Part IV - Innovation During COVID-19

Introduction

I. Glenn Cohen

The three chapters in Part IV all deal with innovation in two senses: (1) the innovation ecosystem that gave us COVID-19 vaccines, diagnostics, and anti-virals; and (2) the innovation in the structures that produced those products. Behind the scenes of these chapters, I would argue, is a related but distinct conversation: Are these flaws in the legal system that the COVID-19 pandemic exposed or is this a story about how an exceptional “perfect storm” brought on by the COVID-19 vaccine foundered on the shoals of otherwise good regulatory structures?

In Chapter 15, “Innovation Law and COVID-19: Promoting Incentives and Access for New Health Care Technologies,” Rachel Sachs, Lisa Larrimore Ouellette, W. Nicholson Price II, and Jacob Sherkow give a 10,000-foot view of the legal structures that led to these developments and what can be changed. They use the case of COVID-19 testing to show the way conflict and lack of coordination in the legal regimes of three sub-agencies of the Department of Health and Human Services – the Centers for Disease Control and Prevention (CDC), the Food and Drug Administration (FDA), and Centers for Medicare and Medicaid Services – led to problems in the production, approval, and quality of COVID-19 diagnostic tests in the first phase of the pandemic. While interagency problems are not perhaps unique to COVID-19, as more cooperation between agencies/sub-agencies would always be helpful, it is fair to characterize the contribution of this chapter as being about COVID-19’s perfect storm, or maybe pandemics more generally, rather than a general critique of how these agencie/sub-agencies work together. The authors then examine the FDA’s emergency use authorization (EUA) grants for several COVID-19 treatments, most notably hydroxychloroquine, remdesivir, and convalescent plasma. Here, the critique is more about how COVID-19 shines a spotlight on a deep, preexisting tension – the way in which faster approval or access programs, not just EUAs but the expanded access program, affect “the ability to generate high-quality clinical trial data to confirm or reject preliminary evidence of safety and efficacy” and the need for these programs to be designed with this tradeoff in mind. The final section of this chapter, which looks at government funding for vaccine development in COVID-19, falls between the two poles described here. On the one hand, the authors recognize that Operation Warp Speed’s success was in part the result of an unusual configuration in medical research, where “public funding of COVID-19 vaccines focused more on covering the final stages of development and manufacturing costs, building on substantial private investments in early-stage research.” On the other hand, some of what they discuss, such as advance purchase commitments as an innovation lever, could be more easily adapted for the next pandemic, which they ominously suggest is certain to come eventually.

In Chapter 16, “Addressing Exclusivity Issues During the COVID-19 Pandemic and Beyond,” Dr. Michael Sinha, Sven Bostyn, and Timo Minssen focus on intellectual property rights related to COVID-19 vaccines and therapeutics with a particular focus on regulatory exclusivities. They describe, in general, the marketing authorization rules in Europe, especially the conditional marketing authorization process, and compare them with the EUA pathway in the United States. They then show how these pathways operated for vaccines and therapeutics. For vaccines they find a story in both places that is fairly exceptional. As they note, “[v]accine R&D over the last few decades has largely occurred within small and medium-sized companies” and successfully navigating clinical trials “is often dependent on additional federal funding or acquisition by larger firms,” with many products languishing if “funding runs dry or large vaccine manufacturers decline to conduct further studies or pursue” authorization. The COVID-19 vaccine situation is very different. As in the previous chapter, the authors zero in on public funding and advance purchase commitments, but they also point to the intellectual property protection over mRNA vaccine platforms, patent libraries, and trade secrets as creating a much more secure environment for the pioneer companies here. But a quirk of how exclusivity periods run in the United States and Europe make a big difference for COVID-19 in comparing the two regimes: in Europe, the time-limited exclusivity period begins to run when conditional authorization is given, whereas in the United States the period is not triggered by the EUA, only by the Biologics Licensing Application (BLA), which they argue disincentivized the companies to rush to get a BLA approval (often thought of as a “full approval” by the public). They also review how voluntary sharing of technology and data, patent pools, and compulsory licensing have worked out in ensuring equitable vaccine access to poorer countries; the short answer, they conclude, is not very well. Here, it is hard to diagnose whether this represents a persistent problem baked into the system or one that is particularly bad for COVID-19 vaccines. The combination of large numbers of patents, the complexity of the technology and the trade secrets surrounding it, and the vaccine nationalism which prompted rich countries to make sure to secure their share first all made COVID-19 a bad if not worst-case scenario. Some of the changes they examine might be more palatable with respect to other global health needs or other technologies.

In Chapter 17, “Vulnerable Populations and Vaccine Injury Compensation: The Need for Legal Reform,” Katharine Van Tassel and Sharona Hoffman examine the strange situation arising from the fact that the United States runs two distinct programs relevant to vaccine injuries (a sad but inevitable result of even very safe vaccines administered to so many): (1) the National Vaccine Injury Compensation Program (VICP), which covers most vaccines given in the United States; and (2) the Countermeasures Injury Compensation Program (CICP), far less generous and more difficult to access, which applies when vaccines are administered as countermeasures. Importantly, during the period when vaccines in the United States were administered under an EUA status, as they were for much of the early months of vaccine availability, those injured could access compensation only under the CICP. The authors nicely show how the CICP coverage interfaced problematically with several – if not exceptional then at least fairly distinct – features of the COVID-19 vaccination scenario: high levels of vaccine hesitancy in poor and minority communities, and the fact that these same populations were both at high risk of COVID-19 infection and also the least financially able to withstand a vaccine-related injury.

The authors argue that an important innovation in policy is needed for future pandemics – a vaccine-specific carve-out (i.e., not drugs or devices) that would “establish that all vaccines that the FDA approves and the CDC recommends to ameliorate a [public health emergency] will be covered by the VICP, regardless of whether they are to be administered to pregnant women or children,” thereby shifting all EUA-approved vaccines into the program.

The pandemic is not over, but it is entering a phase where the public is more interested in reviewing what has happened thus far. There is increasing talk in the United States of something like the 9/11 Commission, a full review of what we did and how it went. These chapters are an excellent guide to beginning that discussion. They also present the possibility of leveraging what went wrong with COVID-19, especially regarding access for the worst off globally, into more systemic changes to our innovation ecosystem.

15 Innovation Law and COVID-19 Promoting Incentives and Access for New Health Care Technologies

Rachel E. Sachs , Lisa Larrimore Ouellette , W. Nicholson Price II , and Jacob S. Sherkow

I Introduction

As the devastating COVID-19 pandemic first swept the globe, it posed a crucial test of biomedical innovation institutions. Containing the virus required developing new technologies including diagnostics, pharmaceuticals, and vaccines; manufacturing them at enormous scale; and rapidly distributing them globally. This, in turn, required mobilizing and coordinating scientists, industry, and government at levels not seen since World War II. Underlying the successes and failures of these efforts was the complex legal architecture of biomedical innovation and access.

This chapter considers how this legal architecture both encouraged and impeded the development and allocation of new technologies in the fight against COVID-19 – and provides lessons about how it might be better deployed for future pandemics. This chapter focuses on three key areas of innovation law: biopharmaceutical regulation; health care reimbursement; and government subsidies for research and development (R&D). The first part of this chapter discusses the need to coordinate government agencies in a public health emergency, especially pertaining to developing, validating, and distributing diagnostic tests. The second part counsels agencies to ensure that early access to therapies in a public health crisis does not obviate developers’ ability (or incentive) to generate robust information about such therapies’ safety and efficacy. The third relays lessons about the successes of incentives for COVID-19 vaccine development – and their failures for vaccine distribution. Addressing the flaws in US biomedical innovation institutions that have been highlighted by COVID-19 will help avoid repeating these failures during the next pandemic.

II Coordinating Agencies in a Public Health Emergency

Fostering interagency coordination at the federal level is a key element of innovation policy, driving both incentives to develop new products and allocation mechanisms to disseminate them.¹ Early in the COVID-19 pandemic, however, federal agencies failed to collaborate and coordinate in the development and rollout of diagnostic testing. As a result, public health officials were unable to identify where the virus was spreading, hindering their ability to contain it. This lack of interagency coordination resulted in unnecessary delays in the dissemination and scale-up of accurate tests for COVID-19.

A Delayed COVID-19 Diagnostics Due to a Lack of Interagency Coordination

The delayed development and rollout of diagnostic testing for COVID-19 illustrates problems that can arise when interagency relationships are not carefully considered in the innovation process. Three federal agencies – the Centers for Disease Control and Prevention (CDC), the Food and Drug Administration (FDA), and the Centers for Medicare and Medicaid Services (CMS) – should have worked together from the beginning of the pandemic to facilitate the creation of more robust testing capacity. Instead, the actions of each agency independently slowed the development and scale-up of diagnostic testing.

