Patents are Not the Problem!

For the last year and a half I have been shouting from the rooftops, “invest in capacity, build more factories, shore up the supply lines, spend billions to save trillions.” Fortunately, some boffins in the Biden administration have found a better way, “the US supports the waiver of IP protections on COVID-19 vaccines to help end the pandemic.”
Waive IP protections. So simple. Why didn’t I think of that???

Patents are not the problem. All of the vaccine manufacturers are trying to increase supply as quickly as possible. Billions of doses are being produced–more than ever before in the history of the world. Licenses are widely available. AstraZeneca have licensed their vaccine for production with manufactures around the world, including in India, Brazil, Mexico, Argentina, China and South Africa. J&J’s vaccine has been licensed for production by multiple firms in the United States as well as with firms in Spain, South Africa and France. Sputnik has been licensed for production by firms in India, China, South Korea, Brazil and pending EMA approval with firms in Germany and France. Sinopharm has been licensed in the UAE, Egypt and Bangladesh. Novavax has licensed its vaccine for production in South Korea, India, and Japan and it is desperate to find other licensees but technology transfer isn’t easy and there are limited supplies of raw materials:

Virtually overnight, [Novavax] set up a network of outside manufacturers more ambitious than one outside executive said he’s ever seen, but they struggled at times to transfer their technology there amid pandemic travel restrictions. They were kicked out of one factory by the same government that’s bankrolled their effort. Competing with larger competitors, they’ve found themselves short on raw materials as diverse as Chilean tree bark and bioreactor bags. They signed a deal with India’s Serum Institute to produce many of their COVAX doses but now face the realistic chance that even when Serum gets to full capacity — and they are behind — India’s government, dealing with the world’s worst active outbreak, won’t let the shots leave the country.

Plastic bags are a bigger bottleneck than patents. The US embargo on vaccine supplies to India was precisely that the Biden administration used the DPA to prioritize things like bioreactor bags and filters to US suppliers and that meant that India’s Serum Institute was having trouble getting its production lines ready for Novavax. CureVac, another potential mRNA vaccine, is also finding it difficult to find supplies due to US restrictions (which means supplies are short everywhere). As Derek Lowe said:

Abolishing patents will not provide more shaker bags or more Chilean tree bark, nor provide more of the key filtration materials needed for production. These processes have a lot of potential choke points and rate-limiting steps in them, and there is no wand that will wave that complexity away.

Technology transfer has been difficult for AstraZeneca–which is one reason they have had production difficulties–and their vaccine uses relatively well understood technology. The mRNA technology is new and has never before been used to produce at scale. Pfizer and Moderna had to build factories and distribution systems from scratch. There are no mRNA factories idling on the sidelines. If there were, Moderna or Pfizer would be happy to license since they are producing in their own factories 24 hours a day, seven days a week (monopolies restrict supply, remember?). Why do you think China hasn’t yet produced an mRNA vaccine? Hint: it isn’t fear about violating IP. Moreover, even Moderna and Pfizer don’t yet fully understand their production technology, they are learning by doing every single day. Moderna has said that they won’t enforce their patents during the pandemic but no one has stepped up to produce because no one else can.

The US trade representative’s announcement is virtue signaling to the anti-market left and will do little to nothing to increase supply.

What can we do to increase supply? Sorry, there is no quick and cheap solution. We must spend. Trump’s Operation Warp Speed spent on the order of $15 billion. If we want more, we need to spend more and on similar scale. The Biden administration paid $269 million to Merck to retool its factories to make the J&J vaccine. That was a good start. We could also offer Pfizer and Moderna say $100 a dose to produce in excess of their current production and maybe with those resources there is more they could do. South Africa and India and every other country in the world should offer the same (India hasn’t even approved the Pfizer vaccine and they are complaining about IP!??) We should ease up on the DPA and invest more in the supply chain–let’s get CureVac and the Serum Institute what they need. We should work like hell to find a substitute for Chilean tree bark. See my piece in Science co-authored with Michael Kremer et. al. for more ideas. (Note also that these ideas are better at dealing with current supply constraints and they also increase the incentive to produce future vaccines, unlike shortsighted patent abrogation.)

Bottom line is that producing more takes real resources not waving magic patent wands.

You may have gathered that I am angry. I am indeed angry that the people in power think they can solve real problems on the cheap and at someone else’s expense. This is not serious. I am also angry that they are sending the wrong message about business, profits and capitalism. So let me end on positive note. Like the Apollo program and Dunkirk, the creation of the mRNA vaccines by Pfizer and Moderna should be lauded with Nobel prizes and major movies. Churchill called the rescue at Dunkirk a “miracle of deliverance,” well the miracle of Moderna will rescue many more. Not only was a vaccine designed in under a year, an entirely new production process was set up to produce billions of doses to rescue the world. The creation of the mRNA vaccines was a triumph of science, logistics, and management and it was done at a speed that I had thought possible only for past generations.

I am grateful that greatness is still within our civilization’s grasp.

Addendum: Lest I be accused of being reflexively pro-patent, do recall the Tabarrok curve.


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