More pandemic-style price fixing won’t help global health

This week, 19 House Ways and Means Committee members wrote to President Biden opposing broadening the pandemic-era waiver on intellectual property protections for COVID-19 vaccines. Despite evidence that the waiver failed to foster developing countries’ access to these vaccines, left serious supply-chain deficits unresolved and threatened future drug development and innovation, the Biden administration and World Trade Organization are contemplating extending it to include COVID-19 diagnostic tools and therapeutics.

Undermining pharma giants and blaming them for excessive profits off patented medicines — even as these companies benefit from billions in public contracts and government-authorized liability waivers — has a lot of populist appeal. Unfortunately, fixing the price of intellectual property at zero deters new American drugs from being developed and brought to market, thus jeopardizing the nation’s critical leadership in global public health innovation.

In June 2022, the WTO waived certain parts of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) for all its members after lobbying by developing nations and the withdrawal of the United States’ initial opposition. 

The move adversely affected American pharmaceutical companies while benefiting large generic drug industries in India and South Africa, whose nations had lobbied for the pandemic exemptions and for softer IP protections for decades before that. We were told it would make critical vaccines available by allowing generic manufacturers to scale up production and reduce costs without paying patent royalties.

These claims were greatly overstated. Low vaccination rates and low access in many developing nations persisted for entirely different reasons, including COVID-19 misinformation and logistical and supply chain constraints like transportation and infrastructure challenges, lack of adequate storage, scant access to raw materials due to factors including trade barriers and the technical challenges of producing complex pharmaceuticals and biologics.

Waiving patents did little to help. By mid-2023, only 503 million of the 635 million vaccine doses procured through World Bank financing had been delivered. Vaccination rates in low-income nations lingered around 30 percent, lagging two years behind the United States.

This should not have been a surprise. Even before the TRIPS waiver, because of commercial agreements between vaccine patent owners and manufacturers across the developing and developed world, enough vaccines for over 70 percent of humanity were projected to arrive by November 2021 — with no further untapped manufacturing capacity left. 

For example, AstraZeneca and other drug companies had contracted with the Serum Institute to manufacture millions of doses in India. Twelve billion doses had been administered worldwide prior to the TRIPS waiver’s actual mid-2022 ratification.

Unlike the TRIPS waiver of IP protections — which no manufacturers have relied on as of late 2023— commercial licensing agreements facilitated the transfer of the technical manufacturing know-how and quality standards necessary for effective vaccine production and rollout.

Conversely, waiving IP or flagging that IP protections could soon be eroded for the sake of short-term low prices takes away some of the incentive to invest in the development, approvals process and rollout of future drugs and biotechnology innovations.

It’s true that over $31.9 billion of U.S. public investment was crucial to developing what eventually became the COVID-19 mRNA vaccines. But they wouldn’t have come to market without private investment. Most of the public funds went towards a guaranteed order for 2 billion doses contingent on an effective vaccine.

However, billions of extra private dollars were poured into researching and developing the drugs, rolling them out and securing the necessary regulatory approvals. The process of developing these particular vaccines began decades ago, building off prior innovations funded by heavy and risky investments in R&D and incentivized by the prospect of recovering those costs through proprietary patent rights.

These patent rights eventually allow for generic manufacturing. They come with a predictable expiration date, allowing for generic manufacturers, who don’t face nearly the same upfront costs, to take advantage of innovations that would not otherwise exist. Generic drug manufacturing usually costs several million dollars. By contrast, the average cost of bringing a single FDA-approved medication to market is $1.3 billion, including out-of-pocket costs, capital costs and sunk costs of failed attempts.

Besides preventing unknown numbers of future innovations from coming to market, compromising IP rights could direct American research investment to competitor economies like China, where IP protections are being strengthened to attract inventers to patent their technologies.

New lipid nanoparticles that will better supply mRNA to cells, can be stored at higher temperatures and have fewer side effects than current vaccines, are already being developed. Extending the pandemic-era IP waiver sends an adverse signal against these and future efforts to bring immense public health benefits to the world’s population. 

With COVID-19 no longer the public health emergency it once was, it’s a good time to rescind the TRIPS waiver. 

Satya Marar is a visiting postgraduate fellow at the Mercatus Center at George Mason University, specializing in competition law, innovation and governance.