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On Wednesday, President Joe Biden announced that he would support the temporary suspension of Covid-19 vaccine patents at the World Trade Organization, at least until the end of the pandemic.
The market reaction was swift and the share price of pharmaceutical companies fell sharply following the announcement. Shares of the pharmaceutical companies Pfizer, Modern, Novax and BioNTech fell between 4% and 10% on account of the President’s announcement.
Despite the market reaction, according to biotech market analyst Zhiqiang Shu, there may be an overreaction to the announcement since: “mRNA vaccine production is not just about intellectual property. A lot of other things are in play, such as manufacturing know-how and capacity. Other companies or countries are unlikely to produce mRNA shots quickly.”
On the other hand, The Motley Fool‘s financial analyst Joe Tenebruso says the U.S. government could be setting a dangerous precedent: “If healthcare companies can’t rely on the patents they earn, they may be less likely to invest in costly research and development programs. And that, in turn, could result in fewer life-protecting medicines being produced in the coming years.”
Despite the concerns of some investors, the stock price recovered during Thursday’s trading, and despite Biden’s announcement, the lifting of the patent is not close to affecting financial performance, as mass production of the vaccine would not happen soon.
Why patent release won’t mass-market vaccine production?
Although the news is encouraging, the reality is that the bottleneck is not in access to patents or the price of vaccines, but in access to vials to contain the drug and raw materials. According to Scott Gottlieb, a member of Pfizer’s board, it could take up to a year or more between the signing of an intellectual property release agreement and the other pharmaceutical companies managing to manufacture the vaccine.
The case of Moderna is illustrative: the lab announced that it would not enforce its intellectual property exclusivity rights to its coronavirus mRNA vaccine. Despite Moderna’s announcement, six months later the company remains the world’s sole producer of the vaccine.
Another reason why vaccines could not necessarily be mass-produced is because they are more complex than ordinary drugs. Ordinary pharmaceutical drugs can usually be easily replicated using reverse engineering. That is why when a patent expires, companies can quickly enter the market and bring out their generic products and considerably lower the price of the drug in a short time.
Vaccines, on the other hand, are complex biological products. Reverse engineering is simply not enough to come up with a viable substitute for a vaccine, unlike ordinary drugs.
In order to replicate a vaccine, potential producers would have to not only know the formula for vaccine development, but also have access to pharmaceutical-specific knowledge such as the manufacturing process, vaccine cell lines, sample storage methods, and so on.
Although some information on Covid-19’s vaccine manufacturing formula could be valuable, potential vaccine manufacturers will not be able to make much progress without the cooperation of the laboratories holding the patents on the entire vaccine manufacturing process.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica