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Will Patent Waivers Hurt COVID-19 Vaccine Companies?

By Brian Orelli, PhD and Keith Speights - Updated Jun 26, 2021 at 10:20PM

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Complications should mitigate any issues the companies may face.

In this video from Motley Fool Live, recorded on May 10, contributors Brian Orelli and Keith Speights discuss the potential for the Biden administration to waive patent rights for vaccines manufactured by Moderna (MRNA -5.22%)Johnson & Johnson (JNJ 0.12%), and Pfizer (PFE 0.41%) and BioNTech (BNTX -5.42%). While the risk may seem daunting, investors should keep the bigger picture in mind: The patent rights may never be rescinded, and even if they go away, other companies may be unable to manufacture the vaccine off-patent.

Brian Orelli: Last week, the Biden administration endorsed a proposal to waive COVID-19 vaccine patent rights. How big of a deal is this for the current vaccine makers like Moderna, BioNTech, Pfizer, and Johnson & Johnson?

Keith Speights: I really don't think that this is as big of a deal as some people are making it out to be. Certainly, not as big of a deal as the declines for the stocks showed last week.

I noticed that Moderna's CEO said publicly that he didn't lose a minute of sleep over this news. I think he's right; he shouldn't have lost any sleep. His reasoning was that there are other companies that, if they had access to the technology, they're not going to have the expertise to make the messenger RNA vaccines that Moderna makes. His thought was, "Look, even if this happens, we're not going to be threatened all that much." I suspect that he is right.

Now, Pfizer's CEO, Albert Bourla, did express some concerns. He wrote in a statement that this proposed intellectual-property-rights waiver could actually create more problems than it would solve. Bourla noted that infrastructure really isn't the bottleneck for Pfizer; it is the availability of raw materials. He thinks that this IP waiver would kick off a global scramble for those raw materials. The companies that don't have much expertise developing these vaccines could potentially disrupt the supply chain for companies like Pfizer that do have the expertise.

It wouldn't surprise me if that scenario that Bourla described might would happen to some extent. However, I would think that companies like Pfizer and Moderna would likely be able to pay a lot more for these raw materials and secure the suppliers they need and put the other companies that are trying to make these vaccines on their own at a severe disadvantage. But if that happened, I would think that Pfizer, Moderna would probably have to hike their prices to countries like the U.S. that could pay up.

Bourla also expressed some concerns that this move could provide disincentives to companies to take risks in the future. My thought on that, though, if it's only a temporary thing, it probably wouldn't be too much of an issue. But I think the big story [laughs] here is that this is probably all much ado about nothing, because Germany has already come out and said they are opposed to granting this temporary waiver and they are a member of the World Trade Organization, and from what I understand, Brian, they have veto power like other WTO members do. If Germany vetoes this, then all of this talk is a waste of time. [laughs] So I don't think this is going to be a big deal. I don't think it's going to go through, but even if it does, I just don't think this is a huge deal for Pfizer and Moderna and some of the other big vaccine makers.

Orelli: If it does go through, do you think it's a slippery slope? This is a pandemic; that makes sense. But then when you start doing it for cancer drugs that are really expensive or the insulin because people need it to live? That sort of thing.

Speights: I think it could be. I don't think it will be. The Biden administration is caving a little bit here, I think, to some pressure from within the Democratic Party. I don't think they would be -- I'm thinking any presidential administration in the U.S. -- wouldn't be in favor of just nearly [laughs] willy-nilly taking away patent rights. I think they realize that would undermine the foundation of our whole structure of drug development and that it would cause a lot more problems than it would solve. Maybe I'm being too optimistic there, Brian. I don't know about what you think, but I just don't think that's going to happen.

Orelli: Yeah. I guess it just depends on the state of the Congress and who's the president. I think right now, we're so divided that I don't think anything will get through Congress in its current state and probably in its future state. I think you're right, but I do worry about setting up a precedent. Although I think we've already had this one. They waved the patent rights on HIV drugs, and that didn't cause a major storm of inactivating patents over the last 20 years or however long its been since they did it. I think we're probably OK, but I just wanted to bring that up as a point.

Speights: Yeah. Personally, I don't think it's a good move. I think it's better to respect all intellectual-property rights and come up with a better solution. I do agree that more vaccines need to be made available to Third World countries and developing nations. I think there's probably a better way.

Orelli: Yeah. I think they're just letting the companies ramp up their production. Moderna is looking at 3 billion doses next year. I think that if we just let them go on [laughs] their own and maybe even support them financially, I think that should be sufficient to get us where we need to be.

Brian Orelli, PhD has no position in any of the stocks mentioned. Keith Speights owns shares of Pfizer. The Motley Fool recommends Johnson & Johnson and Moderna Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
$49.77 (0.41%) $0.20
Johnson & Johnson Stock Quote
Johnson & Johnson
$170.41 (0.12%) $0.21
Moderna, Inc. Stock Quote
Moderna, Inc.
$173.39 (-5.22%) $-9.55
BioNTech SE Stock Quote
BioNTech SE
$160.12 (-5.42%) $-9.18

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