In January 2020, as concern regarding the virus that would later be named SARS-CoV-2 began to emerge in the United States, the CDC developed a diagnostic test for the disease and obtained the FDA’s permission to share the kit with state public health laboratories. However, the CDC quickly discovered a problem with the kits’ negative controls and instructed states to stop using them.² The CDC was unable to solve this problem for more than a month. Although the agency finally announced, on February 28, that states could restart testing using the CDC kits, many states would not begin doing so until March. Although there was certainly communication between the CDC and its fellow health agencies – the FDA had granted emergency authorization for the test in early February – there were also periods of miscommunication. Perhaps most notably, the CDC temporarily blocked an FDA official from visiting the agency to help address the testing issues, reportedly due to “a scheduling misunderstanding.”³ Acting separately, the FDA likely also inadvertently slowed the emergence of nationwide testing capacity. Under an emergency declaration from Health and Human Services (HHS) Secretary Alex Azar, the FDA used its emergency use authorization (EUA) powers to permit test manufacturers to enter the market with fewer pre-market review requirements than usual. But even these more limited evidentiary requirements slowed products’ entry into the market, particularly given both the FDA and companies were dealing with a novel pathogen. Companies spent weeks working with the agency before receiving their EUAs, during which the virus was spreading largely unseen. For laboratory-developed tests, such as those developed by academic medical centers (as contrasted with firms who make kits for others’ use), the FDA’s EUA requirements represented an increase over their usual level of review,⁴ further slowing dissemination. There are, of course, important reasons for the FDA to maintain evidentiary standards during a pandemic, as later demonstrated by the FDA’s overly permissive authorizations for antibody tests.⁵ But the FDA’s heightened scrutiny for diagnostics at the beginning of the pandemic meant that other laboratories could not readily fill the space left by the CDC’s delays.

At the same time, laboratory certification requirements imposed by the CMS likely also limited the number of labs even eligible to obtain FDA authorization for their own tests. The CMS independently regulates clinical laboratories under the Clinical Laboratory Improvement Amendments of 1988 (CLIA). Many academic laboratories with the technical ability to perform COVID-19 diagnostic tests could not do so legally because they lacked CLIA certification and found it challenging to work with labs possessing such certification.⁶ Stronger coordination between these three agencies could have helped address these delays. As head of the parent agency for the CDC, the FDA, and the CMS, HHS Secretary Azar could have worked to mediate disputes and identify where agency policies were delaying the diagnostic rollout. Reporting suggests that the CDC and the FDA waited weeks for Secretary Azar to even approve fallback plans for diagnostic testing.⁷ More actively, Secretary Azar could have directed the CDC and the FDA to move forward collaboratively to adapt and authorize the public testing protocol developed by the World Health Organization (WHO), which was in use in many other countries.⁸ White House officials could also have taken a stronger hand in coordinating issues that arose.

However, it is possible that these officials were not sufficiently aware of the different legal issues at play – FDA Commissioner Stephen Hahn and CMS Administrator Seema Verma were not even added to the COVID-19 Task Force until well after these testing failures were known.

B Encouraging Interagency Cooperation Going Forward

Establishing strong norms of interagency coordination can help avoid harms like these and others that have arisen during the pandemic (such as those related to shortages of N95 respirators).⁹ Additionally, such coordination can be used to accomplish more affirmative innovation policy goals. Different policymakers have different tools for encouraging interagency coordination, and different strategies may be useful depending on the situation and the goal to be achieved.

Congress can encourage interagency collaboration either by requiring it or just by signaling that collaboration is an important policy goal. For instance, Congress requires the National Institutes of Health (NIH) to report annually on its activities “involving collaboration with other agencies” within HHS.¹⁰ Some of these activities – of which there are several hundred – are congressionally mandated, such as the Interagency Pain Research Coordinating Committee.¹¹ But most of the NIH’s interagency collaborations are not legally required. Instead, Congress has emphasized the importance of interagency collaboration while leaving the areas and form of such collaboration largely to the expert agencies.

Administrative solutions might differ depending on whether structural barriers, personnel, or political considerations are the primary impediments to coordination. Where structural barriers exist, options might involve forcing interagency collaboration either through HHS (as the parent agency for many relevant agencies) or the White House (where a whole-of-government response is needed).¹² A White House-led initiative has been effective at driving innovation in some areas of technology where there is sufficient political will, such as with the focus of Operation Warp Speed on vaccine development, discussed further in Section IV.

Generally, it will be easier to foster novel interagency collaborations if there is already a culture of cooperation within each agency. The more existing collaborations there are, the more potential channels there may be for communicating potential interagency challenges going forward.

III Developing New Evidence While Allowing Experimental Use

The FDA balances the goal of making new health care technologies quickly available to the public with the need for sufficient evidence that those technologies are safe and effective – evidence which is costly and time-consuming to gather. Striking this balance is contentious and has been the subject of substantial scholarship. The pandemic placed greater demands on the agency to make decisions on the basis of very little evidence, sometimes in ways that jeopardized the development of further evidence on the topic. In particular, the agency allowed access to COVID-19-targeted therapeutics using both its Expanded Access (EA) and EUA pathways, each of which requires much lower evidentiary standards than traditional approval or clearance.¹³ These cases illustrate the importance, even when prioritizing speed, of ensuring that high-quality data will continue to be collected and evaluated once technologies are available.

A Quick Authorizations and Limited Evidence for COVID-19 Therapeutics

The FDA granted EUAs for several COVID-19 treatments, most notably hydroxychloroquine, remdesivir, and convalescent plasma. The standard for granting an EUA is low; under 21 USC § 360bbb-3, the FDA must determine, based on the “totality of the scientific evidence” available, that it is “reasonable to believe” that the drug “may be effective” in treating the disease and that the known and potential benefits outweigh the known and potential risks.

This evidence may – or may not – include randomized controlled clinical trials, which are key elements of the typical FDA approval standard.

After the FDA issued an EUA for hydroxychloroquine to treat COVID-19 on March 28, 2020, prescriptions soared.¹⁴ The EUA came after President Trump repeatedly touted its benefits based on relatively little evidence, leading to it being asked whether there had been political pressure on the FDA. Nevertheless, when the FDA issued the EUA, multiple clinical studies of hydroxychloroquine were ongoing, presenting the agency with another opportunity to look at the drug’s safety and efficacy, and potentially revise its decision. Once those studies finished, the evidence was strong that hydroxychloroquine does not work to treat COVID-19; indeed, it is affirmatively harmful in some instances.¹⁵ On June 15, 2020, the FDA revoked the EUA on the basis of these data.

Convalescent plasma presents an even more troubling story. On April 3, 2020, the FDA permitted the use of convalescent plasma in clinical trials as an Investigational New Drug and immediately launched a nationwide EA program. Under the program, patients anywhere in the United States could receive convalescent plasma through the Mayo Clinic without participating in clinical trials.¹⁶ Unsurprisingly, faced with the choice between participating in a clinical trial – and running the risk of receiving a placebo – or definitely receiving convalescent plasma, patients overwhelmingly participated in the EA program. Accordingly, randomized controlled trials floundered as they were unable to enroll enough patients, and the efficacy of convalescent plasma remained unvalidated for months.¹⁷ Despite this, in August 2020, on the basis of weak observational evidence – and under substantial pressure from President Trump – the FDA issued an EUA for convalescent plasma.¹⁸ Evidence remains minimal and mixed; several studies found no significant benefit from plasma,¹⁹ though one study published in January 2021 found positive effects for plasma when it was administered very early in the course of infection.²⁰ In February 2021, the FDA narrowed the EUA for convalescent plasma based on evidence that it was useful only in limited circumstances.²¹

B Planning for Adequate Data Collection After Approval or Authorization

The tension between speed and evidence in FDA approvals is not new.²² For some time now, the needle-threading solution has been to pair various forms of faster access with commitments to generate information after access has already begun.²³ The COVID-19 pandemic and its stumbles along this path cast this strategy into a harsher light. In emergency contexts, policymakers should ensure that the FDA is considering the impact of its access decisions – whether an EUA, an EA program, or something else – on the ability to generate high-quality clinical trial data to confirm or reject preliminary evidence of safety and efficacy. Although some emergencies may end before such high-quality data are ever generated – witness the short-lived Middle East Respiratory Syndrome outbreak of 2012 – policymakers should not assume such a flameout.

Problematic incentives hamper both the generation and the use of post-market information generally. For traditional biopharmaceutical products made by a single manufacturer charging supra-competitive prices, incentives to generate costly information on safety and effectiveness are sharply lowered once the product can be sold. Additional positive information on safety or efficacy in subpopulations is realistically unlikely to lead to greater sales. Negative information, meanwhile, could lead to problems, lawsuits, or even withdrawal from the market. These structural problems loom larger in emergencies where products are allowed on the market with less evidence in the first place.

