Biden says he wants to out-compete China — so why attack US medical innovation?

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Development of vaccines to combat the COVID-19 virus moved more quickly than research typically does for most health conditions.

Congress has been burning the midnight oil to pass legislation aimed at investing billions of dollars to out-compete China in critical sectors and champion American innovation. Yet at the very moment that value of the U.S. model of medical innovation is being most vindicated, that model has come under attack from our own government, as well as long-time critics in the developing world.

These critics are proposing to waive the intellectual property (IP) rights guaranteed by the World Trade Organization (WTO) for vaccines and treatments for COVID-19 — a move that would undermine the economic model of innovation that produced the historically unprecedented effectiveness, and speed to market, of vaccines developed by major U.S. and British firms. 

The assault — spearheaded by South Africa and India — is not only unlikely to help get more vaccines to the developing world in a timely manner, but has the potential to unravel decades of progress in building an internationally agreed regime for IP rights, which incentivizes and rewards fundamental research and long-term capital investment. This could harm not only the medical products industry, but also spill over to other high-technology sectors that require long years of research and huge, risky capital investments before bearing fruit.

Proponents of the waiver argue that it would facilitate more rapid production and distribution of much-needed shots for hard hit regions in South Asia and Africa. However, it’s well-established that any increased production — even in India, which is home to the world’s largest manufacturer of vaccines — would require at least a year of preparation and investment to begin large-scale production of the newer vaccines.  

What’s more, opponents to the waiver — led by European countries, home to the world’s second leading medicines industry — can delay the waiver approval for months at the WTO, if not bury the idea altogether. And with plans in place to ramp up production of approved vaccines in the U.S., Europe and India, there will be sufficient surplus production to start exporting to the global South later this summer.

Any forced transfer of the new vaccines technologies almost certainly will benefit China, with its growing manufacturing prowess and ambitions to spend whatever is required to offset the damage to its reputation resulting from its attempt to mask the severity of the SARS-CoV-2 virus in the early days of the pandemic.

A closer look at the South Africa-India waiver proposal, which is supported by some 100 other nations, gives insight into the longer-term and broader danger of the reversal of IP rights protections for advanced technologies. Their language tabled at the WTO in late May calls for waiving not only the fundamental patents behind COVID-19 vaccines but extending the waiver to products including “diagnostics, therapeutics, medical devices, personal protective equipment” and to the raw materials and “means of manufacture” of anything used to contain this virus. It is not a huge leap of logic to speculate that such broad waivers, in the future, could be suggested for any severe threat to world health, with the example of treatments for AIDS as a reminder. 

The proposed waiver would extend for a period of “at least three years,” and could be lifted only by agreement in the General Council of the WTO, which requires unanimous consent of all 164 members and rarely has been achieved since its inception in 1995. It is hard to imagine that once the long-sought goal of removing IP rights protection for medical technologies — supported by developing countries and by progressive groups in developed countries alike — is achieved, it can be reversed easily.

Other high-technology industries characterized by the need for long-term investments in basic research and the development of new manufacturing technologies such as semiconductors, medical equipment or aerospace, or nascent industries such as quantum computing, robotics or 3D printing, would be wise to pay attention to the debate over waiving IP rights for COVID-19 vaccines.  

While the acute and existential issues arising from a pandemic represent a perhaps unique set of circumstances, one can conceive of arguments to justify the social goal of sharing some newer technologies. For example, if innovations in “green hydrogen,” more powerful batteries, or more efficient photovoltaic cells are achieved and promise early returns to combat climate change, the advantages of sharing the technologies for the global common good could be adduced to justify waivers in the appropriate enabling technologies. Or, would a waiver be considered for the advanced semiconductors and computers required for artificial intelligence and needed to find cures for cancer and to perfect climate mitigation strategies?

U.S. support for the vaccine IP rights waiver is especially baffling because it affects one of its most successful industries in terms of global technology leadership and market share, responsible for so many advances of enormous benefit for global health. It is not a mystery why the rapid discovery and ramping up of production for new vaccines came from the unique U.S. innovation ecosystem, in contrast to the more highly regulated and centrally controlled health care sectors in much of the rest of the world.

There are better ways to achieve the goal of eradicating COVID-19, and U.S. actions would be more effective if directed toward expanding production and assisting in the distribution of vaccines. This includes the use of foreign aid and help with purchasing agreements for countries in the global South, as well as facilitating licensing agreements. (For example, Johnson & Johnson is arranging a major project with Indian manufacturers, which has the support of the other Quad countries, Japan, Australia and the U.S.)

If Congress truly cares about protecting American innovation, it ought to assert its constitutional authority over international trade to block this danger to domestic high-technology industries.

Thomas J. Duesterberg is a senior fellow at the Hudson Institute. An expert on trade, manufacturing, economics and foreign policy, he leads project work on trade with Europe and China.

Tags COVID-19 vaccine Deployment of COVID-19 vaccines vaccine IP rights waiver

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