Intellectual Property in the Pharmaceutical Industry

A Washington Post article focuses on the intellectual property situation that vaccine manufacturers are defending in the face of the pandemic. Again, this emphasizes the moral framework that most companies operate in. For pharmaceuticals in particular, patents and trade secrets (know-how) are critical to maintain high profit margins. WaPo writes:

Abdul Muktadir, the chief executive of Bangladeshi pharmaceutical maker Incepta, has emailed executives of Moderna, Johnson & Johnson, and Novavax offering his company’s help. He said he has enough capacity to fill vials for 600 million to 800 million doses of coronavirus vaccine a year to distribute throughout Asia.

He never heard back from any of them.

The drug companies that developed and won authorization for coronavirus vaccines in record time have agreed to sell most of the first doses coming off production lines to the United States, European countries and a few other wealthy nations.

Billions of people are left with an uncertain wait, with most of Africa and parts of South America and Asia not expected to achieve widespread vaccination coverage until 2023, according to some estimates.

But drug companies have rebuffed entreaties to face the emergency by sharing their proprietary technology more freely with companies in developing nations. They cite the rapid development of new vaccines as evidence that the drug industry’s traditional business model, based on exclusive patents and know-how, is working. The companies are lobbying the Biden administration and other members of the World Trade Organization against any erosion of their monopolies on individual coronavirus vaccines that are worth billions of dollars in annual sales.

The fights over vaccine supply are not just over a moral duty of Western nations to prevent deaths and illness overseas. Lack of supply and lopsided distribution threaten to leave entire continents open as breeding grounds for coronavirus mutations. Those variants, if they prove resistant to vaccines, could spread anywhere in the world, including in Western countries that have been vaccinated first.

But no coronavirus vaccine manufacturer has agreed to participate in the program, called the COVID-19 Technology Access Pool, the WHO said. Albert Bourla, the chief executive of Pfizer, last year called the concept “nonsense.”

“Unfortunately, only limited, exclusive and often non-transparent voluntary licensing is the preferred approach of some companies, and this is proven to be insufficient to address the needs of the current COVID-19 pandemic,” the WHO said in response to questions from The Washington Post. “The entire population and the global economy are in crisis because of that approach and vaccines nationalism.”

These exclusive franchises are on track to generate billions of dollars in revenue for the companies. The Moderna vaccine, which was co-developed with the United States government and supported with $483 million in taxpayer backing, is expected to bring in $18.5 billion for the company this year, Moderna said in February.

Pfizer, which partnered with Germany’s BioNTech, a company that received German subsidies, has predicted it will get $15 billion from sales of its vaccine, an estimate that is considered conservative. Pfizer did not accept U.S. government funding.

Step-by-step manufacturing instructions are just as important as intellectual property rights, because vaccines require multiple complex steps to produce. It takes highly specialized equipment and workers trained in biopharmaceutical manufacturing.

In a Zoom call on Feb. 3, John Lepore, Moderna’s senior vice president for government engagement, told vaccine advocates the company is reluctant to share details about how to make its vaccine, according to advocates who participated in the call and were interviewed by The Washington Post. Lepore said Moderna sees its mRNA vaccine delivery system as a proprietary platform for other drugs and vaccines in the future, the participants said.

Moderna did not comment on the conversation but referred to the October patent pledge. “Our patent pledge stated that, while the pandemic persists, Moderna will not use its patents to block others from making a coronavirus vaccine intended to combat the pandemic. There was no mention of a commitment to transfer our know-how beyond our chosen partners,” Moderna spokesman Ray Jordan said in an email.

Does this business model still work? The moral imperative here, profit, is crystal clear. On the one hand, Americans got vaccines in record time by assuming most of the risk of vaccine development failure. But on the other hand, if new virus variants arise among billions of unvaccinated people in the next couple of years, we might need to do this all over again with a new vaccine that works against the new variant. That could go one for a long time. The flu virus requires a new vaccine every year, so this possibility is not out of the question.[1]  

One critical component is the know-how needed to make the vaccines. Without it manufacturers cannot make the vaccine, even if the vaccine is patented and the ingredients are known with precision. What the patents apparently do not teach is the know-how needed to make a functioning vaccine on a large scale. It isn't just a matter of adding ingredients together and stirring the vat. The process is far more complex than that. The process probably can be reverse engineered over a period of months, maybe a year, but that would take a lot of money.

What should the US government do, if anything? The government could fund a research effort to discover the manufacturing process. If successful, and it probably would be, that would convert the know-how (trade secret) into public knowledge, free for anyone to use as long as patents do not block sale of the end product vaccine. The vaccines industry has two lines of defense, patents and know-how. Even if the know-how is eliminated by reverse engineering research, the patents will remain there to block vaccine sales.

What is the right thing to do here? Do nothing and let the free market (such as it is) sort it out? Or intervene in hope of protecting the public interest and people generally? Compel licensing of the patents? At what point does the profit moral outweigh the public interest, if ever? Or does protecting the profit motive always best serve the public as hard core capitalists claim?

Footnote: 

1. A couple of weeks ago, I think one source mentioned that flu season this year is about 2% of what was projected because of mask wearing and physical distancing for COVID. That is solid evidence that COVID is far more infectious than this year's flu. COVID is still spreading while flu got clobbered. That COVID is definitely not the typical flu is something to keep in mind.