Reports released yesterday indicate that President Joe Biden intends to temporarily suspend the pharmaceutical patent system for COVID-19 medicines during the pandemic. This is in a bid to increase production around the world, however COVID-19 manufacturing is already at full capacity. 

This move threatens to rock the foundations of the pharmaceutical sector and will have a detrimental impact on the quality control of future pharmaceutical products.  

In our view, this move is a profound error of judgement and a simplistic measure that, if enacted, could be damaging for long term innovation. 

The patent system is at the heart of the pharmaceutical and biotech industry. Given the huge costs and risks in drug discovery and development, the system is designed to encourage and reward innovation. Many pharmaceutical products cost minimal amounts to manufacture and the patent system enables companies that produce new treatments to be rewarded for risks taken that drugs might fail in clinical trials. 

Historic precedent is, however, for large players in the sector not to excessively profiteer in times of crisis and also to support developing nations to gain access to critical medicines. The first polio vaccine was not patented, Merck developed scale penicillin manufacturing in the world war, and HIV medicines are sold at cost to many nations. 

Indeed, both AstraZeneca, in combination with Oxford University, and J&J have agreed to supply COVID-19 vaccines at cost. There are ways in which large pharmaceutical companies such as these can be rewarded for such actions by regulators and governments in the future. There is an argument that these companies should maintain responsibility for product quality control, even if outsourced to other manufacturers. Ashburton Global Leaders Fund holds positions in AstraZeneca and J&J.

In our view, there are better ways to exert pressure on other large pharmaceutical companies with COVID medicines, rather than to threaten the very foundations of the industry. 

If this is enacted, smaller players such as Moderna and Novavax will be shaken to the core, and future investments in the sector will be threatened.