It is simplistic and short-sighted to undermine Covid-19 patent rights

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.

Trump to Push Pharma on Drug Pricing

President Trump is continuing his push to fulfill campaign promises.  Apparently, he is meeting with pharmaceutical companies this week to negotiate lower drug prices.  This seems to be in response to his supposed Executive Order to link the drug prices that Medicare is charged to prices paid by foreign nations.  This was not an exciting development to pharmaceutical companies and they canceled a scheduled meeting with the President to discuss it.  It will be interesting to see if pharmaceutical companies will be willing to "play ball" with President Trump given the election.  For sure, part of the calculation is whether Presidential Candidate Joe Biden's administration would be better for pharmaceutical companies.  My guess is no.  However, I think the Obama Administration did not do as much as it could have on drug pricing directly--except that President Obama signed the Leahy-Smith America Invents Act into law which included rules concerning Inter-Partes Review Proceedings.  Also, pharmaceutical companies may be worried about additional Democratic appointees to the U.S. Court of Appeals for the Federal Circuit, where the battle over the scope of patent eligible subject matter is being waged (See American Axle en banc denial), and appointees to the U.S. Supreme Court.  FTC and DOJ antitrust enforcement is another issue as well as trade agreements.  Bayh-Dole Act march in rights could be an issue.  Moreover, under President Trump, pharmaceutical companies may be seeing some light at the USPTO concerning patent eligible subject matter.  Let's see if pharmaceutical companies are going to give President Trump a big win with Seniors (aka people who reliably vote). A compromise setting Medicare pricing near the most developed European countries would be interesting and an improvement.  

Where will the Great Brand Odwalla Land?

In a past post, I wrote about how great brands and products never die.  I provided two examples: the first, was Sesame Street; and the second, was Hostess products.  There’s another example of a great brand and product that is on the chopping block: Odwalla smoothies and juices.  Coca-Cola has announced that it is terminating the Odwalla brand.  According to CNN, this is a reaction, in part, to changing consumer demand and simplifying their supply chain.  Those smoothies do have a lot of sugar!  

Notably, Coca-Cola has over 500 brands.  Unlike Hostess, which was in bankruptcy, it will be interesting to see whether Coca-Cola will sell the brand.  If Coca-Cola truly wants to exit the smoothie business, then perhaps they won’t be concerned about a future competitor in that business line.  Coca-Cola does have other juice products.  However, even if demand for smoothies is falling off, I do wonder whether the demand will pick up again.  Interestingly, last year, Coca-Cola offered a zero calorie smoothie—perhaps they didn’t invest enough in marketing the new product.  For sure, it does take a while for trademark abandonment to kick in.  We’ll have to wait and see what happens.  Oh, and by the way, Odwalla was purchased for US $181 million almost two decades ago.  (And, if you are curious about my children's politics--now 15, 12 and 11--they think "cancel culture" is very troubling (everybody makes mistakes, redemption and what happened to free speech). They would vote for Biden if they could, but are relatively lost about what he stands for except that he's the alternative to President Trump--I think some debates will help.  They are concerned about Biden's comments about how if African Americans don't vote for him then they're not black and are somewhat mollified by his back-tracking.)

Is it Time to Increase Funding to Universities for Research and Development in the United States?

In a document released by the Association of American Universities (AAU), Mary Sue Coleman, president of the organization, discusses Vannevar Bush’s report, “Science, the Endless Frontier” in a short essay titled, "Celebrating the Government-University Partnership's 75th Anniversary."  Notably, in light of the report, she explains how issues with respect to climate change and Covid-19 only highlight why government should continue to invest in university research.  Unfortunately, the Trump Administration continues to push for less funding for research and development at universities in terms of real dollars.  One of the Democratic presidential candidates who consistently appeared to support university research and development was Tom Steyer.  If former Vice President Biden is elected, hopefully he will consider Tom Steyer for a position in Biden's administration.  If President Trump is reelected, I hope he reconsiders his position regarding funding university research and development.  The AAU document provides, in part: 

. . . 

Famously titled “Science, the Endless Frontier,” the influential report had been requested the previous year by then-President Franklin D. Roosevelt, whom Bush served as chief scientific adviser. As World War II increasingly appeared winnable – in no small part due to the scientific research enterprise that Bush’s office led – Roosevelt was looking to the future. He asked the MIT-trained Bush to file a report addressing four questions:

1. “What can be done, consistent with military security, and with the prior approval of the military authorities, to make known to the world as soon as possible the contributions which have been made during our war effort to scientific knowledge?”

2. “With particular reference to the war of science against disease, what can be done now to organize a program for continuing in the future the work which has been done in medicine and related sciences?”

3. “What can the Government do now and in the future to aid research activities by public and private organizations?”

4. “Can an effective program be proposed for discovering and developing scientific talent in American youth so that the continuing future of scientific research in this country may be assured on a level comparable to what has been done during the war?”

Bush took this brief set of questions and delivered an expansive report with recommendations that have informed U.S. science policy ever since. Calling basic scientific research “the pacemaker of technological progress,” Bush recommended a significant and ongoing partnership between the federal government and universities to conduct research to benefit the nation.

Bush’s report noted that government support for basic research could continue to bolster not only the nation’s security, but also its economic prosperity. “New products and new processes do not appear full-grown,” he wrote. “They are founded on new principles and new conceptions, which in turn are painstakingly developed by research in the purest realms of science!”

Bush’s recommendations led to the creation of the National Science Foundation, the National Institutes of Health and other federal agencies. These agencies conducted and funded the research that sent humans to the Moon, gave us the Internet and smartphones, ended polio and a host of other diseases, and made HIV infection manageable -- more akin to diabetes than a death sentence.

I recently participated in a National Academies of Sciences-sponsored symposium exploring the legacy of this important report and forecasting the future of the government-university partnership. As Vannevar Bush realized 75 years ago, wartime is not the only time for the government to invest in the science that makes us safer and more prosperous. Leading scientists, government officials, and academic researchers at the symposium agreed that – as emerging threats like the COVID-19 virus and the climate crisis make clear – the United States should double down on investments in the government-university research partnership. In fact, in a 2018 article I wrote for Change: The Magazine of Higher Learning, I describe in detail how we must continue pressing toward that “Endless Frontier.” Our prosperous and healthy future absolutely depends on vigorously pursuing this journey.