Big Pharma public funds

A vast majority of the planet’s population had every reason to welcome the Biden administration’s belated backing of a proposed patent waiver for COVID-19 vaccines. To anyone not invested in the pharmaceutical industry or not named Bill Gates, it was a no-brainer. Economist David Adler and Dr. Mamka Anyona, writing for The Guardian, convincingly argue that “the system of pharmaceutical patents is a killing machine.”

The good news coming from the White House predictably triggered bad news on Wall Street. CNBC reported that within hours, share prices of major vaccine producing pharmaceutical companies “including Moderna, BioNTech and Pfizer, dropped sharply.” The alarm may have been exaggerated. “Johnson & Johnson shed a modest 0.4%,” and closed higher at the end of the week. Pfizer and the others had also gained ground by Friday.

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The brief Wall Street plummet was enough to provoke the ire of Stephen J. Ubi, president of the Pharmaceutical Research and Manufacturers of America, ready to demonstrate the bad faith everyone might expect from a powerful industrial lobbyist. “In the midst of a deadly pandemic,” he explained indignantly, “the Biden Administration has taken an unprecedented step that will undermine our global response to the pandemic and compromise safety. This decision will sow confusion between public and private partners, further weaken already strained supply chains and foster the proliferation of counterfeit vaccines.”

Today’s Daily Devil’s Dictionary definition:

Public and private partners:

A euphemism invented to hide the practice of getting taxpayers (the public) to pay for research that will guarantee future profits for commercial firms (private partners) by gifting them a monopoly permitting exorbitant margins on sales to the public, whose tax dollars funded the research

Contextual Note

The pharmaceutical industry will tend to judge any political decision made in the name of human health and the prosperity of all as an act of “sowing confusion.” In our ultra-rationalist economy, profit has become the sole measure of value. Compromising profit is evil, and, as Milton Friedman endlessly repeated, “There’s no such thing as a free lunch.” Calling into question the pricing strategies of private companies in the supposed free market is considered a dangerous heresy.

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When a government puts up money and resources to stimulate research, guarantees massive purchase orders and transfers the intellectual property to private companies, the companies that benefit don’t consider it “a free lunch.” There’s a reason for this: A lunch at an expensive restaurant in New York may set you back $100 or more. A Coney Island hot dog costs less than $5. But the kind of transfer of wealth from the public to the private sector is routinely measured in billions, if not tens of billions.

The current system of research funding and pharmaceutical production has admittedly produced a certain form of consumer abundance. But the driver of the system even in ordinary times is the management of scarcity and human misery. There seems to be an iron-clad rule that many take to be a law of nature: The misery of the many serves the prosperity of the few. The enduring good fortune of the wealthy enterprises ensures their capacity to partially respond to the needs of the many — but only partially, thanks to the sacrosanct scarcity principle.

Ubi begins his complaint by reminding us that we are “In the midst of a deadly pandemic.” He doesn’t bother to mention that the pandemic might have been controlled months ago if, from the start, we had followed the advice of those who preached in favor of coordinated research and “patent pools.” As Alexander Zaitchik explained in his New Republic article on the crucial role Bill Gates played in defending patents, there was a brief moment when the World Health Organization and health professionals were ready to coordinate global research by suspending considerations of private interest and monopolistic profit in response to an impending global threat. That, alas, was seen as stealing Big Pharma’s lunch and violating the consecrated principle of public-private partnerships.

When the pandemic began to spin out of anyone’s control, US President Donald Trump and French President Emmanuel Macron proudly declared war against the virus. In a veritable world war against a truly evil enemy, with the well-being of every nation’s citizens at stake, reasonable people might expect private interests to give way to the public good. Not in today’s economy. The public sector has accepted its structural dependence on the private sector’s greed to accomplish even its most modest goals. Instead of pooling their efforts, the world’s nations acted as if every other nation was a rival, if not an enemy. Call it the triumph of the spirit of competition.

Historical Note

Ubi complains that the Biden administration took “an unprecedented step.” That is simply untrue. The Defense Production Act (DPA), passed in 1950 during the Korean War, authorized “the federal government to shape the domestic industrial base so that, when called upon, it is capable of providing essential materials and goods needed for the national defense.” According to The New York Times, the DPA “has been invoked hundreds of thousands of times” in recent years to ensure the procurement needs of the military. Is global health a less deserving cause than equipping an aircraft carrier?

Waiving the patents, according to Ubi “will undermine our global response to the pandemic and compromise safety.” Some might see this as a threat. That actually makes sense, since threats are an item in every effective manager’s toolbox. But it becomes the equivalent of blackmail. In all likelihood, the Big Pharma behemoths would refuse to cooperate with the transfer of technology and know-how at a time when all processes need to be accelerated to achieve a lasting effect. They are the ones who possess the clout required to “undermine our global response” and “compromise safety.”

Most astonishing is Ubi’s claim that the “decision will sow confusion between public and private partners.” Although President Biden’s initiative is only a modest step forward, the waiver would be a welcome occasion to begin to clarify what a presumed “partnership” means. For the public, it could signal the breakthrough some believe they see in Biden’s stance. For the first time in at least two decades, the idea of putting a valuation on the public contribution and translating it into intellectual property rights becomes conceivable.

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In the recent past, public investment in all kinds of innovation has been quietly transferred at a fixed price to private interests. In most cases, the price takes little account of actual cost and even less of commercial value. This is as true of Silicon Valley as it is of Big Pharma. The richest billionaires have benefitted from more than a few free lunches.

Ubi fears that the waiver will “further weaken already strained supply chains.” A year ago, the question of supply chains emerged as a major issue as the wealthy nations discovered they no longer had easy access to the masks, PPE and medical supplies needed to respond to the pandemic. In a competitive globalized world, nearly every nation suddenly found itself at a disadvantage. Ubi is right to signal “strained supply chains.” But the whole point of the waiver is to reduce supply chain bottlenecks at a moment of crisis.

Ubi’s final point concerns his fear of “counterfeit vaccines.” But liberating intellectual property reduces the attraction of counterfeits, an effect associated with the protected monopoly of exclusive brands. Illicit imitations of every type of commodity will continue to be an issue for local or national law enforcement. The medical profession is far more capable than retail stores to combat counterfeiting.

The CNBC article concludes with warnings about “China’s ability to piggyback on U.S. innovation to further its vaccine diplomacy aims.” It mentions Russia as well. The idea of cooperation appears nowhere in its reasoning. That is what’s expected from a media whose sole focus is on what affects the stock market. It cites The Washington Post editorial board’s echo of Bill Gates’s self-interested reasoning. With such well-funded resistance in the financial and political world, the likelihood of a serious change of outlook seems limited. DC lobbyists, generously funded politicians and conformist media clearly have more power than the American people and far more than the seven billion people that populate nations not called the United States.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More