As of this writing, about 41 million vaccine doses have been administered in the United States, with the total number of vaccinated increasing daily. Presently, only the Pfizer and Moderna vaccines have been approved, but other candidates are likely to follow. As we approach one year of lockdowns in the United States, it is relieving to know that there is a light at the end of the tunnel.
But the current supply of vaccines, which the Biden Administration seeks to raise to 600 million doses by this summer, may not be quite enough to vaccinate every American–let alone the billions of other people around the world, whose immunization is a necessary condition for the United States’ return to normalcy. The federal government must exercise its power to license coronavirus vaccines to all those who can manufacture them if we have any hope of living in a post-COVID world, just as it exercised its power to research coronaviruses before and during the current pandemic.
Before moving forward, one caveat is necessary: while I will focus on the need for compulsory licensing of patents, there is a great deal of non-patented intellectual property or information (generally referred to as “know-how”) necessary to effectively mass produce, distribute, and administer the variety of COVID-19 vaccines. Agreements with the federal government under Operation Warp Speed also included sharing this know-how, though the legal means are less straightforward than with patents.
But What About Incentives?
It’s difficult to overpay when innovation yields a vaccine during a pandemic. Considering the trillions spent on relief packages already, a few billion more to develop a cure for what the trillions in relief was meant to treat is money well spent. Moderna’s $1 billion grant covered “100% of R&D costs,” and most of the other contracts under Operation Warp Speed (including advance purchase of hundreds of millions of doses) were in the single-digit billions. This return on investment, especially considering the speed with which the vaccine was developed, is difficult to overstate. The $18 billion spent on Operation Warp Speed as of October 2020 could have been tripled, with a free week in Las Vegas involved, and it would still be worth the money.
While an “everything but the kitchen sink” attitude is necessary to develop COVID vaccines and treatments expeditiously, not all incentives are created equal. The standard-issue argument in favor of patent rights is “if everyone copies a technology, then nobody will pay to develop it and we’re all worse off.” This argument is open-ended and closed-minded. It is open-ended because it can always be played as a trump card to justify stronger patent rights. Clearly, there must be some point at which the (risk-adjusted) costs of R&D and a reasonable return are covered, and exclusivity beyond that turns incentives into excess rents.
The argument’s closed-mindedness comes from its singular focus on exclusive rights as the alpha and omega of innovation. There are other tools to finance innovation that don’t place a hard legal barrier in front of those who seek to contribute to fighting the pandemic, two of which the U.S. government has pursued through Operation Warp Speed. The first is an advanced market commitment, where the government agrees to purchase a set amount of doses from a vaccine manufacturer for a drug that has not yet been developed. Guaranteeing a customer base at a locked-in price gives drug manufacturers certainty that they will recoup their investment–as they would likely do in a “patents only” world. The second, of course, is more direct financing of drug development, also part of Warp Speed.
We don’t have an Earth B to examine what these policies could have yielded if Warp Speed funding had been conditionalized on a waiver of patent eligibility. Still, if the primary argument for the patent system is the need to recover risk-adjusted R&D costs and a healthy return, then there is no clear reason why advance purchasing agreements or direct R&D subsidies wouldn’t do the job well. Another main advantage of a patent is that in the creation of a property right, it creates an incentive for the rights holder to bring a product to market. Under a prize system, it’s conceivable that the inventor receives a lump sum of cash and calls it a day, but there’s no reason they would not be interested in selling the invented product in addition to developing it. Regardless, this argument fails because a COVID vaccine is highly coveted, and countless consumers are champing at the bit to receive it.
Finally, patents are valuable because they encourage disclosure via the patent application, but this is also not unique to a well-structured prize system. Conditionalizing a prize on the sharing of know-how is a reasonable requirement. Even if knowledge-sharing isn’t required, it’s far from impossible for another pharmaceutical manufacturer to reverse-engineer a vaccine.
Patents provide valuable incentives in certain contexts, to be sure, but as a tool during a pandemic, they aren’t particularly useful. By design, patents reduce the overall availability of a technology by granting temporary exclusivity that allow patent holders to charge above-market prices as a means to recoup the upfront costs of development. This feature is fine in some contexts, but it becomes a serious bug when there is an urgent need to get as many needles into arms as quickly as possible.
How to Do It
As a matter of law, there are three main tools at the government’s disposal to force companies to license the patents for their COVID vaccines. The first is the exercise of “march-in rights” created under the 1980 Bayh-Dole Act. The Bayh-Dole Act is billed as a tool to facilitate technology transfer from universities and government contractors to the private sector (though figures on the lack of technology transfer before Bayh-Dole are often misleading). “Subject inventions”–those which were created or applied during a funding agreement–are covered by the Bayh-Dole Act, and are (at least in theory) subject to compulsory licensing under the “march-in rights” section.