On the use side, the FDA has historically faced difficulty acting on negative post-market information.²⁴ Patient groups exert substantial pressure against withdrawing drugs from the market. And in the case of EUAs for a second use of an existing product, such as hydroxychloroquine, withdrawing an EUA does not even remove the product from the market. Doctors remain free to prescribe the product off-label.

At least two potential avenues exist to improve the generation of post-market information, especially in emergencies. The first, and most straightforward, is a simple mandate. The agency should release clear statements about what circumstances will lead EUAs to be expanded, revoked, or modified. Such statements should include not only triggers for what evidence will lead to what result (e.g., certain efficacy signals leading to expansion, or certain safety signals leading to revocation), but also how much evidence must be generated.²⁵

Unfortunately, such mandates work much better for products with a single, identified manufacturer. The Moderna and BioNTech-Pfizer vaccines fit neatly into this category; the companies have incentives to ensure that the vaccines remain on the market and are actually approved rather than just authorized, with the difference impacting reimbursement and potentially vaccination mandates. For products made by many entities, such as hydroxychloroquine (generic manufacturers) or convalescent plasma (hospitals), incentives are diffuse and a mandate would not have a clear focus. It is hard to see whose behavior would change had the FDA made the convalescent plasma EA program or EUA conditional on the timely generation of high-quality clinical trial data. Data on convalescent plasma were limited by the lack of interested research participants (as several clinical trials closed due to inadequate enrollment), not a lack of clarity or incentive regarding the scope of their EUAs.

Second, government investment could make information generation less costly so that incentives to generate information do not need to be as strong. Research grants can support the costs of pandemic-focused clinical trials, for instance – a non-excludable knowledge good when conducted on already marketed products or generic drugs.²⁶ But, as noted, trials must also be able to enroll sufficient patients, something that can be aided with government coordination.²⁷ Reducing the costs of generating higher-quality observational data could also help. Although observational data are typically less dispositive than randomized controlled trial data, learning health systems that systematically collect large amounts of data can help fill evidentiary gaps, particularly in pandemic emergencies when controlled studies must compete for finite patients over short time horizons. Infrastructure for the ongoing collection of such data could help reduce the information problem of rapidly authorized therapeutics. Finally, policymakers could facilitate the use of intermediate protocols that are less costly than patient-level randomization but generate better data than observational studies, such as randomization at the hospital or county level.

Sometimes, though, the tension between the need for high-quality data and the need for broad, early access to novel therapeutics may be irreconcilable. Indeed, for COVID-19 vaccines, the FDA seems to have reached exactly this conclusion, announcing EUA standards in the summer of 2020 that foreclosed the possibility of early access based on the typical relaxed EUA data standard. While policymakers can improve the generation of post-market data, sometimes the best answer is to do it right the first time.

IV Rewarding Vaccines for Diseases with Pandemic Potential

Vaccine development in the United States is rife with both political and market failures.²⁸ But in the COVID-19 context, the record-breaking speed of vaccine development has been the biggest success story. Most notably, policymakers aggressively implemented several reward structures to advance the development and dissemination of new vaccines. Unfortunately, SARS-CoV-2 will not be the last devastating infectious disease, so it is worth considering how the approaches used in this context can be applied more broadly.

A COVID-19 Vaccines at Warp Speed

Effective COVID-19 vaccines reached the public with record-breaking speed. Less than a year after China announced that an outbreak in Wuhan was caused by a novel coronavirus in January 2020, the FDA issued EUAs for the first two vaccines, from BioNTech-Pfizer (on December 11) and Moderna (on December 18). By contrast, the development of most vaccines takes over a decade, while the prior record was four years (for mumps).

How were COVID-19 vaccines developed so quickly? Part of the story is getting lucky with science: researchers were able to build on years of work on the novel mRNA platform that supported both the BioNTech-Pfizer and Moderna vaccines. Part of the story is effective FDA regulation: clinical trials were allowed to proceed more quickly than usual, and the agency set clear approval standards in advance so that companies had certainty about what would be required for authorization.²⁹ But perhaps the most important part of the story is that governments committed substantial public resources to the effort.

In a reverse of typical funding patterns, public funding of COVID-19 vaccines focused more on covering the final stages of development and manufacturing costs, building on substantial private investments in early-stage research.³⁰ Both Massachusetts-based Moderna and German-based BioNTech did receive some government and non-profit funding for developing their mRNA platforms pre-pandemic, but from 2017 through 2019, grants constituted less than 4 percent of Moderna’s $1.4 billion in R&D expenses and less than 2 percent of the €450 million spent by BioNTech. By the end of 2019, each firm had been working on mRNA technology for about a decade and had incurred net losses every year, with accumulated losses of $1.5 billion for Moderna and €425 million for BioNTech. But because of these investments, both startups could quickly pivot to applying their platform to COVID-19.

In Moderna’s case, a key partner was the NIH, which launched the first human clinical trial on March 16. The following day, BioNTech announced a collaboration with pharmaceutical giant Pfizer, and they launched their own human trial on April 23. In April, Moderna received $483 million from the Defense Department’s Biological Advanced Research and Development Authority to support clinical trials and manufacturing; this was later increased to a maximum of $955 million. In May, the firm raised $1.3 billion in private equity to help contract with additional manufacturers. BioNTech funded development through both Pfizer’s large cash reserves and a €375 million grant from the German government. The primary goal of this funding was to reduce developers’ risks so that steps that usually would depend on the success of earlier stages – such as building manufacturing capacity – could proceed in parallel.

Another critical source of funding for COVID-19 vaccine development was from governments committing to purchase vaccines before clinical trials were completed. In the United States, this effort was coordinated through Operation Warp Speed (OWS), a multi-agency effort primarily run through HHS and the Department of Defense. By mid-August, OWS had already committed to purchasing 800 million doses from six developers if those vaccines ultimately proved effective, including 100 million doses from Moderna (for milestone payments up to $1.5 billion), and 100 million doses from BioNTech-Pfizer (for $1.95 billion).³¹ These pre-commitments were both an effective spur to innovation and a form of “vaccine nationalism” that secured early US access to the resulting products, at the expense of other nations.³² The Biden Administration continued to increase its purchases of vaccines from both BioNTech-Pfizer and Moderna even after the vaccines’ authorization, including hundreds of millions of doses for both domestic boosters and global distribution.

Advance vaccine purchases were not completely novel: a 2007 $1.5 billion advance market commitment for pneumococcal disease vaccine doses had been used to spur development and dissemination, resulting in the immunization of over 150 million children in low-income countries.³³ And guaranteeing or increasing reimbursement through health insurance functions as a similar pull incentive for innovation.³⁴ Indeed, the first empirical study showing that policies to expand health care use can increase R&D was in the vaccine context.³⁵ But as a whole-of-government push for vaccine development and dissemination, OWS was relatively novel.

Although OWS largely succeeded in getting vaccines through FDA authorization in record-breaking time, vaccines are not vaccinations, and the initial US rollout of the vaccines was tragically slow. Vaccine distribution initially received insufficient attention from the federal government, either in terms of resources or coordination.³⁶ Even after COVID-19 vaccines became widely available in the United States, vaccine hesitancy limited uptake domestically. And internationally, vaccine inequity remains a global tragedy: one year after vaccines became available, less than 1 percent of doses had been administered in low-income countries.

B Vaccines for the Next Pandemic

Part of the reason the COVID-19 pandemic wrought as much devastation as it did was inadequate preparation, including “insufficient R&D investment and planning for innovative vaccine development and manufacture.”³⁷ Properly rewarding vaccine developers and distributors during the COVID-19 pandemic is important not only for controlling this pandemic, but also for being better prepared for the next one.

Most importantly, policymakers should work to increase public funding for vaccine R&D and to increase incentives for private funding. Research on vaccines for diseases with pandemic potential has enormous social value; ideally, R&D investments should be made up to the point that the marginal social benefit equals the marginal cost. But the vaccine sector has been beset by both political and market failures. Market incentives are insufficient because vaccines are preventatives and because individual prices do not account for societal benefits, such as herd immunity; political incentives are insufficient because payoffs from these investments span electoral cycles, and voters do not pay much attention to problems that were successfully averted.³⁸

Even with the mobilization of public funding during COVID-19, the all-in prices paid by the United States to Moderna and to BioNTech-Pfizer are only a small fraction of a low-end estimate of their vaccines’ social value.³⁹ But hopefully these rewards for the firms’ private investments and the salience of the costs of an unchecked pandemic will help spur greater private and public investment going forward.

