Vaccine patents: a bitter pill for drug companies

The US has suggested waiving drug companies’ vaccine patents to hasten the defeat of Covid-19, sending their share prices down.

Shares in pharmaceutical companies slumped last week after the US government “threw its weight behind global plans for a patent waiver on Covid-19 vaccines to boost their production and distribution around the world”, says Julia Kollewe in The Guardian. Vaccine makers Moderna and Novavax fell by over 10%. In Hong Kong CanSino Biologics slumped by 22% and Fosun Pharma, which distributes the Pfizer/BioNTech vaccine, lost 18%.

No wonder investors “shuddered”, says The Economist. Drug companies have hitherto banked on big profits from a vaccine, with Pfizer forecasting “vaccine revenues of $26bn in 2021, with profits around $7bn”. But much of this would disappear if their know-how could be “pilfered with impunity”. Worse, “botched imitations” by generic manufacturers could “fuel vaccine hesitancy” and lead to litigation. But these arguments are unlikely to impress countries pushing for a waiver. They insist that “a pandemic is not the time to be thinking about profits”.

An unfortunate precedent

It’s not just lost profits from Covid-19 drugs keeping drug firms up at night, says the Financial Times. For decades, the US has “fiercely” protected domestic companies’ intellectual property rights in trade disputes, even to the extent of preventing cash-strapped countries trying to lower the costs of expensive HIV treatments in the late 1990s. The biotech sector fears that President Biden is now opening a “crack in the wall” that could be used to set a precedent to “make it easier to suspend patents in the future”, thus reducing the incentive for future innovation.

Investors shouldn’t panic just yet, since the US announcement is more a “symbolic milestone than a turning point”, says life-sciences news site Stat. Due to opposition from Germany and other countries it will take “months of international infighting” before any proposal is agreed at the World Trade Organisation, with the most likely outcome a “narrow” compromise involving the compulsory licensing of vaccines. What’s more, even if patents were waived today, generic manufacturers would struggle to find the “skilled expertise” required for making the vaccines. Note that even though Moderna has already opened the door to copycats, it’s unclear whether any company has tried to emulate its vaccine.

While an immediate patent waiver may be a bad idea, there are several ways in which drug and other companies could help speed up distribution in poorer countries, says The Wall Street Journal. For example, the US could make “hundreds of millions” of surplus doses in its stockpile available to countries such as India and Brazil. Countries that produce “quality vaccines” could also invest in a “major expansion” of manufacturing facilities aimed at increasing exports to poorer countries. Finally, pharma groups should speed up efforts to build up manufacturing capacity in poorer countries.

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