Found in 35 USC § 203, march-in rights allow a federal agency to require a contractor to issue a “nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances” or for the federal agency to grant such a license itself if:
(1) action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;
(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;
(3) action is necessary to meet requirements for public use specified by Federal regulations, and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or
(4) action is necessary because the agreement required by section 204 has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204.
In the forty years that Bayh-Dole has been on the books, march-in rights have never been exercised. Considering that all of the current major vaccine candidates (save for Pfizer) were created through funding agreements which included financing for research as part of Warp Speed, they are all almost certainly “subject inventions” under the definition of the Bayh-Dole Act. (For a full list of COVID drug contracts, you can examine this database put together by Knowledge Ecology International).
Some misconceptions surround the application of march-in rights as it relates to the non-Pfizer coronavirus vaccines. First, some have argued that as long as a vaccine is available, then it has achieved “practical application” and thus march-in rights don’t apply. I’ve addressed this argument before. Still, it relies on an embarrassing misreading of the Bayh-Dole Act by completely ignoring the ability of the government to exercise march-in rights to “alleviate health and safety needs.” To ignore this provision is to stop reading the legislation after (1). Second, even if (2) did not exist, “practical application” means the invention “is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.” Should there be any general shortage of the vaccine, then the government would be well within its rights to say that “practical application” has not been achieved.
There is a clear case for the exercise of march-in rights for all of the eligible vaccines developed under funding agreements with the government. If this is not a scenario in which the exercise of such rights is justified, then such a scenario simply doesn’t exist. However, the march-in rights section of the Bayh-Dole Act also includes a right for a patent holder to appeal, and this would take time that we simply do not have.
Fortunately, there is a far more expansive power that the government may exercise to require t patented material licensing, which is found in 28 USC § 1498 (“Section 1498”). Section 1498 authorizes the federal government to either make use of a patented technology directly or indirectly at the cost of “reasonable and entire compensation for such use and manufacture.”
In their paper “Who’s Afraid of Section 1498?” Charles Duan and Chris Morten outline a history of the statute. They argue that, unlike trade secrets or other non-patent knowledge necessary to manufacture large amounts of COVID-19 vaccines or other drugs, patents are the “sole significant barrier to access.”
The most recent example of Section 1498’s power came after 2001, when fears of anthrax attacks prompted the Bush administration to stockpile ciprofloxacin (“cipro”). Bayer held the patent to the drug at the time, and (depending on which history you read) the threat of invoking Section 1498’s compulsory licensing power induced Bayer to reduce the price from $1.83 to $0.95. The Cipro case is interesting as an example of achieving results through the mere threat to exercise power. It is likely that noises from the Biden administration could induce pharmaceutical firms to openly license their drugs to generic manufacturers and provide the other know-how necessary to manufacture the drugs.
The third tool available to policymakers would require international collaboration from severalforeign states. The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, a legal agreement between members of the World Trade Organization regarding the mutual recognition of intellectual property rights, allows for the possibility of a waiver of obligations. In October, a waiver to deal with the current pandemic was proposed by India and South Africa but has yet to progress. A waiver would supercharge the vaccine distribution effort in less developed countries, as nations like India could mass-produce vaccines cheaply. Suspending the requirements associated with TRIPS when dealing with the COVID-19 pandemic was endorsed by Dean Baker, Achal Prabhala, and Arjun Jayadev in a New York Times op-ed last December. Not only would this solution go beyond the United States–unlike the exercise of march-in rights or Section 1498–but it would also cut through red tape in a way that imposing a licensing regime simply wouldn’t.
These are the policy tools available to the federal government. Still, it is absolutely essential to point out an obvious solution that many people miss: nothing is stopping those who hold vaccine patents from releasing them. The same goes for those who hold the patents to drugs needed to treat COVID. Everyone is suffering under the current pandemic. The more general rethinking of corporate responsibility over the past year should inform pressure on those who hold the exclusive right to nonrivalrous objects to open their vaults. Unlike approval from the FDA, there is no requirement to receive a patent on a drug (or any other invention for that matter), and several firms have joined the Open COVID Pledge to share their intellectual property voluntarily.
Why We Need It
We’ve all seen the ticking clock stories of vaccines about to expire being given out to anyone available, including this one story of healthcare workers in Oregon administering the vaccine to drivers stuck in traffic during a snowstorm. These stories are like those of Boy Scouts scavenging for scrap metal during WWII. Heartwarming, but scratch the surface and, underneath, you’ll find a nation going through a serious supply shortage.
To be sure, there have been serious issues with the vaccine rollout. The Biden Administration is certainly doing a better job with vaccine distribution than the Trump administration did. Still, such a massive logistical undertaking is straining the country’s diminished state capacity, and exasperating delays are virtually inevitable. This makes it even more essential to expand the vaccine supplies as much as possible.
Massive pharmaceutical manufacturing operations cannot turn on a dime, and it would be foolish to assume that a robust compulsory licensing regime or the suspension of intellectual property rights on the world stage would end the pandemic overnight. Simultaneously, this makes removing legal barriers to full mobilization all the more important.