Additionally, we hope that academics, patient advocates, and politicians can use the COVID-19 experience to broaden conventional understandings of the policy playbook for promoting access to medicines. The importance of widespread access to COVID-19 vaccines led some commentators to argue for limits on profits and patent rights for vaccine developers; for example, both Moderna and BioNTech-Pfizer were criticized for rejecting calls to sell their vaccines for no profit. But out-of-pocket costs paid by patients represent an entirely separate question from financial rewards for developers.⁴⁰ Vaccines can be free to patients even if developers receive enormous financial rewards, and access-to-medicines advocates should look for policies that reduce patient costs while still aligning profits with social value.

Even if policymakers recognize that social value is the right lodestar for R&D spending, numerous questions remain about optimal innovation policy design. How should rewards be divided between competing vaccine developers? Between developers and distributors? Who should estimate value? Could more vaccine development or distribution be conducted in-house by the federal government? Many of these questions parallel ones that legal scholars have long grappled with in the patent law context. But for vaccines, rewards are substantially shaped by government decisions on issues such as direct R&D funding, coverage requirements, and market subsidies, requiring these questions to be considered anew.

The critical role of government health agencies in vaccine innovation is a challenge, but it is also an opportunity. COVID-19 has led to an outpouring of scholarship on how to improve vaccine incentives.⁴¹ Now the United States needs the political will to make it happen.

V Conclusion

The triumphs and sorrows of the COVID-19 pandemic in the United States ultimately have significant roots in innovation policy. A lack of agency coordination and cooperation regarding diagnostics delayed the country’s ability to identify where the virus was spreading. A rush to questionable therapeutics – by enthusiasm, by demand, by political pressure – without developing robust information about their safety and efficacy hampered providers’ ability to treat patients. And even while the creation of COVID-19 vaccines was a success story – thanks to advances in science, market incentives, and luck – the failure to rapidly deploy them when the virus was at its peak was a tragedy.

The COVID-19 pandemic has been a truly exceptional event: a rapidly spreading, deadly disease plagued by the failures of political administration and exacerbated by a diminishing trust in science. But pandemics and social failures have long been part of the fabric of history, from the Plague of Athens following the Peloponnesian War to now. New pandemics will emerge, and in less than ideal political circumstances. Innovation policymakers should take lessons from this crisis to guard against history repeating itself.

16 Addressing Exclusivity Issues: COVID-19 and Beyond

Michael S. Sinha , Sven J.R. Bostyn , and Timo Minssen ^*

I Introduction

Almost every aspect of the COVID-19 response, from vaccines, diagnostics, and therapeutics to medical equipment, tracking systems, software, and other innovations, are or will become subject to some form of exclusive rights.¹ Many of these involve intellectual property rights (IPRs).² By offering innovators the exclusive right to exploit their innovations while recouping research and development (R&D) costs and other expenditures, IPRs may incentivize the development of new technologies.³ But IPRs may also preclude others from important research, manufacturing, and distribution.⁴ In the same vein, these exclusionary rights allow right holders to set prices in the absence of competition. Since this may limit access to innovations that are crucial for tackling pandemics, IPRs are a key factor in pandemic response and preparedness.

Consequently, IPRs have generated much controversy around the globe. Many of these debates have focused on traditional IPRs, particularly patent rights. Numerous existing patent claims cover new chemical or molecular entities. Patents are also filed for repurposed drugs and vaccine platforms (e.g., COVID-19 mRNA platforms), with separate patent protection for the vaccine and its elements, including viral particles, adjuvants, and vaccine boosters. Even in situations where no patent protection is available, many COVID-19 therapeutics and vaccines will also obtain regulatory, data, and market exclusivities.

Consequently, the design and application of regulatory exclusivities have become increasingly important in general innovation policy debates.⁵ This chapter addresses exclusivity issues, with a particular emphasis on regulatory exclusivities for vaccines and therapeutics. We begin with a basic overview of the current regulatory exclusivity landscape in Europe and the United States, followed by a discussion of current developments in COVID-19 vaccines and therapeutics. Next, we describe the influence of these technological developments on debates surrounding regulatory exclusivities while describing their relationship to other forms of exclusivities. From these assessments, we draw some lessons for market exclusivity, innovation, and access during the COVID-19 pandemic and beyond.

II Current Regulatory Exclusivity Landscape

A Two Forms of Exclusivity

Two forms of exclusivity are particularly relevant to the treatment and prevention of pandemics: patent and regulatory. In the European and US systems of regulatory exclusivity, data and marketing exclusivities do not depend on patents but are often cumulative with patent protection.⁶

1 Europe

Patents in Europe last twenty years from the date of filing. Patent-like protection can be sustained beyond twenty years by a Supplementary Protection Certificate (SPC),⁷ which compensates for regulatory approval procedures by adding a maximum of five years to the patent term. Six additional months of SPC extension can be obtained for conducting studies in compliance with a pediatric investigation plan.⁸ SPCs apply only to patent-protected products and cannot be added to regulatory exclusivities.

European legislation also offers patent-independent regulatory exclusivity under the 8+2+1 principle for both small molecule drugs and biologics such as vaccines.⁹ Once approved, a drug obtains automatic data protection for eight years, provided it is the first marketing authorization (MA) for that active ingredient in Europe. During this period, no third party can refer to the data in the regulatory dossier of the reference medicinal product, including competitors seeking to file an abridged generic application. An approved drug also receives ten years of marketing exclusivity starting from the date of approval, protecting the reference product against market entry by third parties during the term. There are also three options for obtaining one additional year of exclusivity.¹⁰ The various types of exclusivities available in Europe are illustrated in Figure 16.1.

Figure 16.1 MA process in Europe

This Global Marketing Authorization is issued only once for a given drug product and cannot be renewed or extended for any additional strengths, forms, routes of administration, or presentations, or for any future variations and extensions.¹¹ Subsets of genetic profiles requiring specific treatment for COVID-19 might lead to the development of drugs for which orphan designation and MA can be obtained.¹²

In Europe, there are three main categories for obtaining an MA: central, decentralized, and mutual recognition procedure. For biologics, including vaccines, and new small molecules for viral diseases, the central procedure at the European Medicines Agency (EMA) must be followed.¹³ For new indications for already existing small molecules, the decentralized and mutual recognition procedure can be followed.

The main categories of MAs are full and conditional.¹⁴ To date, COVID-19 vaccines and therapeutics have all been issued conditional MAs, which are applied to products aimed at treating, preventing, or diagnosing seriously debilitating or life-threatening diseases. Other medicinal products falling within the scope of the regulations are orphan drugs and medicinal products to be used in emergency situations, in response to public health threats recognized either by the World Health Organization (WHO) or by the European Community in the framework of Decision No. 2119/98/EC.¹⁵

Conditional MAs may be granted in emergency situations if the EMA Committee for Medicinal Products for Human Use finds that all the following requirements are met: (1) the benefit–risk balance of the product is positive; (2) it is likely that the applicant will be able to provide comprehensive data; (3) unmet medical needs will be fulfilled; and (4) the benefit to public health of the medicinal product’s immediate availability on the market outweighs the risks due to need for further data.¹⁶

2 United States

In the United States, the Patent Act, the Hatch-Waxman Act, and related legislation defines marketing exclusivity periods for pharmaceuticals and biologics.¹⁷ Patent protection for pharmaceutical products in the United States is comparable to that of Europe: twenty years of patent protection, with a patent term restoration period of up to five years for time spent during the regulatory process, and a pediatric exclusivity period of six months for certain drugs studied in pediatric populations pursuant to a written request.¹⁸

Regulatory exclusivity for new drug application (NDA) applicants exists as a five-year New Chemical Entity exclusivity, a three-year new clinical investigation exclusivity, a seven-year orphan drug exclusivity under the Orphan Drug Act, or a twelve-year biologic exclusivity under the Biologics Price Competition and Innovation Act.¹⁹ There is no comparable process of conditional approval.

For new chemical entities, data exclusivity extends for five years as well, though generic manufacturers can begin utilizing originator data after four years for the preparation of generic drug applications. Unlike in Europe, the United States does offer three-year periods of exclusivity for new formulations of existing drugs, though no data exclusivity applies. For biologics, data exclusivity protections run for twelve years, but biosimilar manufacturers can begin using data after the fourth year to develop competing products.²⁰ Review time by the FDA for generic products is approximately fifteen months. Drugs and vaccines for COVID-19 were evaluated through a relatively new regulatory process known as Emergency Use Authorization (EUA).

EUAs are a byproduct of several post-9/11 laws, including the Project Bioshield Act of 2004 and the Pandemic and All-Hazards Preparedness Act of 2013. When invoked during a public health emergency such as COVID-19, an EUA permits broad use of unlicensed products as long as the benefits outweigh risks.²¹ The particulars of available regulatory exclusivities under US law are illustrated in Figure 16.2.

