During the height of the coronavirus pandemic, when South Africa, India, and many lower-income countries requested a special waiver on the enforcement of patents that would allow them to manufacture cheap Covid-19 vaccines and therapeutic medicine, the U.S. pharmaceutical industry snarled.
American drug executives and lobbyists countered that the U.S. should not only vigorously oppose any patent sharing, but also move to sanction any country that dared to violate corporate patent rights.
“Patents are the reason that Covid-19 vaccines exist. Waiving them would undermine our response to this pandemic and future health emergencies,” wrote Michelle McMurray-Heath, a top biotech lobbyist and head of the Biotechnology Innovation Organization, or BIO, in an opinion column scorning the South Africa-led waiver request.
McMurray-Heath, in her column, referenced the success of Moderna Inc., in which “licensing technology, not abrogating patents” made vaccines possible.
That tough talk belies an unprecedented suspension of patent enforcement granted to select pharmaceutical and medical device companies — including Moderna.
We now know that drug companies like Moderna took advantage of emergency conditions to waive patent rights for components of Covid-19 mRNA vaccines. Despite the drug industry’s rhetoric around the sanctity of patent protections, newly disclosed government pandemic contracts and a contentious patent infringement lawsuit against Moderna showcase the extent to which American-made coronavirus treatments were accelerated using the very type of involuntary patent sharing the drug industry has decried.
Knowledge Ecology International, an advocacy group that campaigns for access to medicine, recently released the results of a Freedom of Information Act request showing that the Trump administration quietly invoked a World War I-era law to give companies racing to produce Covid-19 medications, vaccines, tests, and other pandemic-related products special authority to seize virtually any patent they wished without authorization.
KEI has identified 62 federal pandemic-related contracts — including with major companies such as Corning Inc., Eli Lilly and Co., Merck & Co. Inc., Qiagen, Sanofi, Moderna, and Siemens — with clauses that reference regulations associated with Section 1498, a statute that grants a compulsory license for the completion of the contract. A compulsory license allows the use of patented inventions without the permission of patent holders. In the case of the statute, such broad suspension of traditional patent rights are granted as long as the patented invention is used in service of a critical government function, typically in areas of national security or a national emergency.
The contracts flowed to companies that swiftly developed products needed to respond to the pandemic. Qiagen’s federal funding helped it produce the QIAstat-Dx line of PCR testing equipment to detect Covid-19 pathogens in human samples. The Corning contract identified by KEI supported the manufacturing of medical-grade vials and glass tubing used for coronavirus response efforts.
The KEI-identified contracts cite regulations promulgated by Section 1498, some of which indemnify the government over patent lawsuits, while others do not.
“There’s a whole debate: Supposedly, the U.S. government is a big believer in patent rights, we bully other countries on these issues,” said James Love, the director of KEI. “And at the same time, during the pandemic, the U.S. just went hog-wild issuing compulsory licenses.”
“I’m glad they did it,” added Love, “but I was just surprised at what we found.”
BIO and Moderna did not respond to a request for comment.
The Right to Waive Patents
Section 1498 was first enacted in 1910, with lawmakers interested in ways to ensure that patents useful for national security could be quickly deployed by the government. Just a few years after its enactment, the start of World War I pushed what had, up until then, been theoretical applications into reality.
Early in the development of the airplane industry, “almost confiscatory” patent licensing enforcement from the Wright brothers and airplane manufacturer Glenn Curtiss severely restricted competition in the U.S. On the eve of the war, France held 266 military airlines, while the U.S. military owned only six. As the U.S. attempted to close the gap, excessive royalty demands from airplane patent holders throttled aircraft manufacturers. In response, a number of officials, including acting Navy Secretary Franklin Roosevelt, then serving under President Woodrow Wilson, called for Congress to expand the 1910 law so the military could acquire aviation patents by seizure through eminent domain.
The law was expanded again during World War II. In a proposal that was subsequently adopted into law, designed to “aid in the successful prosecution of the War,” Section 1498 was expanded to include subcontractors to the government, to allow the termination of royalty payments deemed “excessive,” and for patent holders to seek compensation in federal court.
The George W. Bush administration also threatened to invoke Section 1498 during the anthrax scare following the September 11 attacks in 2001. At the time, the pharmaceutical company Bayer held the patent on ciprofloxacin, the antibiotic for treating anthrax, but said it would take two years for the company to produce enough supply. Despite protests from generic manufacturers that offered to produce the drug faster, Bayer refused to license the patent.
After pressure from Senate Democrats and calls by senior Bush Cabinet members to invoke the statute for a compulsory license to make generic cipro, Bayer relented and promised a price cut and a massive increase in manufacturing of the drug.
The Lawsuit Against Moderna
President Donald Trump made no announcement of his administration’s decision to invoke Section 1498, yet the law is inserted into dozens of pandemic contracts, KEI revealed.
The compulsory license clause is embedded in the research and development contracts awarded in 2020 to Moderna. The company, through the Operation Warp Speed program to leapfrog coronavirus medications, received $2.48 billion in federal funding to produce its mRNA vaccine.
Once Moderna began producing Covid-19 vaccines, the company “simply used the patented technology without paying for it or even asking for a license.”
