Moderna to Uncle Sam: My Vaccine, Not Yours

Bloomberg Opinion — Moderna Inc. has been a marvel of the pandemic, a startup powered by science, private and public funding and smart people that produced a Covid-19 vaccine in record time. It helped save lives and shortened the course of an epic public health crisis.

Along the way, the company and its investors have also reaped vast financial rewards. Its share price has soared 116% over the past year and more than 650% since March 2, 2020, just before pandemic lockdowns began in earnest. Its market valuation over that latter stretch has grown from $9.8 billion to about $91.7 billion. It posted earnings of $3.3 billion on revenue of $5 billion in the third quarter, compared with a loss of $234 million against revenue of $158 million in the same period a year ago. The company recently said it has signed vaccine orders for 2022 worth $17 billion — which would make it one of the best-selling drugs in the world.

So why is Moderna, with its reputation burnished and its coffers full, being so greedy?

The Covid-19 slayer is currently locked in a patent battle with the U.S. government — its indispensable partner in the vaccine quest — that makes it look like just another pharmaceutical bully: grasping, tone deaf, financially insatiable and conveniently forgetful about some of the reasons behind its success.

Moderna collaborated with the National Institutes of Health and its scientists for four years to develop its vaccine, and the U.S. government gave the company $10 billion in research and development money to pave the way. The government also agreed to purchase 500 million doses of Moderna’s vaccine, guaranteeing a buyer from the get-go — and eliminating some of the market risk that can challenge drug companies.

Some of Moderna’s funding was channeled through Operation Warp Speed, the government’s all-hands-on-deck push that expedited deliveries of vaccines from several drug companies. But taxpayers had been subsidizing Moderna’s vaccine research since long before Operation Warp Speed emerged — leading analysts to speculate about whether the government was entitled to an ownership stake in the vaccine’s intellectual property rights.

Although Moderna’s vaccine most likely wouldn’t have existed without government support, the company filed a claim over the summer with the U.S. Patent and Trademark Office asserting that its scientists alone designed a key genetic sequence that makes the vaccine so effective. The government strongly disagrees, saying three of its own scientists were central to that effort. Both parties tried to settle their disagreement behind the scenes, but this week the dispute spilled onto the pages of the New York Times. A court battle may be coming.

Moderna says it’s willing to acknowledge the NIH and a trio of its researchers as “collaborators” but not as “co-inventors.” The NIH says that such an omission “deprives NIH of a co-ownership interest in that application and the patent that will eventually issue from it.” More than rights and profits stemming from a patent claim are at stake here. Having a rightful claim to a game-changing invention and a place in the history books matters, too. Barney Graham, an NIH scientist involved in the vaccine research, told the Times that the government’s collaboration with Moderna went like this: “We did the front end. They did the middle. And we did the back end.”

Others concur with that take. Earlier this week, Celine Gounder, an infectious disease specialist and New York University professor who was a member of the White House’s Covid-19 Advisory Board, took to Twitter to criticize the company. “Moderna is cheating U.S. taxpayers. Moderna is being scientifically dishonest. Moderna is trying to cheat NIH scientists,” she wrote. “Meanwhile, many around the world still have not received a single dose of COVID vaccine.”

Playing fast and loose with pricing, costs, transparency and proper credit for public partnerships is old hat for drug companies, unfortunately. Pharma has spent years saying hefty prices compensate it for hefty costs, which it has traditionally identified as all of the research and development spending it incurs as part of inventing and producing blockbuster drugs. But the industry has never fully accounted for its costs, and some critics have pointed out that as much as a fifth of drug research is typically subsidized by the government. The drug companies also often enjoy monopoly pricing, and they have routinely deployed patent law warfare to stave off competitors.

To be sure, Moderna is in a tough industry contending with unusually challenging headwinds. Its stock got dinged last week after it disclosed that sales for the year would be billions of dollars lower than expected. It also missed earnings expectations. The company attributed the shortfalls to the difficulties associated with selling into an international market and supply chain headaches. It appears to be falling behind such competitors as Pfizer Inc. and BioNTech Se.

Yet Moderna remains financially flush, and the federal government helped get it here.

Why is the company being so greedy? Maybe simply because it can. The government shouldn’t let it get away with this.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Timothy L. O’Brien is a senior columnist for Bloomberg Opinion.