The following is a guest post from Ana Santos Rutschman, the Jaharis Faculty Fellow in Health Law and IP at DePaul. I invited Prof Santos Rutschman to write about her work on Vaccine Preparedness and IP. Her new article titled IP Preparedness for Outbreak Diseases is forthcoming in UCLA Law Review. – DC.
In September 2017, the development of the US Army’s Zika vaccine—once a leading candidate in the Zika vaccine race—came to a halt after almost all federal funding for Zika R&D was cut short. This happened less than a year from the end of the global public health emergency. Funding will now resume only if the Zika epidemic re-emerges.
That R&D on diseases like Zika is not attractive to pharmaceutical companies is a well-known phenomenon. It usually takes a major public health crisis to shake up the playing field. With Ebola, for instance, funding for R&D increased 258% in 2015. The Zika outbreak had the same effect, and so will future outbreaks of similar diseases.
But funding spikes triggered by outbreaks are short-lived. They fuel an accelerated R&D race, with multiple pharmaceutical companies and research institutions jumping in. As soon as the fear factor begins to decline, so does the support for R&D. The looming possibility of another outbreak guarantees that some drug development will still occur, but only at a residual level.
The relationship between outbreaks and R&D funding has long been a feature of our vaccine development cycles—from diphtheria and polio in the 1920s and 1950s to Ebola and Zika more recently. But Zika is teaching us something new about the role of IP in the development of vaccines through outbreak-spiked funding: we need to look at IP well beyond the realm of patents operating as incentives to prospective R&D players. Transfers of IP rights between R&D entities, if poorly designed, can hinder the development and the availability of new vaccines (and of drugs in general).
We are seeing the consequences of such a bad licensing deal right now. The Army’s Zika vaccine was once considered a top candidate in the Zika vaccine race. Its initial development was supported during the early stages of the outbreak by the National Institute of Allergy and Infectious Diseases (NIAID) and the Biomedical Advanced Research and Development Authority (BARDA), an office under the umbrella of the Department of Health and Human Services. In 2016, the Army brought in a private-sector company, Sanofi, to help with the clinical development of the vaccine. Shortly thereafter BARDA awarded the company $43.2 million for phase II clinical trials. Then, in late 2016, the Army announced that it intended to license the vaccine to Sanofi on an exclusive basis.
Two provisional patents covered the Army’s vaccine—one encompassing methods of production, and another encompassing methods of preparation. Having been developed through government funding, the vaccine is subject to §207-§209 of the Patent Act, which regulate the transfer of federally owned inventions. §207 allows an agency to grant both exclusive and non-exclusive licenses. §209, however, establishes that an agency can only grant an exclusive license if exclusivity is “a reasonable and necessary incentive” to bring the innovation to the public. The fact that Sanofi had already received a substantial amount of government money to develop the vaccine makes it doubtful that exclusivity was needed in this case.
Even more troubling was the fact that, when prompted to disclose the main terms of the license, the Army indicated that no pricing provisions had been agreed upon with Sanofi. Exclusive licenses, per §209, must “promote the invention’s utilization by the public.” The lack of an affordable pricing clause, or of tiered pricing categories, seems to be at odds with this goal. Sanofi, incidentally, has a record of drug overcharging, having recently paid $19.8 million to resolve claims brought by the Department of Veterans Affairs with regard to two different contracts.
Now that federal funding for Zika R&D is over, the problems posed by the existence of a sole licensee become more acute. Even with last year’s $43.2 million boost in federal funding, Sanofi has chosen to stop all work on the vaccine. Meanwhile, several competitors across the globe keep developing other candidates. But the damage is done. All the outbreak-induced R&D at the Army is put to simmer and won’t likely be rekindled until there is a new outbreak (at which point, for all we know, the Zika virus might have mutated and the Army’s vaccine technology rendered ineffective). All the money poured into this project—including the portion of federal funding that subsidized Sanofi’s R&D—will yield no vaccine to help prevent the next outbreak.
Over the past few years, I have been studying IP inefficiencies in the context of outbreaks and outbreak-spiked vaccine R&D. The case of the Zika vaccine is not unique, but rather emblematic of the current lack of IP preparedness to support the development of drugs for outbreak diseases. Much in the same way that health systems struggle to cope with outbreaks, our IP regime works poorly when it comes to making the most out of the R&D funding brought about by an outbreak. As a consequence, we will miss out on vaccines and life-saving drugs before other public health crises arise.
Now that we are seemingly in an inter-outbreak period, it would be timely to address these problems. Here are a few simple solutions to the licensing problem: we can create a limited list of diseases that are ineligible for §207 exclusivity (with neglected tropical diseases coming immediately to mind); we should amend the disclosure requirements in §209 and have agencies disclose all terms of proposed licenses involving federally funded vaccines; and we should make the incorporation of pricing provisions mandatory in §209 exclusive licenses (at least for outbreak-related technologies).
