USITC Comments on Investigation No. 332-596, Covid-19 Diagnostics and Therapeutics: Supply, Demand, and TRIPS Agreement Flexibilities

By SBE Council at 3 May, 2023, 4:07 pm

Investigation No. 332-596

Small Business & Entrepreneurship Council Written Submission

Karen Kerrigan

Does not include CBI

Small Business & Entrepreneurship Council

Lisa R. Barton

Secretary to the Commission

U.S. International Trade Commission

500 E Street SW

Washington, DC 20436

Dear Secretary Barton,

On behalf of the Small Business & Entrepreneurship Council (SBE Council), thank you for the opportunity to provide input on U.S. International Trade Commission Investigation No. 332-596, Covid-19 Diagnostics and Therapeutics: Supply, Demand, and TRIPS Agreement Flexibilities.

SBE Council is an education, advocacy, and research organization dedicated to protecting small businesses and promoting entrepreneurship. Our members include small business owners, entrepreneurs, state and local business groups, and corporate partners and associations.

As part of its investigation, the ITC has asked stakeholders to comment on how new products could be affected by extending the World Trade Organization’s existing waiver of intellectual property rights on Covid-19 vaccines to include diagnostics and therapeutics too.

For many of our members, the answer is clear. The waiver would impose vast financial harm on the small businesses that drive pharmaceutical innovation in the United States, leaving patients without access to new lifesaving medicines and tests – and damaging the economy in the process.

A large majority of U.S. life sciences firms are small businesses. Nine out of ten U.S. pharmaceutical companies have fewer than 500 employees. Three-quarters have fewer than 100 employees, and nearly half have less than 10. Even Moderna — which has now become a household name — was a relatively unknown startup roughly a decade ago.

Though they are small, these companies account for much of the innovation that occurs across this important sector. Emerging companies are responsible for approximately 80% of drugs in the development pipeline.^[1] All told, small businesses generate about 14 times more patents than large firms and universities, and employ roughly four in ten scientists and engineers across the country.^[2]

These firms are able to innovate and scale due to a strong and reliable system of intellectual property protections in the U.S. – the very system that a waiver expansion would undermine.

IP protections give entrepreneurs and investors an opportunity to earn a return on the time, energy and capital they have devoted to a high-risk business venture. Without such an incentive, many startups – which make for inherently high-risk investments – would never get off the ground.

This is particularly true in the pharmaceutical sector, where bringing just one drug to market routinely costs more than $2 billion and can take 10 years or more. Even after firms commit that immense of time and money, there is no guarantee a resulting therapeutic will be a success. Nearly 90% of experimental medicines that enter clinical trials are never approved by the FDA.^[3] To overcome these obstacles, small businesses rely on a favorable policy climate that encourages risk-taking from investors, and rewards innovation.

Suspending IP protections on Covid-19 diagnostics and therapeutics would degrade the policy climate, create uncertainty, and destabilize innovation.

Realizing that governments can arbitrarily waive patents on revolutionary innovations, funders and entrepreneurs will question whether to invest in those sorts of treatments in the future. That would almost certainly leave our nation and citizens on its heels the next time a global public health crisis occurs.

It would also trigger a tsunami of consequences for workers in biotechnology and beyond — and send ripple effects across the economy.

Small businesses employ nearly half the nation’s workforce, account for more than 99% of U.S. businesses, and are responsible for nearly two-thirds of net new job creation since 1995.^[4] In short, small companies are crucial to America’s economic success.

This is especially the case in IP-intensive sectors, where small businesses make up roughly 96% of firms. Altogether, companies in these industries employ nearly half of all U.S. workers and contribute more than two out of every five dollars of U.S. economic output.^[5][6]

Each new innovation in these industries generates countless jobs. Consider the development of Covid-19 vaccines and treatments, which has supported more than 400,000 U.S. jobs alone.^[7] Clinical trials for Covid-19 vaccines and treatments have supported another 100,000 American jobs.^[8]

Extending the TRIPS waiver would put future jobs – many of them at small firms – in jeopardy.

Though Covid-19 diagnostics and therapeutics are at the heart of the current waiver proposal, global leaders show no sign of stopping there. For instance, UN Secretary-General António Guterres has suggested that “removing obstacles to knowledge sharing and technological transfer – including IP constraints – is crucial for a rapid and fair renewable energy transition.”^[9]

If the WTO agrees to the waiver extension, investors in renewable energy and every other IP-intensive industry will have reason to worry they will become the next target. As capital dries up in these high-risk sectors, firms will not be able to initiate new projects or hire more employees. And as companies scale back their new ventures, there will be fewer opportunities across sectors that depend on growth. For example, construction workers building new facilities, fewer electricians setting up power, and other ancillary businesses that derive opportunity, revenues and growth from innovative private-sector activity. From scientists to assembly line workers to plumbers to electricians, a host of high-paying jobs will disappear.

At the same time, our fiercest economic rivals would gain ground. The waiver would put revolutionary technologies developed by U.S. inventors into the hands of other WTO member countries, including China.^[10] We simply can’t afford such giveaways, especially considering China already steals roughly $225 to $600 billion worth of intellectual property from the United States each year.^[11]

Some might argue that these catastrophic consequences are simply the price we must pay to promote equal access to Covid-19 treatments and tests throughout the world. But the fact remains that there is no IP-induced shortage of Covid-19 diagnostics and therapeutics.^[12]

Indeed, supply of Covid-19 treatments far exceeds demand. Last fall, therapeutic manufacturing lines were sitting dormant and millions of courses destined for low- and middle-income countries had yet to be distributed.^[13] Pharmaceutical companies, meanwhile, had already entered into nearly 140 voluntary licensing and manufacturing agreements to increase access to Covid-19 treatments in 127 countries across the world.^[14]

Diagnostics are similarly widely available. That is why, in a November communication to the TRIPS Council, the governments of Switzerland and Mexico concluded that “we do not face a situation where we have an IP-induced lack of access to or a lack of manufacturing capacity of COVID-19 therapeutics and diagnostics.”^[15]

The original TRIPS waiver has already proven ineffective at expanding access to lifesaving Covid-19 vaccines. Since the WTO agreed to the waiver last June, millions of unused shots have been simply trashed. Because demand for the vaccines has plummeted, so too has the number of doses scheduled for delivery to low- and middle-income countries.^[16]

Yet instead of working to remove trade and regulatory barriers, improve healthcare infrastructure, and reduce patient hesitancy – the true hurdles that hinder access to vaccines, treatments, and tests – world leaders are now doubling down.