Figure 16.2 MA process in the United States

B COVID-19 Vaccines

Pandemics create a time pressure to develop vaccines as quickly as possible, which concentrates the cost of development over a very short time window. Given the crippling effects of pandemics on the economy and health care systems, governments are often extremely willing to commit capital to accelerate vaccine development. Government funding will typically be in the form of push incentives (e.g., funding R&D in developing new vaccines) and pull incentives (e.g., in the form of advance purchase agreements or other advance market commitments).²² Yet the exclusive rights structure after regulatory clearance or approval remains unchanged, and final vaccines are fully owned by pharmaceutical companies, even those developed with significant government funding and collaboration.

In Europe, the European Commission joined forces with several countries to collect research funding under the Coronavirus Global Response, which strives for “universal access to affordable coronavirus vaccination, treatment[,] and testing,”²³ as part of the WHO’s global call for action.²⁴ In the United States, investment in vaccine development largely occurred through a federal initiative known as Operation Warp Speed, though execution was largely in conjunction with federal agencies such as the National Institutes of Health. Agencies within the Department of Defense, including the Biomedical Advanced Research and Development Authority and the Defense Advanced Research Projects Agency, have historically been involved in vaccine development as well; the former agency contributed nearly $6 billion each to the Pfizer and Moderna COVID-19 mRNA vaccines.²⁵

Vaccine R&D over the last few decades has largely occurred within small and medium-sized companies.²⁶ Therefore, pushing vaccine candidates through clinical trials and scaling up production is often dependent on additional federal funding or acquisition by larger firms; between 1990 and 2012, small and medium-sized companies accounted for 71 percent of Phase I vaccine trials but only 38 percent of Phase III trials.²⁷ Many products will languish if funding runs dry or large vaccine manufacturers decline to conduct further studies or pursue an MA. For emerging infectious diseases, this has historically been termed the “valley of death.” Even with an urgent push to develop a vaccine – as was the case with the Ebola epidemic – waning interest in the face of a geographically limited outbreak can result in the shelving of important projects prior to clinical testing and approval.²⁸

To date, this has not been the story of COVID-19 vaccines. Global R&D efforts and advance market commitments have yielded several promising vaccines, but the issue of exclusive rights has unfortunately been pushed aside. Apart from the fact that the vaccine itself is subject to patent protection and/or regulatory exclusivities, many of the COVID-19 vaccines are based on proprietary platforms. Moderna has a large patent portfolio covering their mRNA vaccine platform, boasting on its website that it “has been granted over 100 patents in the [United States], Europe, Japan[,] and other jurisdictions, protecting fundamental inventions in the mRNA therapeutics space, with several hundred additional pending patent applications covering key advances in the field.”²⁹ Similar patent libraries protect the Pfizer/BioNTech and CureVac mRNA platforms, to the extent that “Moderna, CureVac, BioNTech[,] and GSK collectively own nearly half of the mRNA vaccine patent applications.”³⁰ Trade secrets will also play an important role when it comes to vaccine manufacturing methods.³¹ See Table 16.1 for more about COVID-19 vaccines in use and in development.

Table 16.1 Regulatory status and launch prices of COVID-19 vaccines³⁴

Manufacturer	Product Name	Product Type	Dosing Regimen	Approval Status (EU)	Launch Price per Dose (EU)	Approval Status (US)	Launch Price per Dose (US)
Pfizer/BioNTech	Comirnaty	mRNA (modified nucleoside)	2 doses 3 weeks apart	Conditional approval 12/21/2020	€12	Full approval 8/23/2021	$19.50
Moderna	Spikevax	mRNA (modified nucleoside)	2 doses 4 weeks apart	Conditional approval 1/6/2021	€15	Full approval 1/31/2022	$15
Oxford/AstraZeneca	Vaxzevria/ Covishield	Viral vector	2 doses 4 to 12 weeks apart	Conditional approval 1/29/2021	£1.61	To be determined	$3–4
J&J/Janssen	Janssen COVID-19 Vaccine	Viral vector	1 dose	Conditional approval 3/11/2021	£6.30	EUA 2/27/2021	$10
Novavax	NVX- CoV2373	Protein subunit	2 doses 3 weeks apart	Conditional approval 12/20/2021	€17.80	EUA 7/13/2022	$16
Sanofi/GSK					€7.56	To be determined	$10.50

Focusing on regulatory exclusivities, we can discern different dynamics in Europe and the United States. All vaccines, as new biological products, will be able to benefit from regulatory exclusivities. In Europe, all vaccines approved have received conditional market approval; the regulatory exclusivity period of 8+2 years starts running immediately. In the United States, the vaccines that have currently received an EUA follow a different regulatory path.³² A Biologics Licensing Application (BLA) would secure permanent regulatory approval of the vaccine by the FDA, but EUAs are temporary and typically expire once the public health emergency ends.³³

Importantly, EUAs do not trigger the beginning of regulatory exclusivity windows, meaning that the Moderna and Pfizer vaccines, which have been distributed to hundreds of millions of Americans, received their full twelve-year marketing and data exclusivity periods only after BLA approval. When it developed statutory provisions granting regulatory exclusivity, Congress likely did not anticipate a scenario in which millions of vaccines could be distributed, and billions of dollars in revenues earned, without triggering regulatory exclusivity periods.

The director of the FDA’s Center for Biologics Evaluation and Research, Dr. Peter Marks, described the EUA process as an “EUA-plus,” noting that a vaccine EUA “is going to be closer” to full BLA approval.³⁵ The FDA’s “EUA-plus” standard for vaccines seems more aligned with conditional approval in Europe, except that in Europe the clock has already started running on regulatory exclusivities.

With this in mind, vaccine manufacturers are arguably incentivized to delay full BLAs until the public health emergency ends and the EUA is not reauthorized. Indeed, EUAs for past infectious disease outbreaks have been renewed several times, with no guarantee of a later-filed full licensing application.³⁶

C COVID-19 Therapeutics

Therapeutics are largely governed by the same rules as vaccines. Upon approval, new chemical entities receive full regulatory periods in both Europe and the United States, governed by the rules set out in Section II. A. In Europe, the clock begins at the time of conditional approval. In the United States, an EUA does not trigger the initiation of regulatory approval periods.

For new uses of existing drugs, regulatory exclusivities may apply even if no patent protection can be obtained. In Europe, options to gain additional regulatory exclusivity protection for repurposed drugs are quite limited. Repurposing could be patent protected in Europe as a so-called further medical indication patent,³⁷ but under the Global Marketing Authorization, with a few notable exceptions,³⁸ no renewal or extension of regulatory exclusivities is possible. In the United States, periods of guaranteed market exclusivity can be obtained regardless of patent status; this includes reformulated drug products, which may obtain NDAs or supplemental NDAs.

In the United States, Operation Warp Speed invested far more into COVID-19 vaccines as compared to therapeutics. Globally, the trend is similar: 95 percent of all investments have gone into vaccines, with only 5 percent devoted to therapeutics.³⁹ Some clinical trials have evaluated the efficacy of marketed antivirals in the fight against COVID-19.

In Europe, remdesivir (Veklury) was conditionally authorized by the EMA for the treatment of COVID-19; in the United States, remdesivir received full FDA approval. The WHO raised issues about remdesivir’s efficacy, amending its guidelines accordingly,⁴⁰ but in Europe, the drug remains conditionally approved while the EMA continues to evaluate the data. Despite questions about its efficacy, remdesivir is FDA-approved in the United States and costs $3,120 for a five-day course of treatment when purchased by private insurers ($2,340 when purchased by public payers such as Medicare and Medicaid).⁴¹ The drug is still under patent protection: its primary US patent will lapse in 2031 and in Europe in 2035. Other antivirals are being studied, including favipiravir, which is authorized in Japan for the treatment of influenza.⁴² Merck recently reported that its antiviral drug molnupiravir “reduced the risk of admission to hospital or death by around 50 percent in non-hospitalized adults who had mild to moderate COVID-19 and were at risk of poor outcomes”; it has requested an EUA from the FDA.⁴³ Pfizer initiated clinical studies of PF-07321332, its investigational COVID-19 antiviral drug, in August 2021.⁴⁴ The drug, later named nirmatrelvir (Paxlovid), received an EUA in December 2021 and has since become a mainstay in COVID-19 treatment in the United States.⁴⁵

The injectable corticosteroid dexamethasone, an older medication that has no patent or regulatory protection, showed considerable promise in treating COVID-19.⁴⁶ However, the lack of exclusivities for dexamethasone in the United States and Europe give pharmaceutical companies little incentive to rigorously study its use in COVID-19. That said, a significant benefit of dexamethasone is its low cost, which is driven by the existence of multiple generic manufacturers for the product.⁴⁷

Various antibody treatments have also been studied in clinical trials.⁴⁸ For instance, the Regeneron antibody cocktail contains human antibodies harvested from COVID-19 patients combined with mouse monoclonal antibodies against the spike protein.⁴⁹ Initially available in the United States only via compassionate use or participation in clinical trials, several monoclonal antibodies have since been granted EUAs.

