Wednesday, August 5, 2020

Are COVID-19 vaccine advance purchases a form of vaccine nationalism, an effective spur to innovation, or something in between?

No vaccine for the novel coronavirus has been approved anywhere. Nevertheless, governments and international organizations around the world are announcing deals for billions of dollars to procure tens of millions of doses of vaccines from companies that are still running clinical trials, including a $2.1 billion deal with Sanofi and GSK announced by the US on Friday. What’s going on? And what do these deals tell us about innovation policy for COVID-19 vaccines? In this post, we lay out the landscape of COVID-19 vaccine pre-purchases; we then turn to the innovation impact of these commitments, and finish by asking what role patents and compulsory licensing have to play.

Who is pre-purchasing COVID-19 vaccines?

Enormous public interest and political pressure are focused on when a COVID-19 vaccine will be approved by the FDA or its counterparts abroad. But developers must also build manufacturing capacity and supply chains to get a vaccine into patients’ arms, which usually takes around five years and costs over three times more than a conventional pharmaceutical factory. These supply chains are already being built at-risk for some promising candidates—with recognition that many candidates fail during clinical trials—but it is still likely that demand will vastly exceed supply in the short term. Against this backdrop, governments and international organizations have been pre-purchasing very large quantities of promising vaccine candidates.

The US federal government has made substantial pre-purchases, including up to $2.1B for 100M doses from Sanofi-GSK, $1.95B for 100M doses from BioNTech-Pfizer, $1.6B for 100M doses from NovaVax vaccine, and $1.2B for 300M doses from AstraZeneca-Oxford. This is unusual! Most vaccines for US adults are purchased by the private sector or public insurers. (Also unusual is that the federal government will be directing allocation choices through the CDC and the Pentagon—which hopefully will go more smoothly than the distribution of the COVID-19 treatment remdesivir by FEMA and HHS.) 

Other governments are also making advance purchases of yet-to-be-approved vaccines, particularly the UK and other European countries. The UK has secured 250M doses from four suppliers; it has 66M people. (Obviously, it has planned in case not all of them work out.) Italy, Germany, France, and the Netherlands set up the Inclusive Vaccines Alliance—which other EU countries may join—and signed a €750M contract for 400M doses of the AstraZeneca-Oxford vaccine. The EU is also concluding talks to purchase 300M doses of the Sanofi-GSK vaccine. China is developing its own vaccines, which other countries may struggle to access. And the few wealthy countries like Canada that are not making substantial COVID-19 vaccine investments face pressure to do so.

These investments have led to charges of “vaccine nationalism” in the popular press, although as Professor Ana Santos Rutschman explains, these strategies are not new. Rutschman also describes the growth of public-private partnerships to offer a more global solution. Most notably, Geneva-based Gavi has created the COVID-19 Vaccine Global Access (COVAX) Facility, which can be joined by both “self-financing” countries and donor-supported countries. COVAX will distribute vaccines to “all participating countries at the same rate until all countries have received sufficient doses through the Facility to ensure coverage of 20% of their populations,” although potential inequity in access by non-self-financing countries has led to some criticism. Many countries have expressed interest, though only 16 of the 36 OECD states, not including the US, Germany, France, Italy, or Spain. The European Commission has advised EU states not to join COVAX for the purpose of buying vaccines.

How do these advance purchases affect vaccine innovation?

As we discussed last week, pull incentives that increase or provide certainty about the expected ex post reward for a new technology are a crucial tool in the government’s arsenal for promoting innovation. Agreements to purchase a product before it actually exists in the world have successfully been used in the vaccine context to drive innovation. Gavi’s $1.5 billion advance market commitment (AMC) for a vaccine against pneumococcal disease has resulted in the immunization of over 180 million children. A few of the above-described arrangements are structured similarly to the pneumococcal AMC, although most of the reported investments in vaccine companies do not appear to be contingent on the success of their innovative efforts. 
These COVID-19 vaccine agreements differ in at least three additional, key ways from this previous AMC or other innovation-promoting efforts. First, unlike with previous efforts to use pull incentives in the vaccine context, it is not at all clear that advance purchase commitments are needed to encourage companies to invest in the development of vaccines against COVID-19. COVID-19 is truly global in scale; there is an enormous potential market for the vaccine. There is also less concern that the disease will dissipate before a vaccine arrives, as COVID-19 is harder to contain than other diseases for which vaccines have been researched. With rarer conditions like Ebola, for instance, it is difficult to be sure that there will be enough patients to enroll in clinical trials, as traditional public health tools can successfully contain individual outbreaks of the disease. For other conditions, such as the particular strains of pneumococcal disease prevalent in low-income countries, there may not be a large enough developed-country market to encourage pharmaceutical company investment. Neither is true for COVID-19. As of July 31, there were 26 vaccine candidates in clinical trials and another 129 in preclinical evaluation, many of which lack advanced purchase commitments like those described above.