If they agree to extend the TRIPS waiver, America’s small businesses and entrepreneurs will be further harmed in an already challenging and uncertain economic environment. Our economy and innovative sectors would be harmed and undermined without anything being meaningfully pursued to increase access to diagnostics and therapeutics.

For these reasons, SBE Council urges the ITC to recommend against a waiver expansion. Our economic team and members would be more than happy to offer further assistance as your investigation proceeds.

Sincerely,

Karen Kerrigan, President & CEO

^[1] https://www.biospace.com/article/investment-in-biopharma-is-reaching-an-inflection-point-/

^[2]https://www.sbc.senate.gov/public/index.cfm/innovationresearch#:~:text=Small%20businesses%20produce%20more%20than,of%20America’s%20scientists%20and%20engineers.

^[3] https://www.biospace.com/article/investment-in-biopharma-is-reaching-an-inflection-point-/

^[4]https://sbecouncil.org/about-us/facts-and-data/

^[5] https://advocacy.sba.gov/2015/06/09/4572/

^[6] https://www.uspto.gov/sites/default/files/documents/uspto-ip-us-economy-third-edition.pdf pg. iii

^[7]https://phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Refresh/Report-PDFs/2022-09-30-PhRMA-TRIPS-Waiver-Expansion-FINAL_November-2022.pdf

^[8]https://phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Refresh/Report-PDFs/2022-09-30-PhRMA-TRIPS-Waiver-Expansion-FINAL_November-2022.pdf pg. 7

^[9]https://unfccc.int/news/antonio-guterres-time-to-jump-start-the-renewable-energy-transition#:~:text=Removing%20obstacles%20to%20knowledge%20sharing%20and%20technological%20transfer%20%E2%80%93%20including%20intellectual%20property%20constraints%20%2D%2D%20is%20crucial%20for%20a%20rapid%20and%20fair%20renewable%20energy%20transition

^[10] https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN22/W15R2.pdf&Open=True

^[11] https://law.stanford.edu/2018/04/10/intellectual-property-china-china-stealing-american-ip/

^[12]https://phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Refresh/Report-PDFs/2022-09-30-PhRMA-TRIPS-Waiver-Expansion-FINAL_November-2022.pdf

^[13] https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W693.pdf&Open=True pg. 1

^[14] https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W693.pdf&Open=True pg. 2

^[15] https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W693.pdf&Open=True, pg 3

^[16] https://www.washingtonpost.com/world/2023/01/04/covid-vaccine-demand-covax-2023/

500-word summary for inclusion in ITC report

Expanding the WTO’s intellectual property waiver to Covid-19 diagnostics and therapeutics would significantly harm the small businesses that drive pharmaceutical innovation in the United States, leaving patients without access to various lifesaving new medicines and tests, while damaging the U.S. economy and its innovative capacity in the process.

Small businesses are responsible for the lion’s share of U.S. pharmaceutical innovation. This is only possible because of our strong and reliable system of intellectual property protections, which provide entrepreneurs and investors an opportunity to earn a return on the time, energy, and capital they have devoted to a risky business venture. Without such an incentive, many startups – which make for inherently high-risk investments – would never get off the ground.

Suspending IP protections on Covid-19 diagnostics and therapeutics would dismantle this incentive structure. Knowing that governments can arbitrarily waive patents on revolutionary inventions, funders and entrepreneurs will question whether to invest in these small businesses – and their innovations – in the future.

That will have ripple effects across the entire economy.

Small firms, which account for over 99% of U.S. businesses and employ nearly half the nation’s workforce, are vital to America’s economic success. This is particularly true in IP-intensive sectors such as the pharmaceutical industry, where small companies make up 96% of all firms and each innovation generates numerous jobs. For instance, the development of Covid-19 vaccines and treatments alone supported 400,000 American jobs.

Extending the TRIPS waiver would jeopardize future jobs at small firms in IP-intensive industries. While the current waiver proposal focuses on Covid-19 diagnostics and therapeutics, global leaders, including UN Secretary-General António Guterres, have advocated for removing IP constraints in other sectors. If the WTO agrees to the waiver extension, investors across IP-intensive industries may fear their sectors will be targeted next, leading to reduced capital and inhibiting new projects and job creation in multiple industries.

Some might argue that these harmful consequences are simply the price we must pay to promote equal access to Covid-19 treatments and tests throughout the world. However, the fact remains that there is no shortage of Covid-19 diagnostics and therapeutics. That is why, in a November communication to the TRIPS Council, the governments of Switzerland and Mexico concluded that “we do not face an IP-induced lack of access or a lack of manufacturing capacity of Covid-19 therapeutics and diagnostics.”

Extending the TRIPS waiver will constrain America’s small businesses and entrepreneurs, impose irreparable damage to the economy, and mar our nation’s innovative standing without doing anything to increase access to diagnostics and therapeutics. For these reasons, SBE Council urges the ITC to recommend against a waiver expansion.