COVID-19 and future patent wars

There is a broad agreement that the only way to end the COVID-19 pandemic is to immunize enough people worldwide (the bynow famous herd immunity). “No one is safe until we are all safe”. US President Joe Biden’s administration has announced it will join the 100 other countries seeking a COVID-19 emergency waiver of the World Trade Organization intellectual-property (IP) rules. The US Trade Representative has acknowledged that “the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures.” The decision has been (generally) received as a welcome move. Even the Pope is happy. However, for the time being, and this is to me an interesting twist, Key EU countries rebuff Biden on sharing COVID vaccine patents. There is no agreement on the practical effectiveness of the waiver.

Jeffrey Sachs and Lori Wallach underline that IP must serve the global good, rather than humanity serving the interests of a few private companies. In the case of COVID-19, the global good is not in doubt: rapid worldwide immunization, in order to save lives, prevent the emergence of new variants, and end the pandemic.

We face a situation in which the world’s urgent needs are pitted against the narrow corporate interests of a few US and European pharmaceutical companies. (…) The benefits of mRNA and other IP should be made available globally without further delay, and the knowhow should be shared as rapidly and widely as possible. (…) The pharmaceutical industry argues that an IP waiver would deprive the industry of its rightful profits, and of financial incentives for future drug development.

Joseph Stiglitz argues that the shortfall in global COVID-19 vaccine production could be closed if manufacturers around the world were granted access to the necessary technology and knowledge. Vaccine production is currently nowhere close to delivering the 10-15 billion doses needed to stop the spread of the virus, and scarcity itself is largely artificial. In order to do it, the US and other key governments must recognize the drug companies’ opposition to this solution for the deadly rent-seeking that it is.

The scarcity of COVID-19 vaccines across the developing world is largely the result of efforts by vaccine manufacturers to maintain their monopoly control and profits. Pfizer and Moderna, the makers of the extremely effective mRNA vaccines, have refused or failed to respond to numerous requests by qualified pharmaceutical manufacturers seeking to produce their vaccines.

A waiver would make a real difference. But drug companies are opposing it so vehemently. The “market” confirms the reason is profit, as evidenced by the sharp decline in the major vaccine-makers’ share prices just after the Biden administration’s announcement that it will engage in waiver negotiations.

With a waiver, more vaccines will come online, prices will fall, and so too will profits. Yet even with a WTO waiver, the vaccine makers stand to make heaps of money.

COVID-19 vaccine revenue for Pfizer and Moderna just in 2021 is projected to reach $15 billion and $18.4 billion, respectively, even though governments financed much of the basic research and provided substantial upfront funds to bring the vaccines to market.

Alex Tabarrock vehemently opposes these arguments. He thinks that patents are not the problem!

All of the vaccine manufacturers are trying to increase supply as quickly as possible. Billions of doses are being produced–more than ever before in the history of the world. Licenses are widely available. But technology transfer isn’t easy and there are limited supplies of raw materials

The mRNA technology is new and has never before been used to produce at scale. Pfizer and Moderna had to build factories and distribution systems from scratch. There are no mRNA factories idling on the sidelines. If there were, Moderna or Pfizer would be happy to license. But Technology transfer is difficult even a relatively well understood technology, like AstraZeneca’s vaccine.

He has also put the finger in the sore of vaccine nationalism, e.g. in the dramatic situation in India.

Pfizer was the first company to apply for an EUA from India in December of 2020 but India demanded that they conduct a clinical study on the Indian population and Pfizer pulled its application. In other words, India could have had a third vaccine approved and in use but “vaccine nationalism” reared its ugly head. 

What can we do to increase supply? Tabarrock thinks there is no quick and cheap solution. We must spend. Producing more takes real resources not waving magic patent wands.

Stiglitz is against the argument that developing countries lack the skills to manufacture COVID vaccines based on new technologies is bogus.

While it may have been difficult and expensive to develop the mRNA vaccine technology, that doesn’t mean production of the actual shots is out of reach for other companies around the world.

He is also against the idea that a waiver would help China and Russia gain access to a US technology, because the vaccines are not a US creation in the first place, and they are already in the process of being licensed to those countries.

Being one of the most eager voices against the waiver (or the expected benefits of the waiver), Alex Tabarrock reminds us that he is known for the Tabarrock Curve:

Let me be clear. The present debate about vaccines IP is a huge geostrategic one, that will only become more entrenched in the future, because the challenges we are facing (antibiotics, supply chains, a very large population, human immune system adaptation, etc.). The easiest way to appreciate it is by careflly watching the positions and arguments of heavyweights in economics. They do not only disagree, that would be something expected about such a thorny problem, but they do it using it exactly the same “evidence” to argument in favour and against.

And let me finnish with another reflection. Everybody is talking about a well-known, old time debate: the trade-offs in intellectual property. My hunch is the waiver is not going to arrive in time for this pandemics, yet an agreement will be a key achievement for the future. What’s interesting is that nobody is talking about many other potentially disturbing incentives the IP rules introduce as we are moving to more and more sensitive “patentable subject matter”, which is the case with genes and genetic engineering.

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