That contract language is now at the center of a contentious legal battle over patented technology that served a critical function in one of the most widely used vaccines. Earlier this year, Moderna was hit with two patent lawsuits alleging that the company infringed on patents controlled by Arbutus Biopharma Corp. and Alnylam Pharmaceuticals Inc. over the use of lipid nanoparticle technology. The lipid droplets are essential for protecting the integrity of mRNA vaccines, which tend to degrade rapidly once entering the body. The companies are seeking royalties for the use of their patents.
The plaintiffs note that Moderna had licensed patents for its other products in the past but that once the company began producing Covid-19 vaccines, Moderna “simply used the patented technology without paying for it or even asking for a license.”
In court, Moderna attorneys have moved first to argue that the plaintiffs in the patent dispute may only seek compensation from the U.S. government, not Moderna, given the special license granted to Moderna under Section 1498 in its contract to produce the vaccine. In its brief to dismiss the case, Moderna noted that the government enacted the law for national emergencies and included protections against patent infringement lawsuits for situations like the coronavirus crisis.
“Short of war,” wrote Brian Egan, an attorney for Moderna with the law firm Morris, Nichols, Arsht & Tunnell, “it is difficult to conceive of a situation more within the heart of Section 1498 than the COVID-19 crisis, ‘one of the greatest public health challenges in modern history.’”
The only redress, Moderna claims, is for the plaintiffs to file a lawsuit to seek taxpayer money through a special claims court. If Moderna is successful in dismissing the lawsuit, the only route for Arbutus and Alnylam will be to seek payment through the U.S. Court of Federal Claims. The legal strategy would amount to taxpayers providing yet more of a windfall to the pharmaceutical industry while shielding the profits the companies made as they denied cheap, global vaccine production.
Refusing to Share Patents
Regardless of the court decisions, the hypocrisy of pharmaceutical companies is clear and egregious.
BIO, a lobbying group that represents Moderna and other pharmaceutical research companies, has argued against any compulsory license to share patents that could be used to assist in the creation of coronavirus vaccines or medicine for lower-income countries. The organization seems to neglect the role of a compulsory license for one of its own members to seize patents.
“BIO and its members are also extremely concerned about emergency regulations introduced in several countries that call for the unilateral use of compulsory licenses for COVID products or those implemented under vague national security grounds,” BIO wrote in a petition last year to the Biden administration, asking that it oppose any patent sharing with countries seeking to produce generic vaccines and coronavirus treatments.
Pharmaceutical Research and Manufacturers of America, another drug industry trade group, similarly mobilized lobbyists and urged the Biden administration to oppose the patent waiver request. “Eliminating IP protections undermines our global response to the pandemic and compromises safety,” read one PhRMA advertisement urging opposition against the patent waiver.
Meanwhile, Moderna has capitalized on its position as one of the financial winners of the pandemic. The company, which also utilized government National Institutes of Health patents in the development of its coronavirus vaccine, has catapulted in size, winning multibillion-dollar contracts.
Stéphane Bancel, the chief executive of the company, has sold more than $400 million of company stock since the beginning of the pandemic. Earlier this year, the Moderna board approved a “golden parachute” compensation package for Bancel worth more than $926 million if the company is sold or he exits the firm.
The vaccine, noted KEI’s Love, is “really one of the most profitable biopharmaceutical products of all time.”
WTO Deal Falls Short
In March 2020, recognizing the need for rapid global cooperation to respond to the pandemic, Costa Rican President Carlos Alvarado Quesada, who left office earlier this year, called for special efforts to share patents and know-how across borders for developing drugs, vaccines, and diagnostic tests.
The discussions transformed into a formal petition later that year by a coalition led by India and South Africa for a formal World Trade Organization exemption on patent and intellectual property enforcement on a range of medical tools and medicine used for treating Covid-19.
Instantaneously, the pharmaceutical industry, with allies in wealthy countries, pushed back — opposing any, even temporary, lifting of WTO rules that govern patent and IP enforcement.
The political wrangling over the request to the WTO stymied an effective global response to the pandemic. While negotiators dithered, hundreds of thousands died without access to vaccines or personal protective equipment.
Moderna played multiple sides in the dispute. In 2020, Moderna pledged not to enforce patents on its vaccine during the pandemic, a promise that won international acclaim. Yet the company did not explicitly endorse the South Africa and India-led WTO waiver, and its lobbyists at BIO and other organizations mobilized aggressive opposition to the campaign. And the company has reportedly reserved the right to return to enforcing patents when the pandemic becomes endemic.
And in the meantime, Moderna has filed for broad mRNA patents in South Africa that critics fear will undermine future vaccine development. While the company has pledged narrowly not to enforce patents on Covid-19-related issues, the broad mRNA patents may represent a stumbling block to copying the vaccine formula in an effective way for emergency and existing diseases.
Then, earlier this year, after making a surprise move to endorse the WTO waiver, the Biden administration negotiated a watered-down proposal for the waiver only on vaccine patents. Public health advocates and industry groups assailed the agreement to exempt therapeutics and diagnostic systems, the areas where the need is now highest.
“They waited out the clock. The time to waive patents was in 2020, when it takes about six months to have a vaccine out the door,” noted Love. Now, with close to sufficient global vaccine supplies, the need in lower-income countries centers on diagnostic equipment and therapeutic medications like Pfizer’s Paxlovid — all of which are more easily copied as a generic than a new vaccine yet are exempted from the current WTO deal.
“Just waiving patents for vaccines isn’t really enough. But if used for drugs, you can get a generic version on the markets within months. It’s much harder for a generic vaccine, which requires close cooperation and lengthy regulatory approval,” added Love.