Securing the U.S. Biopharma Innovation System against Bad Ideas

By Jeffery Depp and Tisyaketu Sirkar

The journey of Katalin Kariko and Drew Weissman’s Nobel prize-winning invention of modified nucleotides—essential components of the mRNA vaccines—to their commercial application in vaccines that aided in arresting the Covid-19 pandemic illustrates the importance of a robust innovation system that is founded on secure intellectual property rights and robust technology transfer mechanisms.

Strong intellectual property (IP) rights are a cornerstone of the U.S. biopharmaceutical innovation system. By assigning clear ownership, they turn research discoveries into assets that can be owned and protected, thereby allowing the collaboration needed across multiple actors to develop and commercialize them. More formally, IP rights provide the patent owner, for a limited time, the ability to transfer (i.e., license) their exclusive right to partners to develop, manufacture, and sell goods and services based on the invention. The revenue resulting from this exclusive right creates rents for entrepreneurs, not only incentivizing the expensive and years-long development of the invention but also to making it possible for this process to repeat.

A robust technology transfer mechanism is the second mainstay of the innovation system. In the United States, the provisions of the Bayh-Dole Act of 1980 incentivize universities—including the University of Pennsylvania where Kariko and Weissman conducted their research—to develop and commercialize new discoveries developed with federal funding by licensing them to firms. In the case of mRNA, moving the research out of the university labs and into startups such as Moderna and BioNTech were critical to the development of mRNA-based drugs and vaccines. Both companies obtained university licenses to use Kariko and Weissman’s breakthrough. In turn, these firms worked—not without difficulty—to raise the investment capital necessary to transform Kariko and Weissman’s breakthrough into vaccines protecting at-risk segments of the world’s population from Covid-19.

These dual pillars of the biopharma innovation system are now under threat. First, the Biden administration is considering a proposal that would expand the removal of IP protections from Covid-19 vaccines to include therapeutics and diagnostics. And second, the administration is soliciting comments on a proposal that would disincentivize university technology transfer by invoking “march-in-rights” to lower the price of some drugs.

The TRIPS Waiver Challenge

A TRIPS waiver adopted at the World Trade Organization’s (WTO) 12th Ministerial Conference in mid-2022 removed TRIPS-based intellectual property protections for Covid-19 vaccine manufacturing and sales. This waiver was based on the idea that removing IP protections for these vaccines will lower their cost and make vaccines more accessible to the Global South. Further, the U.S. Trade Representative is currently considering a proposal to expand the TRIPS waiver beyond vaccines to include Covid-19 therapeutics and diagnostics. The expansion proposal was discussed during the 13th WTO Ministerial Conference (MC13) meeting in Abu Dhabi in late February 2024. While the WTO took no action on the expansion proposal at MC13, it did not affirmatively table the proposal. Thus, continued calls for IP waivers at the WTO and other multilateral organizations cannot be ruled out.

The first issue with the original waiver is whether it addressed the central problem in vaccine availability in the effected countries. Both the BioNtech and Moderna mRNA vaccines involve complex manufacturing processes. The key components, the mRNA itself and the lipid nanoparticles necessary to deliver the mRNA to the cell, require tremendous manufacturing expertise and experience among individuals at multiple different facilities. Most developing countries lack the foundational knowledge and innovation networks needed to support complex biopharmaceutical manufacturing techniques.

In addition, once the finished vaccine doses finally make it into their vials, they require cold-chain networks for storage and transport. Many developing countries lack the infrastructure that can support the cold-chain distribution of these mRNA vaccines. The infrastructure gap stems from inadequate public health systems in several developing countries that were already stretched thin before the pandemic.

In any event, as the pandemic abated and demand fell, neither the original vaccine waiver nor the proposed expanded waiver is necessary. Indeed, the WHO has declared that Covid-19 is no longer a global health emergency. This fact has contributed to a glut of vaccines, forcing GAVI to suspend vaccine deliveries to several participating countries and the led to the destruction of hundreds of millions of unused doses around the world. Even prior to this point of reduced demand, no country had taken advantage of the original waiver, buttressing the notion that the exercise of intellectual property ownership was not limiting access to the vaccines because nothing changed once those protections were eliminated by the original waiver.

These criticisms not only address the practicality of the original waiver as a policy tool but also raise serious doubts about the wisdom of expanding it. The more fundamental issue is that undermining IP rights in a clumsy attempt to deliver short term relief threatens to degrade the very innovation system needed to bring future lifesaving technologies from the lab to market.

The March-in Rights Challenge

The so-called “march-in-rights” issue is another example of how the (mis)invocation of the Bayh-Dole Act in pursuit of short-term consumer relief undermines the sustainability of the innovation system. The Bayh-Dole Act, passed in 1980 to spur commercialization of federally funded technologies, sets forth four specific circumstances where the federal government may “march-in” to revoke the exclusive license for a product developed with federal funding and grant non-exclusive licenses. Importantly, none of those circumstances makes any reference to the price of the commercialized product. The Act’s namesake senators are on record confirming the same.

The proposal now being considered by the federal government would allow federal agencies to exercise that “march-in” authority if the resulting product is not offered to the public at a “reasonable” price. Unfortunately, what constitutes a “reasonable” price is entirely subjective, creating fatal unpredictability for firms and investors who must worry about losing rights to their technology if its final sale price is deemed “unreasonable” by a federal agency. The expected result is less investment in further developing early-stage technologies to bring new lifesaving or life-improving products to market. Perversely, this reduced innovation will also serve to keep drug prices higher. Real competition from substitute products is what drives prices substantially lower. In other words, an additional identical product resulting from march-in may serve to restrain future price increases, but real lowering comes from next-generation products that deliver enhanced results with increased safety and/or ease of use (i.e., building a better mouse trap). In the pharmaceutical context, substitute products that deliver improved efficacy with fewer side effects and less frequent dosing will, over time, drive the price of the earlier generation products significantly lower.

What is at stake here is the security of intellectual property rights, and the ability of actors in the innovation system to collaborate—in this case transfer technologies across universities and private companies—in the knowledge that these rights are secure.

The TRIPS waiver expansion and the march-in proposal currently under consideration are bad ideas that should be abandoned. They will inject additional unreliability into the patent system, further weakening U.S. patent rights, stifling innovation, and preventing future breakthroughs like those of Kariko and Weissman from being transformed into useful products that can benefit society. Rather than undermining it, we need to develop and implement policies that support and promote the U.S. biopharmaceutical innovation system. We need to immunize our shared innovation system against policy ideas that seemingly offer easy short-term solutions but instead weaken this vital national resource. Indeed, our national security depends on it.

Tisyaketu Sirkar is a research intern with the Renewing American Innovation Project at the Center for Strategic & International Studies (CSIS) in Washington, D.C. Jeffrey Depp is a policy consultant for the CSIS Renewing American Innovation Project.

This piece was originally published on March 7th, 2024 with the Renewing American Innovation (RAI) Project at the Center for Strategic and International Studies (CSIS).

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