How Big Pharma Is Using Public Money to Make Billions Fighting the Virus … and Dragging Their Feet as They Do It
The big drug companies are killing people.
I get to say this about the drug companies, now that President Joe Biden has said that Facebook is killing people by allowing people to use its system to spread lies about the vaccines. There is actually a better case against the drug companies.
After all, they are using their government-granted patent monopolies and their control over technical information about the production of vaccines to limit the supply of vaccines available to the world. As a result, most of the population in the developing world is not yet vaccinated. And, unlike the followers of Donald Trump, people in developing countries are not vaccinated because they can’t get vaccines.
The TRIPS Waiver Charade
The central item in the story about speeding vaccine distribution in the developing world is the proposal put forward at the WTO last October (yes, that would be nine months ago), by India and South Africa, to suspend patents and other intellectual property rules related to vaccines, tests and treatments for the duration of the pandemic. Since that time, the rich countries have been engaged in a massive filibuster, continually delaying any WTO action on the measure presumably with the hope that it will become largely irrelevant at some point.
Suppose that during World War II a military contractor developed a new sonar system to detect German submarines. What would we do if this company refused to share the technology with the U.S. government?
The Biden administration breathed new life into the proposal when it endorsed suspending patent rights, albeit just for vaccines. This is the easiest sell for people in the United States and other rich countries since it is not just about humanitarian concerns for the developing world. If the pandemic is allowed to spread unchecked in the developing world it is likely only a matter of time before a vaccine-resistant strain develops. This could mean a whole new round of disease, death, and shutdowns in the rich countries until a new vaccine can be developed and widely distributed.
After the Biden administration indicated its support for this limited waiver, many other rich countries signed on as well. Germany, under longtime chancellor Angela Merkel, has been largely left alone to aid the pharmaceutical industry in opposing the vaccine waiver.
I had the chance to confront the industry arguments directly last week in a web panel sponsored by the International Association for the Protection of Intellectual Property (link included when it becomes available). It’s always educational to see these arguments up close and real people actually making them.
The first line of defense is that the waiver of patent rights by itself does not lead to any increase in vaccine production. This is of course true. Vaccines have to be manufactured, eliminating patent rights is not the same thing as manufacturing vaccines.
But once we get serious, the point is that many potential manufacturers of vaccines are being prevented from getting into the business by the threat of patent infringement suits. In some cases, this might mean reverse-engineering the process, something that might be more feasible with the adenovirus vaccines produced by Johnson and Johnson and AstraZeneca, than with the mRNA vaccines. The manufacturing process for these vaccines is similar to ones already used by manufacturers in several countries in the developing world, as well as several in the rich countries that are not currently producing vaccines against the pandemic.
Another possible outcome from eliminating patent rights is that the drug companies may opt to do more voluntary licensing agreements under the logic that it is better to get something than nothing.
If manufacturers use reverse engineering to produce vaccines, the patent holders get nothing. They would be much better off with a limited royalty on a licensing agreement, even if it is less than they could have expected if they had been able to maintain an unchecked patent monopoly.
(Editor: Reverse engineering is how startup computer companies built clones of the early PCs or personal computers. They bought IBM personal computers and paid one set of engineers to take it apart and describe what they found. Then a second set of engineers used the descriptions to build a personal computer. Voila, no royalties to IBM.)
The other route that suspending patent monopolies may open is one where former employees of the pharmaceutical companies may choose to share their expertise with vaccine manufacturers around the world. In almost all cases these employees would be bound by non-disclosure agreements. This means that sharing their knowledge would subject them to substantial legal liability. But some of them may be willing to take this risk. From the standpoint of potential manufacturers, the patent waiver would mean that they would not face direct liability if they were to go this route, and the countries in which they are based would not face trade sanctions.
While suspending patent rights by itself could lead to a substantial increase in vaccine production, if we took the pandemic seriously, we would want to go much further. We would want to see the technology for producing vaccines fully open-sourced. This would mean posting the details of the manufacturing process on the web, so that engineers all over the world could benefit from them. Ideally, the engineers from the pharmaceutical companies would also be available to do webinars and even in-person visits to factories around the world, with the goal of assisting them in getting their facilities up-to-speed as quickly as possible.
The industry person on my panel didn’t seem to understand how governments could even arrange to have this technology open-sourced. He asked rhetorically whether governments can force a company to disclose information.
As a legal matter, governments probably cannot force a company to disclose information that it chooses to keep secret. However, governments can offer to pay companies to share this information. This could mean, for example, that the U.S. government (or some set of rich country governments) offers Pfizer $1-$2 billion to fully open-source its manufacturing technology.
Suppose Pfizer and the other manufacturers refuse reasonable offers. There is another recourse. The governments can make their offers directly to the company’s engineers who have developed the technology. They can offer the engineers say $1-$2 million a month for making their knowledge available to the world.
This sharing would almost certainly violate the non-disclosure agreements these engineers have signed with their employers. The companies would almost certainly sue engineers for making public disclosures of protected information. Governments can offer to cover all legal expenses and any settlements or penalties that they faced as a result of the disclosure.
The key point is that we want the information available as soon as possible. We can worry about the proper level of compensation later. This again gets back to whether we see the pandemic as a real emergency.