III Impact of Regulatory Exclusivities on Access to COVID-19 Medical Treatments

The list of drug and vaccine candidates for COVID-19 that are authorized or in various stages of development is extensive; many are protected by patents or eligible for regulatory exclusivities. These exclusive rights allow manufacturers to determine access and price in the absence of suitable substitutes. COVID-19 vaccines have yet to compete on price because the manufacturers contract with the government for certain quantities of vaccine at fixed prices; those prices, in fact, have risen over time. Exclusive rights offer a significant incentive for the development of vaccines and therapeutics for COVID-19.

Even though the effects of exclusive rights on access are similar for therapeutics and vaccines, the situation is more complicated for vaccines, as there are more parameters to consider: vaccine platforms, vaccine adjuvants, the vaccines themselves, and the complex manufacturing processes for those vaccines, which are often shrouded in trade secrecy. The broadly patented vaccine platforms may slow the development of other vaccines as third parties, unable to make use of patented platforms, are either blocked from entering the market or require a costly licensing agreement. Early on, manufacturers declared their intent not to engage in price gouging,⁵⁰ meaning that prices would not rise during the “crisis” phase – presumably the duration of the public health emergency. Yet taxpayers have little information regarding the costs and conditions of vaccine purchasing agreements. The prices listed in Table 16.1 have already started to increase as manufacturers move away from “pandemic pricing” limits.⁵¹ Indeed, Pfizer and Moderna have increased the prices of their vaccines, including for Omicron-adapted versions, in both Europe and the United States.⁵² Though such price increases are good news for investors, they do not bode well for global access.⁵³

The presence of extensive patent, regulatory exclusivities, and trade secrets also positions manufacturers in opposition to compelled licensing agreements. We see this already playing out with the shortage of supplies in vaccines. Unwillingness to license vaccine manufacturing to third parties – and limited leverage among payers to compel such licensing – makes patients very vulnerable to delays and disruptions in manufacturing, as we have seen with the AstraZeneca vaccine in Europe.⁵⁴

Even though voluntary sharing of technology is always an option, there is little evidence this is happening for most COVID-19-related technology.⁵⁵ AstraZeneca has a licensing agreement in place with Serum Institute India to produce and distribute one billion doses of the AZ/Oxford COVID-19 vaccine;⁵⁶ a similar license is in place with Dutch company Halix BV.⁵⁷ For the other authorized vaccines, no production licensing agreements are in place. The Medicines Patent Pool, a United Nations-backed public health organization working to increase access to, and facilitate the development of, life-saving medicines for low- and middle-income countries,⁵⁸ has extended its mission to include COVID-19 products, but has yet to negotiate licensing agreements. Similarly, the WHO COVID-19 Technology Access Pool (C-TAP) has not led to sufficient sharing of technology or treatments. Though patents present a significant obstacle for technology sharing, their issuance depends on full disclosure and enablement; even if patented technology is licensed, institutional expertise held as trade secrets likely poses greater barriers to the sharing and scale-up of vaccine technology.⁵⁹

Another solution to guarantee access to vaccines and therapeutics at reasonable prices is to grant compulsory licenses. In Europe, all Patent Acts provide for compulsory licensing, even though the conditions under which they can be granted may differ across nations.⁶⁰ In the United States, Section 1498 enables the federal government to step in and use patents in exchange for reasonable compensation, but this authority has never been invoked in any context, let alone for COVID-19.⁶¹ Compulsory licensing is deeply unpopular in both Europe and the United States, and these statutory schemes are rarely invoked. However, a global pandemic is as good a moment as any to begin using these approaches of last resort.⁶²

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) also allows for compulsory licensing,⁶³ and during health crises, it suspends the usual requirement of exhausting voluntary licensing options prior to the grant of a compulsory license.⁶⁴ The details of that framework, however, apply predominantly to domestic supply,⁶⁵ except for export to the least-developed countries – those that lack production infrastructure.⁶⁶ Even in high-income countries, the technical infrastructure may not exist for manufacturing vaccines, especially vaccines as complex as the COVID-19 mRNA vaccines. The more complex the manufacturing process, the less likely that addressing the intellectual property and regulatory issues alone will enable rapid scale-up of production.⁶⁷ More effective mechanisms for transferring the necessary know-how will also have to be considered.⁶⁸ A refined statutory framework may be needed to allow for global manufacturing via compulsory licensing. In spite of US support, the United Kingdom and the European Union continue to oppose waivers of IPRs during the pandemic.⁶⁹ Given the time required for vaccine scale-up, compulsory licensing needs to occur at earlier stages in development.

Compulsory licenses might resolve patent rights issues and guarantee manufacturing of vaccines and therapeutics, but only if regulatory exclusivities are waived or deferred, an option that does not currently exist.⁷⁰ Deferring the practical application of regulatory exclusivities, including data exclusivity, would similarly require statutory change. The benefit of a deferral is that those rights could be paused, to be invoked at a later date. Yet deferring exclusivity to a “less acute” period of the COVID-19 pandemic would permit manufacturers to profit now without curtailing the period where they can charge higher prices. This is the situation in the United States: EUAs have slowed momentum toward full approval and licensure of vaccines, and as a result, regulatory exclusivity periods for many vaccines and therapeutics have yet to start.

Vaccine nationalism further complicates the matter by exacerbating disparities in vaccine access – scarce supply goes to the highest bidder, while the rest of the world waits indefinitely.

The United States has committed to more vaccines than it needs, while in low-income countries, access to vaccines has been limited. COVID-19 Vaccines Global Access (COVAX), which is co-led by Gavi,⁷¹ the Coalition for Epidemic Preparedness Innovations, and the WHO, aims to accelerate the development and manufacture of COVID-19 vaccines, and to guarantee fair and equitable access for every country in the world.⁷² By early September 2021, COVAX had delivered 240 million doses to 139 countries.⁷³ Yet even COVAX seems willing to sell vaccines to the highest bidder.⁷⁴ Finally, advance purchase agreements could be conditioned on commitments from manufacturers to voluntarily license technology to third-party manufacturers in order to shore up global supply, though this might limit the power of the advance purchase agreement as a pull incentive for innovation.

IV Lessons for the Future

During the COVID-19 pandemic, the global biopharmaceutical industry has invested considerable time and resources in the development of treatments and vaccines. Since rapid success was so crucial, the industry also received massive support from public resources and investments around the globe, including US and EU public authorities and EU member states. As a result, millions of people have received highly effective vaccines, several promising vaccine candidates are on the horizon, and some therapeutics show promise in mitigating the severity of SARS-CoV-2 infection. In spite of these successes, challenges to global access and affordability remain due to widespread and ongoing inequities. Few of these inequities have been adequately addressed during the COVID-19 pandemic and remain substantial obstacles in addressing future pandemics.⁷⁵ Inequities have contributed substantially to the prolongation of this pandemic as new SARS-CoV-2 variants continue to emerge for which new booster inoculations will likely be necessary. New variants of contagious viruses are a hallmark of every pandemic, present and future.

This chapter shows that resolving the devastating health issues caused by pandemics tend to follow a similar scenario, convincing those in higher-income nations to subsidize – via pull and push mechanisms – R&D in vaccines and therapeutics. Despite massive public spending, the vaccines and therapeutics are subject to a dense thicket of exclusive rights, in the form of patents, regulatory exclusivities, and trade secrets. The COVID-19 pandemic is no exception.

That web of exclusive rights allows the holders of those rights to act as gatekeepers, restricting access to, and setting the price of, the technology needed to produce vaccines and therapeutics.⁷⁶ Despite the existence of competition in the COVID-19 vaccine space, the need to vaccinate billions of people across the globe still gives substantial leverage to the holders of those exclusive rights and presents barriers to access. The recent push to waive IPRs for COVID-19 vaccines illustrates the rather belated realization of the importance of exclusive rights during pandemics.⁷⁷ Presumably, a waiver would free those vaccines from their exclusive rights, which could clear a path for third parties to manufacture them – thereby increasing volume while lowering price.⁷⁸ Though there are other complex supply chain issues as well, discussions of intellectual property waivers for COVID-19 vaccines understate the complexities of the exclusive rights involved.⁷⁹ As noted earlier, COVID-19 vaccines are protected by hundreds of patents, including those that cover the vaccine platforms, and many of the vaccine manufacturing processes are closely guarded as trade secrets.⁸⁰ Finally, regulatory exclusivities are only partially governed by the TRIPS Agreement and would not entirely fall within the scope of the waiver.

