- Posted on: Apr 2 2020
By Michael Lehr
Lehr is an associate practicing in Dunlap Bennett & Ludwig’s Richmond Office
[Apr. 2, 2020 Richmond] The novel coronavirus COVID-19 has plunged the U.S. into a global pandemic. The virus continues to cause massive disruptions in all facets of societies around the world. The federal government’s current “social distancing” efforts are in effect in every state, with over 30 states had issued a more restrictive “stay-at-home” orders as of the time of this article. However, while these measures are to slow the spread of the virus, the battle is not won until a successful vaccine can be tested, manufactured, and distributed to the populace at large. The question then comes, who sets the price of that vaccine?
Researchers in pharmaceutical labs across the U.S. are engaged in a race against time to complete clinical trials for an effective vaccine against COVID-19. Human trials of several potential vaccines have already begun. For example, the biotech firm Moderna received worldwide coverage after administering its newly developed vaccine on human subjects back in mid-March. Typically, an organization developing a similar vaccine spends millions of dollars over several years extensively testing a drug’s effectiveness and potential dangers before applying for approval with the Food and Drug Administration (FDA) and filing for a utility patent. However, due to the exponentially increasing rate of COVID-19 infections, these timelines have been slashed—commentators have estimated that the release of a COVID-19 vaccine could come as quickly as in the next 18 months. While this is undoubtedly good news, there is the additional consideration regarding whether the organization which first completes its testing will receive the full gambit of patent protections which it would typically be entitled to.
U.S. patent law affords the patent holder numerous protections, typically described as a miniature monopoly over the patented invention for a limited period. The patent holder can exclude others from making, using, selling, and offering to sell or import the claimed invention. This right applies to all manners of invention, including lifesaving medical technology, such as the COVID-19 vaccine. This means that the vaccine producer could charge whatever price it deemed appropriate while withholding the formula from competitors—and with supply and demand in its favor, the bidding war could be astronomical. That is unless the federal government steps in.
Article 1, Section 8, Clause 8 of the U.S. Constitution grants Congress the power to promulgate certain laws for the benefit of inventors through granting patents. The government grants these protections to promote investment and progress in the useful arts and sciences. However, the government has the authority to effectively seize patents if deemed necessary and when certain factors are met. There are two mediums for this effective seizure: (1) the Bayh-Dole Act of 1980, and (2) 28 U.S.C. § 1498.
In the Bayh-Dole Act Congress stated that the Act’s purpose was to promote the utilization of patents developed by federally funded sources—in other words, the government didn’t want patented inventions which it funded to sit idle. One section of the Act provides the government “march-in” rights which allow the government to require the patent holder to license the invention to a “responsible applicant.” 35 U.S.C. 203.
The Act gave several applicable scenarios, for example: if “necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees.”
35 U.S.C. § 203(a)(2). However, some legal skeptics believe the government is unlikely to use this method as a manner for compelling the pharmaceutical companies to act. This is because the law allows the government to compel licensing to applicants but does not allow the government to unilaterally lower the invention’s price and/or set the license fees. Moreover, this only applies to inventions from federally funded research—meaning an independent lab would not be affected. Finally, the government has never actually utilized this tool before and has appeared unwilling to do so in the past.
Therefore, the second legal vehicle appears to be the more likely method. Section 1498 more broadly allows the government to use or manufacture a patented invention for the “reasonable . . . compensation” of that use or manufacture. 28 U.S.C. § 1498(a). Thus, whichever laboratory reaches the finish line first will immediately find itself at the negotiating table with the federal government to set the payment structure while releasing its newly patented formula to all capable vaccine manufacturers. Unlike the Bayh-Dole Act, the government has at least threatened to use this procedure before, such as in response to the 2001 anthrax attacks. At that time the government threatened to import life-saving treatment for anthrax exposure from overseas, despite producer Bayer AG’s valid U.S. patent. As a result of the government’s threat, Bayer AG quickly lowered the drug’s price. Knowing that the government has considered relying on § 1498 in this manner before, it appears more likely that it will rely on the law again, if necessary, to respond to COVID-19. Previously, the government has refused to utilize either of these methods to combat high drug prices to not dissuade investment in the highly competitive pharmaceutical field. The idea being that inventors should be adequately compensated for their inventions, thus spurring innovation and investment. Repeated government involvement or compulsory licensing in the name of public health would decimate this long-held legal protection. However, due to the suffering and disruption to daily life that COVID-19 currently presents, some have already proposed that such severe action may be necessary.
It is important to remember that these discussions are quite premature at this point. This is because we are unfortunately still at least a year or more away from such a vaccine. Likewise, it would not be unheard of for the successful laboratory to follow the lead of Dr. Jonas Salk who successfully developed the vaccine for polio in the 1950s then chose not to patent the formula. COVID-19 is this generation’s comparable pandemic, and the federal government may soon be forced to take these drastic measures to ensure that a vaccine is mass-produced and immediately available to combat the disease.