On vaccine patents: the logic of bandits
The U.S. decision to support a World Trade Organization waiver of intellectual property (IP) related to COVID-19 vaccines, therapies and medical devices is baffling and perverse, not to mention a betrayal of the country’s long-standing support for strong IP protections. The Wall Street Journal called it “bewildering” and “the single worst presidential economic decision since Nixon’s wage-and-price controls.”
Canada must not follow the Americans’ appalling example. We have an opportunity to show support for an industry we have mistreated for far too long, but our response so far has been limp and ambiguous.
The WTO proposal began with India and South Africa. It is opportunistic and exploitative. IP is not currently limiting access to vaccines or other therapies or devices. The companies involved have gone to great lengths to provide wide access to their IP. Manufacturers are licensing intellectual property royalty-free, selling at cost, collaborating with competitors and donating to less-developed countries. The issues that remain involve scaling and logistics. It’s worth noting also there already are measured, emergency medical provisions to access IP in the WTO Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). A blanket waiver would, instead, create a freefor-all, achieving nothing but the destruction of valuable intellectual property.
There isn’t a large supply of expert manufacturing capacity sitting out there that has the complex know-how, and logistics and supply networks to manufacture and distribute these very complex vaccines and other therapies, or even the ingredients necessary for them — especially without profit. Access to IP might lead some new players to try to scale up — but it won’t provide any near-term relief.
What have pharmaceutical companies and the IP
laws that support them done for the world lately? From no coronavirus vaccines at all to mass vaccination in less than a year is beyond amazing, particularly given the typical timelines for vaccine development. As of April 8, 2021, 859 unique active compounds were under development for COVID, including 397 treatments, 247 antivirals, and 215 vaccines — over half of them from the U.S.
A waiver would benefit IP thieves like China, whose coverup enabled the pandemic to take hold and which stole Canadian IP to make its vaccine. It would lead to enhanced credibility for counterfeit and impure or ineffective products in the supply chain. It also very likely would ensure that companies won’t respond to the next pandemic nearly as swiftly or effectively.
It is entirely illogical to say, as many do, that a massive public health crisis is not the time for patents. That is completely wrong. Now is precisely the time when upholding the integrity of the system that serves us so well is so important. If we undermine a system precisely when it’s needed, it won’t be there to serve us in the future. IP isn’t the problem, it’s the solution; stealing stuff isn’t the solution, it’s the problem.
A chorus of voices, for spurious or ulterior motives, supports the waiver: opportunistic governments and manufacturers, who see a way to profits and corruption; single-minded and simplistic academics and ideologues; misguided NGO’S like Médecins sans frontières, whose self-defeating IP policy mars its otherwise admirable work. Aware that they advocate stealing, some of these critics try to argue that pharmaceutical companies are too profitable. For instance, Dr. Ananya Banerjee of Mcgill University’s School of Population and Public Health says: “I think it really comes back to capitalism … these patents are guaranteeing drug makers a stream of income … Now is not the time to think of profits over people.”
This is the sort of vague, specious economic thinking that too often passes for public policy commentary in Canada. It fails to come to grips with the value, complexity, sensitivity and rarity of innovative businesses and networks, the risks they take on or the scope and depth of their contributions to society and the world. How else, and on what magical terms, free from economic discipline or cost, do people expect such scientific and technological achievements to arise? Divine miracle?
Profit is good. If efforts and property create wealth, who’s to say it’s more than deserved? By what measure? What about accounting for all the lives saved and health improved? The lure of profit drives investment in the development of new vaccines and drugs. It brings new players to the field. Research clearly shows that more pharmaceutical profits results in more money being devoted to research, to the ultimate benefit of everyone. But alas, IP alone doesn’t make pharmaceuticals profitable. Rather than protecting excessive profits for decades, as Professor Banerjee asserts, patents and exclusive marketing rights for pharmaceutical inventions have often had to be extended to ensure that profitability remains adequate, given the immense compliance, regulatory and legal burdens pharmaceutical companies must shoulder.
Professor Aswath Damodaran of NYU’S Stern School of Business publishes industry sector figures for return on equity (ROE) in the U.S. The traditional pharmaceutical industry ranks in the lower third of profitable industries. Financial services and computers, for instance, have about three times the ROE of pharmaceuticals. For biopharmaceuticals the ROE is actually negative. So, mommas, maybe don’t let your babies grow up to be life scientists. The money’s not as good as it seems, and saving the world is rewarded with vilification and confiscation of your property.