Violating intellectual property rights jeopardizes quality health care
Policymakers across the globe are attempting to vilify the same private companies that have been invaluable partners in the fight against the COVID-19 pandemic. If these efforts are successful, it will be patients who are harmed the most.
Globally, the World Trade Organization (WTO) wants to waive the patent rights for the companies that developed effective COVID-19 vaccines in record breaking time. Here in the U.S., states as diverse as Arkansas, California, and Texas are considering policies that use the pandemic as an excuse to violate device manufacturers’ intellectual property rights.
In both cases, the proponents of violating companies’ intellectual property rights try to frame the problem as an issue of people over profits. Nothing could be further from the truth.
The WTO claims that violating the patent rights will widen access to Covid-19 vaccines to low-income countries, which are still facing shortages. But, even if the patents were violated, it would take an incredibly long time for another manufacturer to develop, test, manufacturer, and distribute its vaccine. This time lag undermines the claims of the proponents.
As a letter to President Biden from Senators Mike Lee, R-Utah, Tom Cotton, R-Arkansas, Joni Ernst, R-Iowa, and Todd Young, R-Indiana, explains, “The proponents of this scheme argue that if we just destroy the intellectual property developed by American companies, we will suddenly have more manufacturers producing COVID-19 vaccines. But the opposite is true. By destroying the intellectual property of every American company that has worked on COVID-19 vaccines and treatments we would be ending the progress—started under Operation Warp Speed—that led to the fastest development of life-saving vaccines in history.”
The drive to invalidate patents in the U.S. includes California legislation Senate Bill 605. This legislation violates the intellectual property rights of manufacturers of medical equipment such as diagnostic and imaging machines and forces these companies to disclose confidential training materials and service tools to other third-party service businesses.
The purpose of forcing manufacturers to reveal their proprietary information is to enable other service firms to become more effective competitors. Therefore, by violating their government granted property rights, these proposals will harm the original innovative manufacturers. Like the WTO, the proponents of these bills wrongly claim that violating property rights is the only way to protect public health.
It is also important to note that once any state passes this law, it is in effect for all 50 states – after all, once a manufacturer has been forced to release its proprietary intellectual property in one state, it is available publicly to anyone across the globe. There is no way to prevent someone from Michigan, Arkansas, or Canada from accessing the training materials released in California. Essentially, if one state forces manufacturers to release this information it is as if they all have.
Similar to vaccines, the immediate consequences may not be what the advocates expect. In the case of servicing complex medical devices, there are serious quality concerns. Competitor service businesses also tend to oversimplify critically important issues such as cybersecurity. As my colleague and founder of the FDA’s Office of Biotechnology, Henry Miller, notes “as medical devices became increasingly reliant on a harmonized interaction between their hardware and software components, the cybersecurity consequences of even a slightly imprecise or careless maintenance job have become increasingly stark.
It’s exactly for this reason that the Food and Drug Administration holds OEMs [original equipment manufacturers] to mandatory Quality System/Current Good Manufacturing Practices, to ensure that device software updates, patches, and more comprehensive repair jobs are done correctly. Third-party servicers are held to no such standards”.
The long-run consequences from violating the intellectual property rights of innovative manufacturers (whether of vaccines or medical devices) are even more troubling. After investing billions of dollars into developing a vaccine or creating a better medical device, innovative manufacturers must be able to recoup their cost of capital. When governments violate their patent rights, they make recouping these costs more difficult and uncertain. The result will be less innovation in the future.
Policies that promote violating intellectual property rights are fool’s gold: the purported benefits are illusory, but the consequences will be severe and include worse quality healthcare today and less healthcare innovation tomorrow.
Wayne Winegarden is a senior fellow in business and economics and director of the Center for Medical Economics and Innovation at the Pacific Research Institute.