Marvelous innovations in vaccine design and production by patent-protected American companies have afforded us powerful weapons to beat COVID-19, save lives, and accelerate the economic recovery. Here’s the latest thoroughly encouraging good news.
“Pfizer-BioNTech vaccine offers strong protection against key variants of concern, real-world data from Qatar shows,” https://www.washingtonpost.com/health/2021/05/05/pfizer-vaccine-virus-variants/
“Moderna Announces Positive Initial Booster Data Against SARS-CoV-2 Variants of Concern,”
https://investors.modernatx.com/news-releases/news-release-details/moderna-announces-positive-initial-booster-data-against-sars-cov/
These phenomenal achievements are, unfortunately, now under attack by forces trying to rip patent protection away from the vaccines that companies have developed. These forces must not be permitted to succeed. See this CNBC report on the Biden administration’s decision to support waiving patent protections:
“U.S. backs waiving patent protections for COVID vaccines, citing global health crisis,” https://www.cnbc.com/2021/05/05/us-backs-COVID-vaccine-intellectual-property-waivers-to-expand-access-to-shots-worldwide.html
The fundamental issue is simple.
Remove patent protection, and you remove the incentive to create a Pfizer or a Moderna vaccine. No protection, and how do you compensate the designers of the new booster? Waiving a patent is an example of “taking” by force. In this case, wresting patent protections out of vaccine makers’ hands is actually a life-threatening course rather than a lifesaving one.
Proponents of this policy pivot argue that vaccines will get farther faster if patents are waived, but vaccine makers and others point out that there is actually no speed gain to be had in lifting patent protection. In fact, there may even be a loss. As the Washington Post reports, “The Pharmaceutical Research and Manufacturers of America [predicts] that allowing more manufacturers to begin making shots would spark new competition for limited ingredients, slow down existing production and even lead to counterfeit vaccines. (“Biden commits to waiving vaccine patents, driving wedge with pharmaceutical companies,” https://www.washingtonpost.com/health/2021/05/05/biden-waives-vaccine-patents/) Those results are a win for no one: they are a lose-lose propostion.
Anti-patent folks are as misguided as anti-vax folks are. In fact, the two become actually aligned with this policy change when examined in terms of generating harmful outcomes for the long run. Take away the property right today, and you won’t have the new vax tomorrow. Then the idiots at the Miami school who forbid vaccination will have to find something else to forbid (“Centner Academy in Miami will not employ teachers who receive COVID-19 vaccine,” https://wsvn.com/news/local/centner-academy-in-miami-will-not-employ-teachers-who-receive-COVID-19-vaccine/).
My Camp Kotok fishing buddy Peter Boockvar offered this take in his morning note on May 6, “Soap box time/Rents/BoE.” I fully agree with his take. Note that I also opposed the horrible trade intervention policy of Trump, which led to catastrophic results. We see Trump’s policy at work with the supply chain deficiencies today. If Biden follows the same path — interference — he invites a second chapter added to Trump’s failure. And Biden, not Trump, will own Chapter 2. Now here’s Boockvar:
“So let me get this straight. Our Federal Government starts a trade war with China, instigated by one side but supported by the other, in large part to have them better protect US intellectual property, and then the US Government just decides to expropriate vital US IP, some of which is the most important the world has ever seen? The Chinese are now laughing at us. Also, the men and women at Pfizer, Moderna and JNJ involved in creating COVID vaccines are modern day heroes and how do we reward them, our government wants to steal all their work. Finally, and most importantly, we’ll likely now see a peak in R&D spending on biotech as a percent of total R&D and we’re going to be left wondering how many lives this is going to cost us in the decades to come in lost lifesaving drugs. Sorry for the soap box rant if you disagree with me.”
Peter, please don’t apologize. The more our financial market and economic colleagues take on hard issues head to head instead of being politically correct, the sooner we can work out of this political mess of acquiescent silence. Thank you for the rant.
We believe that to unilaterally suspend a patent protection is a taking and a form of an “eminent domain” action. Legal liability of the government is likely to be a very large number. And changing the rules in the middle of a contest between viruses and vaccines can only yield a victory for the virus. A negotiated licensing agreement would be the correct way to proceed, instead. A win-win is better than a lose-lose.
Our investment position is unchanged. We favor the healthcare overweight, which includes these wonderful American companies who are in the process of saving millions of lives around the world. The best course for the Biden Administration is keep letting them do it.
Protecting these innovators is in our self-interest. Weakening their patent protection is a potential health disaster in the making.
Matt McAleer and I plan to discuss this issue on the Friday afternoon YouTube channel interview. You can get the notice from this link: https://www.YouTube.com/CumberlandAdvisors
David R. Kotok
Chairman of the Board & Chief Investment Officer
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