Safeguards are needed to guarantee global access to sufficient vaccines at reasonable prices. Such solutions are even more urgent given the emergence of new SARS-CoV-2 variants. If new booster shots against the variants become necessary, current vaccine-related inequities will surely be replicated if nothing is done. That might require statutory change, such as waiving regulatory exclusivities in compulsory licensing arrangements. Moreover, the use of compulsory licensing should become part of a more sophisticated approach to contractual arrangements, such as in advance purchasing agreements. If negotiated equitably, vaccine developers and manufacturers could be contractually obligated to supply more (as opposed to “best effort” commitments) while granting licenses to third parties that can scale up vaccine production in facilities abroad – with appropriate guarantees of safety and quality. Those contractual arrangements could also require vaccine developers to supply the COVAX system directly, with a view toward eliminating inequities in low- and middle-income countries.

As the development and manufacturing of COVID-19 vaccines (and to some extent COVID-19 therapeutics) has largely been financed by public resources,⁸¹ governments have the leverage to use these tools. This may contrast with other areas of drug development, in which the role of public funding might be more limited. Greater effort should be made toward pooling of vaccine and therapeutics technology, including manufacturing processes; C-TAP has not been optimally utilized during COVID-19.

Although more research is needed, our analysis offers a starting point for broader discussions of the nature of these incentives in Europe and the United States. Our proposed solutions may enable global access to products essential for resolving the COVID-19 pandemic, but can also be broadly applied to future global crises. Careful analyses of the complex dynamics that drive innovation, global manufacturing scale-up, and access are essential for improving pandemic preparedness, pharmaceutical innovation, and global access issues in the future.

17 At-Risk Populations & Vaccine Injury Compensation

Katharine Van Tassel and Sharona Hoffman ^*

I Introduction

Developing a new vaccine takes, on average, ten years.¹ In the case of COVID-19, however, the pharmaceutical industry developed vaccines in a matter of months, and three quickly received emergency use authorization (EUA).² As discussed in Chapter 15, by Sachs, Ouellette, Price, and Sherkow, and in others in this volume, this record-breaking pace of development raised concerns regarding rare undetected side effects and ones that would manifest only in the long term.

This chapter argues that the potential for vaccine-related harms raises acute concerns for vulnerable populations. These harms have a disparate impact on low-income people, who are disproportionately non-White, and who have limited financial resources to obtain medical care, weather job losses, and pursue injury compensation. When a vaccine is given as a countermeasure during a declared public health emergency (PHE), the problem is acute because of the limited availability of injury compensation.

This chapter reviews and assesses the two existing mechanisms to which injured parties can turn for remedies: (1) the National Vaccine Injury Compensation Program (VICP), which applies to most vaccines given in the United States; and (2) the far less generous and less accessible Countermeasures Injury Compensation Program (CICP), which applies to vaccinations given as countermeasures during PHEs.³ It highlights the health and financial disparities suffered by vulnerable populations during a pandemic and its aftermath, and how the CICP intensifies these disparities. This chapter then develops a proposal for legal reform to the injury-compensation and vaccine-approval processes that aims to protect the disadvantaged and enhance equity.

II Vaccine Side Effects

During the COVID-19 pandemic, Pfizer/BioNTech and Moderna enrolled 44,000 and 30,000 subjects, respectively, in the studies upon which they relied to obtain initial EUA from the Food and Drug Administration (FDA).⁴ With tens of thousands of trial participants, common side effects that occur fairly soon after vaccination were identified.⁵ But there was little opportunity to identify adverse events that might appear in the longer term or that are rare enough that they would be discovered only after a significant percentage of the public had been vaccinated. Such side effects could include joint pain, anaphylaxis, and neurological conditions such as encephalitis, transverse myelitis, or Guillain-Barré Syndrome, which are known to occur with other vaccines.⁶ A case in point is the National Swine Flu Immunization Program. In 1976, the federal government decided to protect the public from swine flu and quickly advanced the administration of a vaccine. Forty million vaccines were administered in just a few months. Unfortunately, 450 vaccinated people developed Guillain-Barré Syndrome, a rare and serious neurological disorder that can result in muscle weakness and paralysis.⁷ The program was quickly suspended, but the harm was done. Regrettably, it triggered an enduring public mistrust of flu vaccinations and often appears as part of the anti-vaccination movement’s narrative.⁸

III Vaccine Injury Compensation Programs

The United States is fortunate to have a robust system to compensate individuals who suffer vaccine injuries. This system, however, is not available to those vaccinated with a countermeasure during a declared PHE.

A The National Vaccine Injury Compensation Program

The VICP is normally available to anyone who is injured by a vaccine after the FDA approves it and the Centers for Disease Control and Prevention (CDC) recommends it for children or pregnant women.⁹ The VICP covers most vaccines administered in the United States. This no-fault program was created in the 1980s to ensure relatively quick and fair compensation for vaccine injuries and to insulate manufacturers from liability as an incentive for them to pursue vaccine development.¹⁰ Claimants who develop recognized symptoms of injuries listed in the Vaccine Injury Table within a certain amount of time after vaccination need not prove that the injuries were caused by the vaccine. Rather, they present evidence only about the extent of their damages.¹¹ When an injury is not listed in the Vaccine Injury Table, petitioners must prove that it was caused or exacerbated by the vaccine.¹² Claim denials can be appealed to the Court of Federal Claims.¹³

The VICP offers up to $250,000 for pain, suffering, and emotional distress,¹⁴ as well as attorneys’ fees and legal expenses to good-faith claimants.¹⁵ At the end of 2022, the Vaccine Injury Compensation Trust Fund (VICTF) was valued at over $4 billion.¹⁶ The VICTF is funded by a seventy-five-cent excise tax on each vaccine dose, which is paid by the manufacturers.¹⁷ From 2006 through 2018, the VICP approved about 70 percent of claims.¹⁸ Since 2015, the fund has paid out an average of $216 million per year to an average of 615 claimants per year.¹⁹

B The Countermeasures Injury Compensation Program

The benefits offered under the VICP are not available to people injured by vaccines given as countermeasures during declared PHEs.²⁰ When the Department of Health and Human Services (HHS) declares a PHE, it triggers the Public Readiness and Emergency Preparedness (PREP) Act.²¹ This federal law requires that claimants bring claims relating to countermeasures that are used during a PHE exclusively under the CICP.²² Such countermeasures include not only vaccines, but also drugs, equipment, and more. Awards under the CICP are paid by the Covered Countermeasures Process Fund (CCPF). Congress funds the CCPF through emergency appropriations to HHS that HHS may transfer to the CCPF.²³ Manufacturers do not contribute to this fund as they do to the VICTF.

The CICP is far less generous than the VICP.²⁴ It compensates people only for serious injuries,²⁵ requires a heightened burden of proof regarding injury causation,²⁶ and has a one-year statute of limitations following the date of vaccination.²⁷ Individuals are bound by the one-year filing deadline regardless of when their symptoms appear or are determined to be associated with the vaccine. Furthermore, the deadline applies to pregnant women, who must file claims on behalf of their babies within one year of being themselves vaccinated, leaving parents with only a few months to discover any injuries after their baby is born.²⁸ The CICP also limits damages awards.²⁹ For example, under the CICP, claimants can recover a maximum of only $50,000 in lost income for each year out of work. The CICP also denies any compensation for pain, suffering, and emotional distress, as well as for attorneys’ fees and costs.³⁰ There is no opportunity to appeal claim denials.³¹

Furthermore, the CICP process for pursuing compensation is lengthier, more difficult, and more expensive because of the absence of reimbursement for attorneys’ fees and costs.³² It is important to note that those receiving countermeasure vaccines during a declared PHE can never pursue injury claims under the VICP, even if their symptoms appear or are linked to the vaccine after the declaration is lifted.³³ If they were vaccinated during a declared PHE, they are forever barred from the VICP with respect to the injection in question.

The CICP was first implemented in 2010.³⁴ Up until 2020 and the declared COVID-19 PHE, the CICP received 485 claims (mostly related to the H1N1 vaccine approved in 2009) but awarded compensation to only 39 people, for a total of $5.7 million.³⁵ While the VICP has a 70 percent payment rate for claims filed from 2006 through 2018, the CICP has rejected 90 percent of injury claims since it was created.³⁶ As of the end of March 2023, 11,252 COVID-19-related claims were filed with the CICP.³⁷ As of March 1, 2023, the CICP rendered decisions on 630 COVID-19 claims. Twenty-one claims were granted, and 630 were denied.³⁸ Over two-thirds of the claims were for vaccines, with the remainder relating to other COVID-19 treatments.³⁹

IV Public Readiness and Emergency Preparedness Act Tradeoffs

PREP Act immunity for all countermeasures is designed to accomplish two main goals. First, this immunity encourages manufacturers to speed innovative treatments to market during declared PHEs when there are no other viable treatments. Manufacturers are more willing to skip the usual time it takes to invest in safety through testing when they are given immunity from liability.