Suppose that during World War II Lockheed, General Electric or some other military contractor developed a new sonar system that made it easier to detect the presence of German submarines. What would we do if this company refused to share the technology with the U.S. government so that it was better able to defend its military and merchant vessels against German attacks?
While that scenario would have been almost unimaginable – no U.S. corporation would have withheld valuable military technology from the government during the war – it is also almost inconceivable that the government would have just shrugged and said, “Oh well, I guess there is nothing we can do.” (That’s especially hard to imagine since so much public money went into developing the technology.) The point is that the war was seen as a national emergency and the belief that we had to do everything possible to win the war as quickly as possible was widely shared. If we see the pandemic as a similar emergency it would be reasonable to treat it in the same way as World War II.
Perhaps the most interesting part of this story is what the industry representative saw as the downside of making their technology widely available. The argument was that the mRNA technology was not actually developed to be used against Covid. Its value against the pandemic was just a fortunate coincidence. The technology was actually intended to be used for vaccines against cancer and other diseases.
From the industry perspective, the downside is that if they made their technology more widely available, then other companies may be able to step in and use it to develop their own vaccines against cancer and other diseases. In other words, the big fear is that we will see more advances in health care if the technology is widely available, pretty much the exact opposite of the story about how this would impede further innovation.
I gather most of us do not share the industry’s concerns that open-sourcing technology could lead to a proliferation of new vaccines against deadly diseases, but it is worth taking a moment to think about the innovation process. The industry has long pushed the line that the way to promote more innovation is to make patent and related monopolies longer and stronger. The idea is that by increasing potential profits, we will see more investment in developing new vaccines, cures and treatments.
But these monopolies are only one way to provide incentives, and even now they are not the only mechanism we use. We also spend over $40 billion a year in the United States alone on supporting biomedical research, primarily through the National Institutes of Health. Most of this money goes to more basic research, but many drugs and vaccines have been developed largely on the government dime, most notably the Moderna vaccine, which was paid for entirely through Operation Warp Speed.
If we put up more public money, then we need less private money. I have argued that we would be best off relying pretty much entirely on public money. This would take away the perverse incentives created by patent monopoly pricing, like the pushing of opioids that was a major factor in the country’s opioid crisis. It would also allow for the open-sourcing of research, which should be a condition of public funding. This could create the world the industry fears, as many companies could jump ahead and take advantage of developments in mRNA technology to develop vaccines against a variety of diseases.
But even if we don’t go the full public funding route, it is pretty much definitional that more public funding reduces the need for strong patent monopolies to provide incentives. If we put up more dollars for research, clinical testing, or other aspects of the development process, then we can provide the same incentive to the pharmaceutical industry with shorter and/or weaker monopoly protections.
In the vaccine context, open-source means not only sharing existing technology, but creating the opportunity for improving it by allowing engineers all of the world to inspect production techniques. While the industry would like to pretend that it has perfected the production process and possibilities for improvement do not exist, this is hardly plausible based on what is publicly known.
To take a few examples, Pfizer announced back in February that it found that changing its production techniques could cut production time in half. It also discovered that its vaccine did not require super-cold storage. Rather, it could be kept in a normal freezer for up to two weeks. In fact, Pfizer did not even realize that its standard vial contained six doses of the vaccine rather than five. This meant that one sixth of its vaccines were being thrown into the toilet at a time when they were in very short supply.
Given this history, it is hard to believe that Pfizer and the other pharmaceutical companies now have an optimal production system that will allow for no further improvements. As the saying goes, when did the drug companies stop making mistakes about their production technology?
Has Anyone Heard of China?
It is remarkable how discussions of vaccinating the world so often leave out the Chinese vaccines. They are clearly not as effective as the mRNA vaccines, but they are nonetheless hugely more effective in preventing death and serious illness than no vaccines. And, in a context where our drug companies insist that they couldn’t possibly produce enough vaccines to cover the developing world this year and possibly not even next year we should be looking to the Chinese vaccines to fill the gap.
China was able to distribute more than 560 million vaccines internally in the month of June, in addition to the doses it supplied to other countries. Unless the country had a truly massive stockpile at the start of the month, this presumably reflects capacity in the range of 500 million vaccines a month. The Chinese vaccines account for close to 50 percent of the doses given around the world to date.
It would be bizarre not to try to take advantage of China’s capacity. There obviously are political issues in dealing with China, but America and other Western countries should try to put these aside, if we are going to be serious about vaccinating the world as quickly as possible.
‘Mistakes Were Made’—NOT Our National Motto
If a vaccine-resistant strain of the coronavirus develops, and we have to go through a whole new round of disease, deaths, and shutdowns, it will be an enormous disaster from any perspective. The worst part of the story is that it is a fully avoidable disaster.
We could have had the whole world vaccinated by now, if the United States and other major powers had made it a priority. Unfortunately, we were too concerned about pharmaceutical industry profits and scoring points against China to go this route.
Nonetheless, we may get lucky. Current infection rates worldwide are down sharply from the peaks hit in April, but they are rising again due to the Delta variant. It is essential to do everything possible to accelerate the distribution of vaccines. It is long past time that we started taking the pandemic seriously.