The Moderna Model

The Moderna Model

On Tuesday, the federal government announced an agreement with Moderna to purchase 100 million doses of its COVID-19 vaccine.  Moderna was one of the firms that testified before the House Energy and Commerce Committee and is a recipient of support from Operation Warp Speed in the research and development of a coronavirus vaccine, but it did not commit to selling at a non-profit price. Previous reports stated an intent to sell around $35 per dose, far above the current agreement for 100 million doses at $1.5 billion.

These types of advanced purchase agreements are a great way to balance the need for a healthy return for pharmaceutical companies and patient affordability. But this news comes on the heels of reports that the almost $1 billion received by Moderna ($483 million in April and another $472 million in July) covered the entirety of the R&D costs for its vaccine candidate.

Why is this such a scandal? From Bob Herman at Axios:

Moderna has not been living up to contractual obligations to disclose the percentage of taxpayer dollars that are funding its coronavirus vaccine project, but the pharmaceutical company tells Axios that federal money makes up “100% funding of the program.”…

Moderna’s contract with the Biomedical Advanced Research and Development Authority, which is part of Health and Human Services, includes a provision that requires Moderna to “clearly state [when issuing public statements, press releases, etc.] the percentage of the total costs of the program” financed with federal vs. private dollars.

The plot thickened when it was revealed not only that Moderna’s patent may likely be co-owned by the NIH, but also that the vaccine patent may infringe on one owned by Arbutus Biopharma.

Questions about the NIH’s co-ownership and infringement on Arbutus’ patent complicate the story significantly (even if the recent purchase by the federal government simplifies things for consumers), and no doubt future developments on both of these fronts will emerge. While these questions remain in flux, there are two things we can take away based on the information as it exists today.

First, Moderna’s failure to disclose and BARDA’s failure to enforce this disclosure requirement are an outrage, no matter your views on the drug pricing debate more generally. Public Citizen and Knowledge Ecology International sent a letter to Acting BARDA Director Gary Disbrow requesting more information. This noncompliance with the Stevens Amendment is a serious betrayal of public confidence and a violation of federal law. The Stevens Amendment doesn’t have any associated penalties, but this noncompliance will most certainly put Moderna in the hot seat. This is purely speculation on my part, but it’s difficult to imagine that this news didn’t strengthen the federal government’s bargaining position when negotiating the price per dose.

The second issue is how to handle the fact that the federal government has, essentially, paid in full for the development of this (likely effective) vaccine. Going forward, we can certainly view this episode as proof-of-concept for a broader regime of public-private partnerships in which government finances pharmaceutical R&D.

More immediately, however, the fact that the taxpayer has fully funded the research needed to produce this vaccine means that a patent simply isn’t necessary–the free-riding problem has been solved. In recognition of this fact, Moderna’s underhanded behavior, and the NIH’s likely co-ownership of the patent, the federal government would be completely justified in freely licensing the patent for any manufacturer.

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By |2020-08-13T10:22:47-07:00August 13th, 2020|Blog, Intellectual Property|