Every day, Americans access drugs, medical devices, and other health products sold by private companies but subsidized by the US government through its various agencies, from Medicare to the Veterans Administration. The firms are handsomely rewarded for the trouble, winning guaranteed-purchase contracts and, sometimes, grants to research their products in the first place.
But for one company, scoring on both ends of the process in this way hasn’t been enough. Not only did it benefit from massive government grants, and not only did it realize super-profits on a product many of us were required to take, the company now wants taxpayers to foot the bill for the alleged patent infringement involved in the making of that product. The company’s name is Moderna, and the product in question is the Spikevax Covid vaccine.
In a little-noticed court filing last month, Moderna invoked a World War I-era statute to shield itself from liability for allegedly borrowing, without pay, a vaccine-delivery system pioneered by other researchers. If this is allowed, it will set a new low in the legalized corporate looting of the public fisc.
In 2019, Moderna was an obscure biotech firm in Cambridge, Mass., with a “long-unrealized dream of using the technique of mRNA insertion to create new drugs,” as the Boston_ Globe _put it. That’s a gentle way of saying the company was a dud. Up to that point, it had never brought to market a single pharmaceutical. Today, Moderna is a $50 billion behemoth with contracts around the world, whose CEO earned more than $18 million in compensation last year alone.
“The mega-firm wants to shift the cost of its alleged theft onto the taxpayer.”
What happened in the interval was the coronavirus pandemic and the American-taxpayer-funded race to build gene-based vaccines against Covid after the virus’s genetic code became public. In the gloomy January of 2020, Moderna managed to create its vaccine over a single weekend—“in an hour,” in fact, as its president, Stephen Hoge, later boasted in an interview with his medical-school alma mater. It shipped its first batch of clinical product in February, and Phase I trials began a month later. Cha-ching!
If all that sounds a tad too easy, that’s because it probably was. The idea of messenger-RNA-based therapies—transmitting synthetic genetic code into human cells that teaches them to do things like fighting viruses—had been known to researchers for more than 20 years. The difficulty was how to deliver the code into the body and past the cell membrane without compromising its integrity. The solution: fat-like molecules, known as lipid nanoparticles, or LNPs, that would envelop the mRNA and bring it safely to its cellular destination.
The solution hadn’t been come by so easily, however. According to a patent-infringement lawsuit filed this year against Moderna, the LNP delivery system for Spikevax was the fruit of two decades of painstaking research by scientists associated with a Canadian-based biotech company called Arbutus and a sister company called Genevant. Moderna knew about these patents, the two LNP companies claim, because “it licensed them for other product programs.” Prior to the pandemic, Moderna had also repeatedly sought to overturn the Arbutus patents and mostly failed to do so. Once it entered the Covid-vaccine race, Moderna “simply used the patented technology without paying for it or even asking for a license,” the plaintiffs charge.
Proving the patent-infringement claim will be a highly complex, technical undertaking. In addition to the fact that Moderna had previously licensed their LNP technology for other products, Arbutus and Genevant cite a research document, known as a preprint, published on June 11, 2020, by Moderna researchers and scientists affiliated with the National Institutes of Health. The plaintiffs claim that the LNP mechanism described in the preprint is remarkably similar to their own patented technology.
Moderna denies infringement. Yet it has never “requested retraction of the Moderna/NIH preprint or otherwise submitted a correction of it.” Moreover, the firm has repeatedly suggested that its LNP technology is the same one described in the preprint, which happens to have similar parameters as the Arbutus-Genevant technology (though, in certain European patent filings, Moderna claims to have changed the LNP formula described in the preprint).
The plaintiffs insist they have never sought to halt distribution of the Moderna vaccine—a step that wouldn’t exactly endear them to the public. Instead, they seek only financial compensation.
Shameless doesn’t begin to describe Moderna’s response. In its May motion to dismiss, the firm didn’t offer any substantive defense of its product. Instead, it merely pointed to a century-old wartime statute providing that when a patented innovation is “used or manufactured by or for the United States,” the infringed inventor must file suit against Uncle Sam. In other words, the mega-firm wants to shift the cost of its alleged theft onto the taxpayer.
Moderna points to language in its contract with the US government calling on it to supply the Spikevax “for the United States government . . . and the US population” amid a “national emergency.” Yet as the plaintiffs note in response, courts have never held that the law in question applies when a patent is infringed for the benefit of “the population as a whole, rather than the benefit of the US government itself.” Indeed, they note, there is precedent running precisely contrary: “that US government-funded sales of a medical product are _not _‘for the government.’ ”
If the law were construed as broadly as Moderna would have it, companies that contract with the US government for any number of products and services could infringe patents at will, endangering the intellectual-property system, and then turn around and ask taxpayers to compensate the infringed parties for the harm caused. In Moderna’s case, moreover, the vaccine was sold and distributed in many instances through private entities and at private settings in which the US government was in no way active or present. As the plaintiffs argue, “under Moderna’s invented standard, every government-funded product used to advance any policy goal” could involve patent infringement for which the public would be on the hook.
There is a still more disturbing element. The pharmaceutical industry is held up as one of the jewels of the US economy, led by genius meritocrats capable of delivering life-saving and -enhancing solutions and in the process generating enormous value. The Covid vaccines—and perhaps even more so, the clinical treatments developed with much less lavish state support—attest to the sector’s strengths. But the Moderna affair also reveals the extent to which success in pharma is also a matter of clever and cronyist maneuvering.
The stunning rise of Moderna shows how corporations privatize the gain, while socializing the pain—including the consequences of their own alleged wrongdoing.