine demand remains immense. Many highly populated nations still have very low vaccination rates in the single digit percentages, for example, in India where the pandemic is currently raging with hospital facilities being overwhelmed. Satisfying demand will benefit us all when most of the world’s entire population is vaccinated because none of us will be safe from the virus and the threat of new variants until then. This is also a major incentive to vaccine patent owners—for example, BioNTech whose business model is in technology transfer, licensing and collaboration with downstream partners—to scale up that further. Fair reward for such efforts will enable licensors to justify up-front commitments and investments required in providing that support.
Patents encourage R&D investment and licensing-based horizontal business models
While the debate about whether patents stimulate or impede R&D investment and innovation continues among those with strong vested interests on either side, research including empirical data over many decades indicates that strong patent rights are particularly important to small, non-vertically integrated firms like BioNTech. A recently recorded LeadershIP seminar publicly available online illustrates this by featuring academic Jonathan Barnett’s new book on the subject entitled Innovators, Firms and Markets: The Organizational Logic of Intellectual Property. The session also includes remarks from others including entrepreneur and venture capitalist Greg Raleigh on the importance of patents to small companies such as BioNTech in biotechnology being able to raise investment capital to fund R&D.
The first-to-market and highly efficacious BioNTech/Pfizer vaccine is a stellar example of how the patent system works. In absence of strong patent protection companies like BioNTech would not exist. Not only did patents incentivise venture capitalists to make large and risky investments ahead of BioNTech’s technology commercialisation prospects, patents also enabled the firm to partner Pfizer, with its wide gamut of complementary resources required to collaboratively complete R&D and bring the vaccine through clinical trials to production and distribution. The partnership’s rapid delivery of Covid-19 vaccine is a huge technical, commercial and humanitarian success story.
Vaccine costs including patent fees are small versus economic costs of pandemics
The Covid-19 epidemic has cost several trillion dollars in the $88 trillion global economy—given a projected economic decline of 5.2 percent in 2020 versus growth of 2.3 percent in 2019. Patent licensing fees pale in comparison to this given that the entire cost of doses has averaged approximately $20 each. In comparison, I recently spent more than $100 on a Covid-19 PCR test and anticipate having to do that several more times in coming months. With competition among many different clinically approved vaccine technologies and suppliers including the highly effective, safe and easy to distribute Oxford/AstraZeneca vaccine priced at around $5 per dose already, existing free market commercial pressures on licensing charges—including patent royalties and for transfers of other intellectual property—are substantial. With around 1.3 billion total doses of Covid-19 vaccines administered worldwide so far, at that price, vaccinating the rest of the world’s entire 7.8 million population with two doses would cost around $70 billion.
Other people’s money and redistribution of wealth
While, as Tai said recently, "This is a global health crisis, and the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures", this is not the first and it will not be the last global health crisis. President Biden plans to spend $3 trillion in government borrowings and tax receipts with various programmes including construction in response to the economic harm from the pandemic. An opportunistic raid on patent owners would also redistribute wealth to intermediaries such as manufacturers, but the world needs ongoing technical developments from large and small, young and old companies in the biotechnology and pharmaceutical industry to deal with new variants of Covid-19 and other new pathogens that will surely emerge. There is abundant economic justification not to undermine the valuable long-term gains the patenting and licensing system is providing. As well as rewarding existing patent holders, availability of such potential returns in “a global health crisis” will reassure and attract others to invest in additional R&D. While this pandemic is terrible with around 3.3 million deaths worldwide already, the next one could be even worse given that the 1918 Spanish flu epidemic killed 50 million people. We need to be as well prepared as we possibly can for whatever might ensue.