Stealing From Drug Makers Is No Way to Vaccinate the World

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The innovative pharmaceutical industry confounded critics by delivering highly effective vaccines for a novel disease in less than a year. The vaccines are working against all known Covid-19 variants, although the newest variant features some unusual mutations. Resistant variants become more likely the longer the virus circulates. Wealthy nations are scrambling to vaccinate the world, but they need to pay for it instead of asking vaccine innovators for a free ride.

Wealthy countries have both selfish and altruistic reasons to help vaccinate developing countries. Developed countries want to prevent vaccine-resistant strains from cropping up. And they want to prevent human suffering, illness and death.

Less than 5% of Africans have been vaccinated, and infections and deaths are spiking. India, which suffered a spring surge and where vaccines are made under license from vaccine developers, has vaccinated less than 5% of its population. Vaccines are no longer scarce; the chief impediment for developing countries now is an inability to pay, including for the necessary infrastructure.

Vaccine makers have voluntarily waived the ordinarily high, patent-protected prices for their products.

AstraZeneca

and

Johnson & Johnson

both pledged to provide their vaccines on a nonprofit basis during the pandemic. Moderna and

Pfizer

are making profits but charging only $30 or $40 for a two-dose course, a reasonable price for lifesaving products that were the first to market.

Novavax,

which is expected to seek Food and Drug Administration authorization soon, will only charge $3 a shot in Africa.

But the Biden administration’s initiative to waive intellectual-property protections for Covid-19 vaccines—supported by several European leaders and the World Health Organization—asks vaccine innovators to pay for more of the world’s gain from global vaccine distribution. If developed countries value vaccinating the world, they should subsidize vaccine production and distribution, not “tax” it by demanding that companies provide vaccines and intellectual property at prices below their value. Why should shareholders and employees of innovating firms pay for the benefit to all of us of world-wide distribution?

This is only the latest attempt by the WHO and public-health nonprofits to take a free ride on the pharmaceutical industry based on the mistaken belief that patents limit access to better healthcare. But intellectual-property protections enable innovative products that lower the effective price of health, not raise it, by providing previously unavailable treatments at temporary patent-protected prices, which fall as competing products, and eventually generics, come to market.

Before effective HIV treatments existed, longer life was unobtainable at any price. Patent-protected HIV drugs reduced the cost of a longer life to a payable number, and prices eventually. Likewise, Covid vaccines reduced the cost of disease prevention from lockdowns to stop economic activity to a simple shot in the arm.

Attempting to catch a free ride on innovative vaccine makers who have already forgone patent-protected prices is counterproductive. Waiving IP protections would slow or abort vaccine development in the next pandemic. And it would discourage vaccine producers from rapidly producing vaccines for world-wide distribution during this pandemic.

President Biden has pledged to donate 500 million Pfizer vaccine doses to developing countries over the next two years. Other developed countries also promised doses, but deliveries are far behind pledges. Following through on the threat to waive patents would make fulfilling these commitments in a timely manner unlikely, eliminating the economic incentives to distribute the shots.

Most donations are routed through Covax, an international nonprofit run by the United Nations and the WHO. Even if supplies materialize, Covax’s target of vaccinating 20% of the population in 92 target low-income countries over the next two years is well short of the level of immunity needed to end the pandemic and keep new variants from developing.

This purchasing shortfall is unsurprising. Providing vaccines to the developing world is a global public good and, like other public goods, is underprovided relative to its value. Wealthy nations need to stop free-riding on innovative companies and instead focus on financial incentives for manufacturers to distribute their products world-wide. This would benefit everyone and preserve the incentives to innovate that saved us in this pandemic.

Mr. Philipson, an economics professor at the University of Chicago, served on the White House Council of Economic Advisers as a member and acting chairman, 2017-20. Dr. Zinberg is a senior fellow at the Competitive Enterprise Institute and a professor at New York’s Mount Sinai Icahn School of Medicine.

Journal Editorial Report: Paul Gigot interviews Johns Hopkins specialist Marty Makary. Image: Saul Loeb/AFP via Getty Images

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