Profits in the pharmaceutical industry are protected by a fortress of patents that guarantee drugmakers a stream of income until they expire. On Wednesday, Joe Biden broke with decades of US orthodoxy and made a crack in the wall.
His administration’s decision to support a temporary waiver of Covid-19 vaccine patents prompted instant outrage in the pharmaceutical sector, which argues that the move rides roughshod over their intellectual property rights and will discourage US innovation while sending jobs abroad.
“Intellectual property is the lifeblood of biotech, it’s like oxygen to our industry,” said Brad Loncar, a biotech investor. “If you take it away, you don’t have a biotech sector.”
Biden’s top trade adviser Katherine Tai said that while the US government still “believes strongly” in intellectual property protections, it supported waiving patents for Covid-19 vaccines to help boost global production of jabs.
The move comes as some countries, including India, struggle to tackle further waves of the virus even as others have rolled out successful vaccination campaigns that are driving down infections, hospitalisations and deaths.
The waiver proposal was put forward at the World Trade Organization in October and has since been supported by more than 60 countries who say worldwide vaccine production must increase dramatically. Washington’s support marks a pivotal step in making the proposal a reality and Tai said the US would engage in negotiations to hammer out the details at the WTO.
Tedros Adhanom Ghebreyesus, the WHO’s director-general, told the Financial Times the decision was a “monumental moment” in the fight against Covid-19. “I am not surprised by this announcement. This is what I expected from the administration of President Biden.”
However, the pharma industry did not expect it; the US has tended to fiercely protect domestic companies’ intellectual property rights in trade disputes. Industry leaders described the decision as a heavy blow for innovation that would do little to boost global production because there is a shortage of manufacturing facilities and skilled employees.
In an earnings call Thursday, Stéphane Bancel, chief executive of Moderna, said a patent waiver “will not help supply more mRNA vaccines to the world any faster in 2021 and 2022, which is the most critical time of the pandemic”.
“There is no idle mRNA manufacturing capacity in the world,” he said.
“The administration’s steps here are very unnecessary and damaging,” said Jeremy Levin, chair of biotech trade association Bio. “Securing vaccines rapidly will not be the result, and worse yet, it sets a principle that companies who invested in new tech will stand the risk of having that taken away.”
Shares in the big makers of Covid-19 vaccines were hit by the announcement. Frankfurt-listed shares in BioNTech closed down 12 per cent on Thursday while Moderna and Novavax pared losses after tanking on Wednesday in New York, trading 2.4 per cent lower and 1 per cent lower, respectively. CanSino Biologics, a Chinese private company that developed a single-shot adenovirus-vectored vaccine with Chinese military researchers, fell 14 per cent on Thursday. Fosun Pharma, which has a deal to supply BioNTech vaccines in China, lost 9 per cent.
Sven Borho, a managing partner at OrbiMed Advisors, a healthcare investment company, said pharma executives feared the administration’s move set a precedent that would make it easier to suspend patents in the future.
“They are worried in the long term that this is a foot in the door — ‘OK, we did it with Covid-19, let’s do it with the next crisis, and the next one’,” he said. “And then suddenly it’s a cancer drug patent that needs to be invalidated. They fear it is a mechanism that sets the stage for actions in the future.”
Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, said there was a potential trade-off that pitted the imminent need to contain the pandemic against the risk that drugmakers would be more cautious when investing in pioneering therapies in the future.
“If this action allows for more access and more people to have their lives saved today in 2021 and the consequence is down the road we may not have some new gene therapy for 100 kids, then that’s the trade-off worth discussing,” Bach said.
The battle over intellectual property rights is the first big international patent dispute since a clash over expensive HIV treatments between drugmakers and several countries including Brazil and South Africa in the late 1990s.
Countries struggling to contain the epidemic wanted to make their own generic versions of HIV drugs but the companies who developed them interpreted the moves as a breach of patent agreements, spawning a welter of litigation that frustrated efforts to generate a supply of cheap pills.
Members of the pharmaceutical industry argue that suspending Covid-19 vaccine patents in an effort to boost production abroad will harm jobs in the US biotech sector. Donald Trump’s administration firmly opposed the waiver last year.
Levin said that US technology “could generate jobs in America but by transferring it abroad there’ll be significant detriment to creating very high quality jobs [here]”.
The mRNA technology used in BioNTech/Pfizer and Moderna’s vaccines is being trialled to treat other illnesses such as cancer and heart disease, and pharma lobbyists have claimed suspending their patents would allow other countries to piggyback on US research breakthroughs.
The long-term consequences are unclear. Umer Raffat, an analyst at Evercore ISI, noted the waiver was not permanent, and that other influential players, including the EU and UK, had not yet supported the Biden administration’s move.
OrbiMed’s Borho said: “This is a unique circumstance. I think this will ultimately be narrow and just on the Covid-19 vaccines. I don’t think the Biden administration wants to undermine broad patents for biotech or the pharma industry.”
Backers of the waiver applauded the US government’s decision as an important step towards boosting the global supply of Covid-19 vaccines.
“The pharmaceutical industry has said the pandemic is no time for business as usual,” said Zain Rizvi, access to medicines specialist at Public Citizen. “Funded by billions in taxpayer dollars, [vaccine makers] have a moral imperative to stop opposing efforts aimed at expanding . . . production.”