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Why Moderna Stock Dropped Today

By Joe Tenebruso - May 5, 2021 at 7:27PM

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Pharmaceutical stocks are facing a major new threat.

What happened

Shares of Moderna (MRNA 4.97%) fell 6.2% on Wednesday after the Biden administration said it would support easing patent protections on coronavirus vaccines. 

So what

Many countries have been unable to obtain enough vaccine doses to slow the spread of COVID-19. With their case counts surging, leaders in countries such as India and South Africa have requested a waiver on intellectual property protections in order to boost the production of these life-saving drugs around the world. 

A person is rotating a wooden block from a side labeled low to a side labeled high, next to other wooden blocks that spell out the word risk.

Moderna and other vaccine makers' revenue streams are now at greater risk. Image source: Getty Images.

"This is a global health crisis, and the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures," U.S. trade representative Katherine Tai said. "The administration believes strongly in intellectual property protections, but in service of ending this pandemic, supports the waiver of those protections for COVID-19 vaccines." 

The U.S. will now participate in negotiations at the World Trade Organization (WTO) to work out the details of an agreement with other member nations. 

Now what 

Moderna and other pharmaceutical stocks fell on the news. Losing patent protection for their COVID-19 vaccines, even temporarily, could cost drugmakers sales and profits they otherwise could have made.

Worse still, the U.S. government may be setting a dangerous precedent. If healthcare companies can't rely on the patents they earn, they may be less likely to invest in costly research and development programs. And that, in turn, could result in fewer life-protecting medicines being produced in the coming years.

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