Privatizeprofits and socializelosses. It’s the American Way. It would take a blinkered soul to imagine that such a powerful fundamental force would play out differently where IP was concerned; or public health for that matter, at least in this age of corporatist hegemony.
Viruses come and go rapidly, mutating before their next outbreak. A patent that covered only a particular vaccine for particular mutation could hardly even issue before the vaccine it covered was obsolete.
This is, of course, true. I would note, however, that if a good vaccine were administered widely enough, it could prevent epidemics from emerging, such that there would be less occasion for the mutations in question to emerge. In other words, what you really want to do is to optimize the law for speed of commercialization. Considerations such as “is the public getting a fair royalty rate” or “is the price low enough” sound like worthy considerations to require under the law, but what you find in practice is that time spent fussing over these sorts of details is time not spent on the one thing that can really make a difference to public health—getting a safe and effective vaccine to as wide a population as quickly as possible.
Whoops, this was supposed to be in response to Ned’s #1 below.
Considerations such as “is the public getting a fair royalty rate” or “is the price low enough” sound like worthy considerations to require under the law, but what you find in practice is that time spent fussing over these sorts of details is time not spent on the one thing that can really make a difference to public health—getting a safe and effective vaccine to as wide a population as quickly as possible.
And this is why spending public money on both basic R&D and manufacturing and distribution is important and vital. It’s not like we (the US) can’t afford it. We can easily afford it. It’s a win-win for everybody … except for (1) the people who want to drown the government in a bathtub so they have a better chance of grabbing all the money for themselves and (2) the people who think that scientific research is part of a government conspiracy to “discredit” their religious beliefs.
[T]his is why spending public money on… basic R&D… is important and vital.
Too true. We are dramatically underfunding basic science research right now. We are, as a society, presently “eating our seed corn” vis-a-vis R&D.
[S]pending public money on… manufacturing and distribution is [also] important…
I confess that I have not really considered that possibility. It might be a better way to go for situations like this, or it might be reinventing the wheel. It is probably worth a try. Unfortunately it is much easier to convince our Congress to craft a law that orders some third party to spend its money, rather than just raising the money through taxes and spending it directly.
Well, we used to have this postal service and the whole point of it was that it was to make sure letters and packages were delivered to people cheaply, wherever in the US they lived (even it was some remote place where hardly anybody lived). It wasn’t about “making money”. It was about a service provided by the government to people.
Having a government-administered service for medicines makes a lot of sense. It would be especially useful to have something in place before, say, a nuclear war (aka “World War III”) when there will probably be a need for lots of medicine and rapid distribution of it. A for-profit business will have different ideas about where/how to direct its services in the event of a shortage or a perceived shortage.
“a nuclear war (aka “World War III”) ”
Not happening in your lifetime. Sorry to burst your bubble but the pax americana will outlast you.
“We are dramatically underfunding basic science research right now. We are, as a society, presently “eating our seed corn” vis-a-vis R&D.”
I know where 500k in waste can be easily got in the NSF’s budget. What do you want to spend it on?
This post has great points that illustrate the current difficulties experienced by the government/public and the private company when receiving government funding and/or trying to bring a government developed product to market (e.g., the hand off). Much of the public feels that any patent/license for the private company is unnecessary as the private company received some government funds. However, there is usually a gap in funds from what was received from the government and the actual cost of bringing a new drug to market. The patent/license is used to incentivize the private company to fill in the gap with private funds. Considering the cost to bring a new drug to market is roughly in the billions (e.g., link to scientificamerican.com ), I believe the $43.2 million is a drop in the bucket compared to the cost Sanofi will have to incur to commercialize the vaccine. Eliminating the exclusivity will eliminate the incentive. However, the point brought up by the author is valid that the exclusive license does the public a disservice when the private company ceases research into the funding and/or commercialization. I would propose amending the clause in 35 USC 209 which states “the applicant makes a commitment to achieve practical application of the invention within a reasonable time,” to include language that forces expiration of exclusivity of the license if the applicant does not achieve practical application. Currently, this clause is very subjective. Decreasing the subjectivity by including language regarding expiration of exclusive licenses if Applicant ceases development or does not bring to market within a mutually agreed upon time will increase the pressure on the Applicant to bring the drug to market without losing the entire incentive for the private company to take on the risk of commercializing the drug.
There’s no such thing as a “provisional patent”.
The two provisional patent *applications* in question were filed May 31 and August 3, 2016 respectively. Neither one is visible on PAIR, so we don’t know the content of either. Nor do we know whether either one served as the basis for an application (US non-provisional or PCT) that will publish at 18 months and has the potential to eventually mature into an actual, enforceable patent.
So at the moment, there’s no patent, and we don’t even know if the provisionals meet the requirements of 35 USC 112. Which means that right now the licensing deal is meaningless vis-a-vis third parties.
All in all, misinformed conjecture dressed up as fact. When did the bar to getting a professorship drop so low?