Second, even if advance purchases are not needed to induce entry, they can still be valuable for increasing the speed of development. In particular, these agreements are designed to promote early investment in vaccine manufacturing, even before a vaccine candidate has demonstrated efficacy. These investments may be wasted in the event that a vaccine candidate fails, and so companies typically would not build this capacity so early in the development process. Here, however, there is enormous social value in enabling speedier access to a vaccine that has demonstrated safety and efficacy, justifying the large government investments. 

Third, governments are using these agreements to reserve doses for their citizens in a way that may lead to a lack of supply for other countries, at least in the short term. These concerns over “vaccine nationalism,” as noted above, may raise grave concerns for equitable access to the vaccine where it could save the most lives. COVAX is a promising development to address this concern, although as of July 31, Gavi had raised only $600 million out of $2 billion in seed funding needed to secure doses for the 92 countries eligible for donor support. At the request of the CDC and NIH, the National Academies just announced a committee to develop a framework for equitable domestic and global allocation of a COVID-19 vaccine; it will be interesting to see if they are able to develop a framework that policymakers will follow.

These advanced purchase commitments also give rise to the potential concern that governments are “picking winners” early, and given high clinical trial failure rates, many of these candidates may fail. However, as noted above, the United States and other countries are diversifying their choices, funding multiple companies using multiple different platforms and hedging their bets to increase their chances of success overall. Further, given the relatively small number of pharmaceutical firms with the know-how to develop and manufacture vaccines, governments may be able to strike deals with many, perhaps most, of the companies with the resources to successfully develop a vaccine against COVID-19. In a range of other contexts, even including the New York taxi manufacturing market, a history of manufacturing success and regulatory sophistication has been relevant to government bodies making awards like these. 

Is compulsory licensing of patents important to ensure adequate access?

Even with advanced market commitments, a number of scholars have voiced their concerns that patents will impede access to or development of COVID-19 vaccines. Professor Sapna Kumar, for example, has called for compulsory licensing by the federal government and generic importation by states. Professor Rutschman has similarly suggested that the US adopt a compulsory licensing regime for coronavirus vaccines, like one recently announced in Chile. Several other scholars, meanwhile, have established the Open COVID Pledge, a voluntary patent pledge for developers who promise to make their “intellectual property available free of charge for use in ending the COVID-19 pandemic and minimizing the impact of the disease.”

Evidence that patents were hindering development of COVID-19-related technologies or that patentees were restricting access to increase profits would help make the case for compulsory licensing during this pandemic. But as of yet, we are unaware of any such examples. As noted above, there are over 150 COVID-19 vaccine candidates in development—an astonishing number for a disease only discovered nine months ago. Clinical trials are already underway for more than two dozen of those. For these vaccines, there’s no evidence that IP is being used to frustrate competition or keep early-stage developers off the market. Nor would patents likely be used to restrict the supply of any successful vaccine. The developer of an effective coronavirus vaccine should maximize its profits (and good PR) by making and distributing as many doses as possible—including through licensing and transfers of know-how to other manufacturers, as they have begun to do. The real access concern, we think, is not that patents will lead to fewer doses being produced—it is that a distribution system principally managed by wealthy nations will fail to adequately distribute the vaccine to those most at risk.

Compulsory licensing doesn’t address these concerns. Whatever merits compulsory licensing offers for some basic pharmaceuticals, vaccines are quite different. In the small-molecule context, entry by numerous generic manufacturers is relatively inexpensive and can rapidly increase supply. But for vaccines, as we’ve detailed before, the more significant impediments to producing a successful coronavirus vaccine lie on the manufacturing side, including issues regarding manufacturing scale-up, the risk of shortages, supply chain management, and other logistical hurdles. That doesn’t even include issues like administrative distribution (e.g., would people receive the vaccine from their employer, physician, or a third-party provider?), or vaccine skepticism that are bound to dog implementation of a COVID-19 vaccine.

The scholarly attention to patents in the pandemic, rather, is part of a long-standing academic debate as to whether patents efficiently mediate a tradeoff of access to the goods they cover and incentives to develop them. But this tradeoff—especially in this contextdoesn’t have to be, and often isn’t antagonistic. As we previously explained, whether developers receive high financial incentives from patents and other policies is a separate question from whether consumers face barriers to access; several proposals include provisions that a COVID-19 vaccine will be available to most patients for no out-of-pocket costs. More broadly, the economic and public health impact of COVID-19 counsels that whatever risk exists from payers overpaying for a patent-protected COVID-19 vaccine is a mere rounding error compared to the enormous harm—both economic and human—from the pandemic. If Pfizer stands to reap $2 billion to end a scourge that has already claimed 700,000 lives and stands to cost $82 trillion globally, it’ll be worth it. Given the difficulties of manufacturing and distributing a vaccine, it’s not clear how patent licensing would address the access problem frequently complained about. Rather than focusing on the margins, now is the time for policymakers to “go big. Really, really big.” 

This post is part of a series on COVID-19 innovation law and policy. Author order is rotated with each post.

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