Patents, economics, and pandemics

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Science  05 Jun 2020:
Vol. 368, Issue 6495, pp. 1035
DOI: 10.1126/science.abc7472

As coronavirus disease 2019 (COVID-19) has quickly killed hundreds of thousands across an unprepared world, destroyed the livelihoods of millions, and cost trillions of dollars, nations must now expand their mindsets and focus not only on overcoming the next phases but also on long-range strategies—for this and for future pandemics. The world needs a permanent preparedness enterprise to engage in a sustained effort to avert pandemics, and provide for the affordable and widespread administration of vaccines and therapies when they are discovered.

Governments, academia, and industry tend to forget the threat of infectious diseases between pandemics, but when they emerge, multibillion-dollar crash programs are quickly put into place. This boom-and-bust cycle in infectious diseases research and development (R&D) has limited attractiveness to scientists, thus preventing real progress. COVID-19 has mobilized the scientific community to generate hundreds of drugs, diagnostics, and vaccines in various stages of development, but this enthusiasm will quickly evaporate once the crisis is over and funding dries up. Existing governmental and market mechanisms fail to protect society against present and future public health threats, leading to chronic underinvestment in infectious diseases in the private sector and causing many companies to quietly abandon the field. Nonprofit organizations try to fill the gap but are unlikely to meet public health needs. Without sustained government effort and investment, the world will be unprepared for pandemics.

Another reason for the market failure in pandemic protection is an inherent misalignment between economic incentives driving industry versus benefits to the public. Private innovation is driven by the patent system. Pharmaceutical companies, responsive to their shareholders, typically invest in therapies for conditions that will predictably maximize profits during the life of a patent. Patents give a time-limited exclusivity to the innovator who can then set premium pricing that maximizes the return on R&D investment. Such pricing can hinder wide dissemination once vaccines or therapies are developed, often leaving many patients unable to afford these products. Tension therefore exists between the need to generate affordable products that preserve human health and the need of innovators to be appropriately rewarded for their risk taking. This is more critical for vaccines as the individual vaccinee is not the only beneficiary. Indirect positive externalities accrue to the whole of society through faster herd immunity and more rapid economic recovery. In economic terms, this means that such products should be priced as close as possible to marginal costs, a proposition normally unattractive to drug innovators.

How is it possible to resolve this dilemma? A system of ex ante economic rewards should be created based on specific innovation and product development milestones. Governments should contribute not only emergency grant awards (which suffer from the need to pick winners and losers prospectively with scant evidence of effectiveness) but also sustained, predictable, and prospective achievement rewards or even prizes based on the value of explicitly achieved preclinical, clinical, manufacturing, and distribution milestones, including advanced market commitments when necessary to lessen the risk for the innovators who deliver. In exchange, prior to public funds being granted—and to avoid conflicts later—companies that accept taxpayer support would agree to make pandemic countermeasures available to the public rapidly, including widespread production and dissemination with reasonable margins. Today, industry practices such a system of milestone-based payments with their smaller R&D partners. Why should governments not do the same with industry for pandemics?

Similar proposals have been advanced in Europe, with the potential to license discoveries internationally. COVID-19 affects all of humanity, and the strategy should not be geographically restricted but global. Why not join forces? At the upcoming G7 and G20 meetings, governments should create and fund an international organization akin to a global institute of health to manage staged funding through calls for proposals from all sectors. This would sustain the R&D needed to establish rapidly scalable platforms and supply chains of diagnostics, drugs, antibodies, and vaccines against current and future pandemic threats. In exchange, innovators would be fairly rewarded, and their discoveries made available at affordable prices to people around the world. Creating such a sustainable R&D enterprise would be something positive to emerge from the wreckage of COVID-19.

  • * Employee and shareholder of Sanofi (active in COVID-19 R&D). The views expressed here reflect my personal opinion and are independent of policies/positions of this organization.

  • Board member and shareholder of Danaher and shareholder of Sanofi (both involved in COVID-19 R&D).

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