Second, PREP Act immunity is an attempt to manage the risk that quickly designed and produced countermeasures might cause a large number of injuries. At the same time that manufacturers are being encouraged to forego their usual testing protocols, PHEs drive the FDA to speed the temporary licensure of countermeasures using a lower standard of safety and effectiveness through its fast-track EUA process.⁴⁰ Together, these measures hold the potential to increase the number and seriousness of any unintended countermeasure injuries.

The tradeoffs that are the centerpiece of the PREP Act may make some sense for most countermeasures, but they do not appear to do so for vaccines. First, countermeasures that have the greatest potential to cause injuries are treatments such as drugs and devices (e.g. antiviral medication and ventilators), which will be used to treat those who have fallen ill from pandemic-triggering diseases. The manufacturers of these countermeasures have no immunity absent the PREP Act. Consequently, granting these manufacturers immunity to encourage their speed to market, while providing sick consumers with quick access to possible treatments, provides a positive tradeoff for consumers for the loss of access to compensation for all but the most serious of injuries.

In contrast, vaccines, as preventatives, fall into a different category. First, the target population for vaccines is healthy people. As such, there is no “access to treatment” benefit for this population that provides a tradeoff for withholding compensation for injuries. Second, in the context of vaccines, there already is a system, the VICP, that, in the absence of the PREP Act, offers immunity to manufacturers to encourage speed to market while adequately compensating all people who are injured by vaccines. It is simply unethical to severely limit compensation for healthy consumers who are injured after agreeing to be vaccinated with an experimental vaccine. They often do so not only for their own benefit, but also for the good of society in that their vaccination promotes herd immunity.

V Vulnerable Populations and the Vaccine Injury Compensation Problem

People are less likely to obtain compensation for injuries arising from vaccines they received as countermeasures during a declared PHE than they are for injuries associated with vaccines included in the VICP. Furthermore, the CICP process for pursuing compensation is more burdensome.⁴¹ Those receiving countermeasure vaccines during a declared PHE can never pursue injury claims under the VICP, even if their symptoms appear or are linked to the vaccine after the declaration is lifted.⁴²

These concerns are particularly acute for low-income people and people of color because these groups typically endure the greatest difficulties during public health disasters and their aftermaths. During the COVID-19 pandemic, racial and ethnic minorities suffered a death rate that was more than double that of White people.⁴³ Likewise, infection rates were significantly higher in economically disadvantaged areas than in wealthier ones.⁴⁴ Similar patterns were evident in past disasters, such as the 1918 Spanish influenza pandemic.⁴⁵ Vaccinating members of minority and low-income populations during pandemics should therefore be a high priority.

A Vaccine Hesitancy and Lack of Access to Compensation

At the same time, however, there are high levels of vaccine skepticism and reluctance to be vaccinated in poor and minority communities.⁴⁶ In some cases, vaccine hesitancy may stem from long-standing inequities in medical treatment and abuses that have resulted in general mistrust of government. A well-known example is the infamous Tuskegee Study.⁴⁷ In this study, which lasted from 1932 until 1972, researchers deprived African American men of penicillin for syphilis, without informing them that a cure was available, because they wanted to study the natural course of the disease.⁴⁸

In a Kaiser Family Foundation poll conducted in August and September 2020, 49 percent of Black respondents stated that they would probably not or definitely not accept a COVID-19 vaccine, compared with 33 percent of White respondents.⁴⁹ Similarly, a Pew Research Center poll conducted in November 2020 revealed that while 71 percent of Black respondents knew someone who had been hospitalized or died because of COVID-19, only 42 percent planned to obtain a COVID-19 vaccine.⁵⁰

During 2021, overall hesitancy dropped as more information was gathered regarding the effectiveness and safety of the COVID-19 vaccines.⁵¹ However, hesitancy continued to be a significant concern among all groups.⁵² If the media had covered stories of individuals who were injured and not adequately compensated, vaccine hesitancy might have intensified. As the Presidential Commission for the Study of Bioethical Issues pointed out in the context of clinical trials generally, people may be more willing to participate in research if they are assured that they will be compensated if injured.⁵³ Similarly, people may be more willing to participate in mass vaccination programs if they know they will be taken care of in the event that they are harmed. Conversely, knowing that they will not be compensated may discourage participation.

B Compensation Inequities and Structural Racism

After an emergency declaration is lifted, newly vaccinated individuals can be eligible for VICP compensation if the CDC has recommended the vaccine for routine administration to children or pregnant women.⁵⁴ However, delaying vaccination until the end of a declared PHE can be particularly dangerous for minority and lower-income workers, including many essential workers. Many suffer from chronic conditions, such as asthma, heart disease, and diabetes, that make it more likely that they will suffer more severely from infectious diseases.⁵⁵ In addition, those with a lower socioeconomic status often have the highest risk of infection because they come in close contact with others at work, while taking public transportation, or while living in crowded households. In fact, employees working in person may have no choice as to whether to receive a vaccine once it is available. Employers may require workers to obtain vaccines. The US Equal Employment Opportunity Commission has determined that such employer mandates are lawful.⁵⁶

At the same time, low-income people who most need to be vaccinated are the most financially at risk. A serious vaccine injury could thus be catastrophic for them if they are not appropriately compensated. Having access only to the CICP rather than the VICP can thus have a disproportionate adverse impact on poor communities.

By contrast, the people who can afford to wait for vaccinations until an emergency declaration has ended, triggering VICP availability, will tend to be more privileged. This group will probably consist largely of people who can work remotely and socially isolate until they feel confident about the vaccine’s safety profile. They tend to be disproportionately well educated, high earners, and White.⁵⁷ If those with socioeconomic advantages choose to wait for vaccines while their working-class counterparts cannot, they may be compensated far more liberally for the same types of vaccine injuries. Differences between the VICP and CICP could therefore reinforce long-established inequities rooted in income, race, and ethnic identity.

VI Proposals for Legal Reform

We argue that anyone who receives a vaccine that is a countermeasure to a PHE should have immediate access to the VICP. Disadvantaged people with the greatest need for vaccination, who are also the most at risk of financial harm, should benefit from an efficient and fair system of injury compensation. Moreover, penalizing early recipients of vaccines could undermine the important public health goal of vaccinating as many people as possible as quickly as possible in order to achieve herd immunity.

Experts predict that the world will face future global pandemics, and many have long worried about bioterrorism attacks.⁵⁸ Establishing the correct incentives and relief mechanisms for people who receive vaccinations is therefore of critical importance.

A straightforward modification to address the inequities that the CICP propagates is to amend the PREP Act. Under this approach, lawmakers would establish that all vaccines that the FDA approves and the CDC recommends to ameliorate a PHE will be covered by the VICP, regardless of whether they are to be administered to pregnant women or children.⁵⁹ This would include vaccines receiving an EUA.⁶⁰

The carve-out would not impact any other countermeasures, such as drugs and devices, that have an EUA. Injury claims related to those countermeasures would still be submitted to the CICP. The vaccine carve-out is justified because vaccines are given to healthy people in part for the good of society in that they protect the collective. By contrast, drugs and devices approved under an EUA are provided to unhealthy individuals to treat and cure their individual maladies. As this proposal deals solely with the liability of vaccine manufacturers, it also would not impact state and federal measures that provide immunity from liability to health care providers who administer vaccines.

The second element of this proposal is that Congress should require manufacturers to pay a seventy-five-cent excise tax per dose for all vaccines that the FDA approves and that the CDC recommends as PHE countermeasures. This excise tax will serve to ensure that the VICTF is adequately financed. As noted in Section III, such a tax already applies to vaccines included in the VICP.⁶¹ During a PHE, when the government purchases vaccines and then distributes them to the public without charge, part of this purchase price can be allocated to cover the excise tax. This action will provide immediate funding for the VICP to cover any increase in the number of claims. In addition, Congress should expand the number of special masters who handle VICP cases because this docket is likely to grow significantly.⁶² This measure will ensure that claims will be processed expeditiously.

VII Conclusion

Even the most carefully developed and tested vaccine can lead to injuries. Such injuries can disproportionately affect vulnerable populations who are most in need of vaccinations but are also at risk of financial ruin if harmed by a vaccine. Fortunately, injured parties can usually attain appropriate recovery through the generous and accessible VICP. However, during a declared PHE, individuals receiving vaccines that are countermeasures can turn only to the much less robust CICP if they are injured.

This difference is not simply technical. It can have severe ramifications, especially for disadvantaged populations. In some cases, people in high-risk communities may struggle to decide whether they should forego a vaccine and risk becoming infected, or risk a vaccine injury for which they could receive little if any compensation.

This chapter has proposed legal changes to rectify this wrong. It argues that the PREP Act should be amended to ensure that relevant vaccines are covered by the VICP rather than the CICP. Rendering the VICP available to all injured parties, including members of vulnerable communities, would advance multiple goals. It would promote public health by encouraging the public to pursue early vaccination, enhance equity, and increase the likelihood of adequate relief in all injury cases.