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Getting drug development right

Apr 06,2023 - Last updated at Apr 06,2023

LONDON — As political theater, it would be hard to beat US Senate Health, Education, Labour and Pensions Committee Chairman Bernie Sanders’ recent grilling of Moderna CEO Stéphane Bancel, who was forced to explain why his company has quadrupled the price of its COVID-19 vaccine. But while Sanders is right that Moderna owes its vaccines to billions of dollars of US taxpayer support, its decision to raise the price should come as no surprise. As I warned in March 2020, drug companies will always make a killing from crises like the pandemic and US taxpayers will always be gouged, until we fix an obviously broken system.

In those early days of the pandemic, the US federal government could have set a powerful precedent by aligning its vaccine investments with common-good principles such as equitable access and affordability. But it chose “business as usual” instead, and now we are witnessing the predictable results: Moderna is doing everything it can to maximise profits and shareholder value, even if that comes at the expense of public health. It claims that it is raising the price for its vaccine to make up for lost revenues; but its vaccine is the fruit of collective intelligence.

The US National Institutes of Health not only invested billions in the discovery of the vaccine; it also holds patents for the foundational mRNA modifications on which the Moderna vaccine relies. After several years of patent disputes, the NIH agreed to license its technology to Moderna for $400 million. From Moderna’s perspective, it was a great deal. That $400 million returned $36 billion back in global sales, a windfall reflected in enormous compensation packages for its executives. During the pandemic, Bancel himself sold $400 million in shares, and his golden parachute (what he will receive if the company is sold and he is ousted) was raised to almost $1 billion, a 100-fold increase from 2019.

Sanders is right to highlight the $1.7 billion in government assistance that Moderna received for developing its COVID-19 vaccine, and to condemn the company’s unjustified price hikes. Drug and vaccine pricing should reflect the full costs of research, development, manufacturing and supply, and in this case, that includes substantial public contributions to R&D.

But the problems with business as usual do not stop at excessive CEO pay or the privatisation of gains funded by taxpayer dollars. Moderna has also refused to share its technology with others, including the South African mRNA Technology Transfer Hub, an initiative aimed at accelerating vaccine development in middle- and low-income countries. While Moderna did pledge to refrain from enforcing patent protections during the pandemic, excessive patenting is still a massive potential barrier to the development and distribution of treatments for other diseases, such as HIV and cancer.

Concrete measures are needed to ensure that lifesaving vaccines are available and free at the point of use in all health-care systems. Protecting public health requires a fundamentally different innovation environment than the one we have, because it depends on all players working together in dynamic ways to share knowledge and accelerate progress. Health-sector governance should promote collaboration and solidarity between countries, not encourage competition and gatekeeping in the development of lifesaving products. The pandemic has already demonstrated why we need such a shift in perspective.

With a common-good approach, the state, businesses, and communities would come together to agree on the rules and obligations pertaining to ownership and knowledge-sharing, guided by the goal of maximising the benefits to global health. This calls for an entirely new governance framework that systematically steers innovation and knowledge toward attaining specific societal goals.

Guaranteeing affordability and access is essential. There is little public value in creating vaccines that are so expensive that only a limited number of people can access them. To prevent vested interests from unduly influencing policymaking, equitable access should be established as an explicit objective of the health-innovation process from the start.

Delivering on ambitious public-health missions will require governments to restore some balance between private incentives and the public interest, which implies the need to devise new legal blueprints for patents and other intellectual property. And to create more symbiotic partnerships, governments should redesign the foundational contracts on which public-private partnerships are built. Patent pools, pledges, or new licensing opportunities can all be used to foster more knowledge-sharing, and compulsory licensing could help countries make the best use of the knowledge that emerges from research.

More broadly, when companies benefit from public investments, those subsidies, guarantees, loans, bailouts or procurement contracts should come with conditions designed to achieve the greatest public benefit. The Oxford-AstraZeneca vaccine, for example, had to meet the condition of being storable at normal temperatures, which made it far easier to transport and distribute globally. By contrast, the Pfizer-BioNTech vaccine came with the market-discriminating feature of requiring storage between -80° and -60°C.

Likewise, procurement contracts can be made conditional on knowledge-sharing, reinvestment of profits, or better working conditions for a firm’s employees. As the “strings” attached to public funds, such conditions are the key to ensuring concrete social returns on investment.

The spread of infectious diseases like COVID-19 highlights the interconnectedness of the modern world and the importance of international coordination in achieving shared goals like health for all. Governments around the world should join efforts to impose firm rules on pharmaceutical companies’ intellectual property, pricing, and manufacturing.

As the world’s largest funder of health innovation and purchaser of medicine, the US government is uniquely positioned to steer the global economy toward a more inclusive and healthy future. But it will have to do more than just publicly shame pharma executives. They are operating in a system that has been designed for their benefit. When the system changes, so will their behaviour.


Mariana Mazzucato, founding director of the UCL Institute for Innovation and Public Purpose, is chair of the World Health Organisation’s Council on the Economics of Health for All and a co-author (with Rosie Collington) of “The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilises Our Governments, and Warps Our Economies” (Penguin Press, 2023). Copyright: Project Syndicate, 2023.

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