Shall we fear a Patent Waiver? Not for Covid-19 Vaccines

Shall vaccine patents be temporarily suspended? In a simple model, I reflect the essence of the debate on the Covid-19 patent waiver. The central message is that if the probability of imitating innovative vaccines is low, then a patent waiver would be harmless to future R&D. Conversely, a patent waiver would be undesirable if it is too easy to imitate future innovations. This paper also derives a simple policy rule for R&D subsidies that governments can use to correct the adverse effects of the waiver on the incentives to innovate. The vaccine industry is highly concentrated. While the social gains from successful imitation are huge, it is hard to transfer vaccine know-how from the handful of patent holders to potential imitators. In this environment, loosening intellectual property rights (IPRs) protection in a pandemic has significant macroeconomic advantages. Still, it may harm future innovation because it would create an expectation of future IPRs waivers. This paper allows an upbeat assessment of the conditions that make a patent waiver desirable, even considering the future R&D implications. Moreover, it shows how reasonably minimal rises of R&D subsidies can overcome the IPRs uncertainty.