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Covid Seen as Tipping Point to Lower Drug Prices, Patent Sharing

April 22, 2020, 9:43 AM

The pandemic has exposed weaknesses in the world’s health system that patient advocates say can move the needle on years-long arguments over pricing and availability of medicines.

The drug industry says it’s undertaken an unprecedented effort to find vaccines and treatments for Covid-19, the respiratory disease caused by the new coronavirus. Researchers are sharing work and pledging to ensure that any treatments are widely available and affordable.

These global efforts give patient advocates new leverage in the debate over drug prices that could continue after the pandemic ebbs.

Much of the conversation so far has centered on compulsory licensing, when a government mandates that a pharmaceutical company other than the one that innovated a drug can produce it—without consent of the patent owner.

There are less drastic ways to share intellectual property, such as patent pools and cross-licensing, and drug companies say those voluntary methods should stave off government patent intervention. Patient advocates are also fans of cross-licensing, which saves companies money on research and in turn helps lower drug prices.

Because of Covid-19, “people will demand that we have more of a say here and around the world,” said David Mitchell, president and founder of Patients for Affordable Drugs. “Folks will get a big, highly visible dose of how pharma does business and it will fuel calls for reform.”

“People tend to be comfortable with a lot of inequality in a lot of normal situations,” said James Love, director of Knowledge Ecology International. “In a pandemic, that reaches a different level. The idea that you would hoard a vaccine seems pretty messed up to people.”

Covid-19 could cause the United Nations’ Medicines Patent Pool to expand. It negotiates licenses for medicines needed in low- and middle-income countries for things like HIV, Hepatitis C, and tuberculosis.

Governments could also make producing new drugs less expensive by offering cash rewards for certain breakthroughs and expanding research grants, tax credits, and subsidies. That would radically upend the current pharmaceutical business model, which relies on sales of blockbuster drugs to fund years of prior research in developing them.

Pharma companies would get “a very good return for innovating a new drug, and once the R&D is paid for, you allow for open production,” said Fred Abbott, a Florida State University professor who has advised the World Health Organization and United Nations on patents and drugs.

The coronavirus’s presence in wealthy countries gives that debate more heft. “It’s one thing when you discuss it in the abstract over cocktails in Geneva, but it’s another thing when people in your country are dying,” he said.

Global Effort


The U.S. lags behind other countries that are compelling drugmakers to license their intellectual property for Covid-19 products to other companies.

The countries most likely to invoke their right to a compulsory licenses are “upper middle income” countries, according to Reed Beall, a population health researcher at the University of Calgary. Those are countries that are developed enough to have an established patent system but not quite rich enough to easily afford high prices of places like the U.S. and most of Europe.

Germany, the U.K., and Canada are among the developed nations that have announced they may limit patent rights to ensure any treatments or vaccines are widely available at a low price.

They join slightly less wealthy countries like Chile, Brazil, and Ecuador that often back compulsory licensing. Costa Rica’s president is promoting a WHO-based pool of IP rights for technologies to fight Covid-19.

Israel recently invoked an emergency patent suspension clause for the first time, allowing it to import a generic version of Kaletra, an AbbVie Inc. drug that may be able to treat the virus.

Groups like Medecins sans Frontieres have called on countries to do more, including imposing price controls, and have urged companies to promise to not enforce any patents on Covid-related treatments. Some Democrats in Washington want to ban exclusive licenses for government-funded Covid-19 research.

Dodging a ‘Blunt Instrument’

Patent lawyers and leaders in the pharmaceutical industry are skeptical that the U.S. will invoke its power to seize pharma companies’ patents—even in the midst of a pandemic.

“There’s really no signs in the current crisis that any patents have been in the way,” said Hans Sauer, deputy general counsel and vice president for intellectual property at BIO, the lobbying group for the biopharmaceutical industry. “There’s been a vast mobilization of resources. Pharma and bio companies have never moved as fast and with as much effort as they have now.”

Drugmakers, already widely criticized for high drug prices, know they are under pressure to make Covid-19 treatments widely available and affordable, said Randall Kuhn, a professor at the University of California’s Fielding School of Public Health.

“If [drugmakers] try to hold back these treatments, you will simply kill the golden goose,” Kuhn said. “You would not be able to defend the patent anywhere, and you would threaten the entire patent system.”

But if patient advocates push too hard to force the equivalent of open sourcing in medical research, it could discourage drugmakers from investing in new vaccines or treatments, said Stephen Ezell, vice president of global innovation policy at the Information Technology and Innovation Foundation.

“We don’t know which [vaccine or treatment] is going to work, so we want to have a lot of people attacking this problem, and we should be providing appropriate incentives,” Brian O’Shaughnessy, senior vice president of public policy for the Licensing Executives Society, said.

Compulsory licensing is “a blunt instrument,” he said.

Unprecedented Crisis

Covid-19 is an unprecedented situation that could be the tipping point for advocates of lower prices for all pharmaceuticals.

The U.S. is among the most reluctant of countries to promote IP sharing. It’s a “well-developed, capitalistic country” in which big businesses “have a huge stake in shaping all of our laws, including our patent law and antitrust law,” said Tara Nealey, an IP attorney in Polsinelli’s St. Louis office.

In developing nations, “compulsory licensing is not deemed to be a major threat to the underlying order,” she said.

The current pandemic is driving a new, broader awareness of the role of patents in drug pricing, said Tahir Amin, co-founder of the Initiative for Medicines, Access & Knowledge. “The realization is that we can’t let intellectual property rights slow down any way of dealing with the impacts of Covid.”

To contact the reporter on this story: Valerie Bauman in Washington at vbauman@bloomberglaw.com and Susan Decker in Susan Deckerin Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com

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