Re your last paragraph, legal academic authors may well be legal experts in their areas of special expertise, but too often there seems to be a serious barrier to, or lack of interest in, communications or reviews of article drafts with others who extensively practice in legal areas their works touch on.
Seems like there was some interest in getting reviews/comments here or else it wouldn’t have been posted.
Here are a few simple solutions to the licensing problem: we can create a limited list of diseases that are ineligible for §207 exclusivity (with neglected tropical diseases coming immediately to mind);
This is a solution to the problem if there was a line of companies waiting to act as manufacturer and distributor for this vaccine, and the only thing standing in the way was the ink on the contract with Sanofi. Is this the case? It was my understanding that other companies were free to jump in once Sanofi cut loose. If so, it would appear that the exclusive license agreement was not the rate limiting step. Rather, the shoddy way that the Army (and grandstanding politicians, who were the motivating force behind the Army’s erratic behavior) treated Sanofi that was the real ruin of the deal. What other company would want to pick up where Sanofi left off, having seen what an unpleasant business it was to do this sort of deal?
[W]e should amend the disclosure requirements in §209 and have agencies disclose all terms of proposed licenses involving federally funded vaccines; and we should make the incorporation of pricing provisions mandatory in §209 exclusive licenses (at least for outbreak-related technologies).
Pause and consider here, why did this deal not come off. It seems to me that the reason was that Sanofi did not believe that it could not make a profit under the terms on offer. If there is no profit to be made, then profit-making entities (who control the overwhelming majority of means-of-production and -distribution for vaccines) are not going to involve themselves. Does it not seem, therefore, somewhat counterproductive to make it even less likely that the company can make a profit from a deal done with the government? This seems likely to result in even fewer new government-developed vaccines and treatments coming into wide-spread distribution.
The fact that Sanofi had already received a substantial amount of government money to develop the vaccine makes it doubtful that exclusivity was needed in this case.
This is a total non sequitur. Vaccine production is expensive and potentially fraught with product liability issues. In other words, it requires a lot of capital (both up-front and during the course of distribution). This is an instance where quantities really matter. Most of us would call $10 million “substantial,” but that does not mean that it is enough. It is entirely possible, in other words, for the amount received to have been “substantial,” and still insufficient to make the work supportable. If one is to conclude that it is “doubtful” that exclusivity was needed, one really needs to do the math (actual numbers concerning amounts received) and “show your work,” so to speak. Otherwise this is just speculation, not argument.
Exclusive licenses, per §209, must “promote the invention’s utilization by the public.” The lack of an affordable pricing clause, or of tiered pricing categories, seems to be at odds with this goal.
I cannot really agree. To have any degree of commercial distribution does more to “promote the invention’s utilization by the public” than to scotch the deal because price terms might be higher than Sen. Sanders imagines to be ideal. To kill the deal because of an objection to prices is to make the perfect into the enemy of the good.
Sanofi, incidentally, has a record of drug overcharging, having recently paid $19.8 million to resolve claims brought by the Department of Veterans Affairs with regard to two different contracts.
If the government finds that Sanofi is not a reliable contract partner, the answer is not to do business with them. I cannot see what good end is served by starting a business venture with them, and then yanking them around until eventually cutting them loose, citing at the end the point that Sanofi had violated contracts unrelated to this contract. This looks less and less like a problem with Sanofi, and more and more a problem with the government, not being able to communicate to the right hand what the left hand is doing.
Good points, Greg. It’s evident that you’re a lawyer working in the real world and not ensconced in an ivory tower.
Good points Greg.
Atari Man,
I reflect that your “Ivory Tower” comment here (and level of professorship comment above), while apparently quite accurate, may be deemed as “offensive.”
So while I see the merit is poking those who have not employed enough critical thinking (and likewise, challenging the provided narrative), your post may be considered by some (named – my gosh, they used their real names so what they say MUST be true) to be of the level to earn you being “outed.”
So anon got outed? Anybody want to catch me up?
This article was a bit difficult to follow given that invention (and innovation) so often does not follow a straight road.
There is a reason why the analogy of a parking lot as opposed to a grid of streets is a more apt analogy for what a patent system should look like.
Viruses come and go rapidly, mutating before their next outbreak. A patent that covered only a particular vaccine for particular mutation could hardly even issue before the vaccine it covered was obsolete.
To provide incentives for companies to invest in vaccine “research” on their own dime, they must be assured of exclusivity. I do not know if the patent system that only provides protection for inventions is the best vehicle for providing required exclusivity. Perhaps we ought to consider the kinds of patents issued by the kings of England prior to the Statute of Monopolies as something we need to consider in the case of vaccines. These patents, otherwise known as the odious monopolies, typically extended for thirty-one years, required royalty payments to the government, and required the assistance of the Atty. Gen. to prosecute infringers. But they also need “policing” if the patent owner provided poor quality or insufficient quantity. That is where the Privy Council really did its work.
Comments are closed.