Drug Patents and Big Pharma Are Slowing Down the Vaccine Rollout and More
By Dean Baker, Jacobin
29 March 21
Our current model of pharmaceutical research is based on patent monopolies
designed to enrich drug company executives and shareholders. But there's a
better way to develop new drugs and vaccines, based on public funding and
open-source research.
It is often said that intellectuals have a hard time dealing with new ideas.
Unfortunately, for purposes of public debate, open-source government funding
of drug development is a new idea, and people in policy positions seem to be
having a very hard time understanding it. So, I will try to write this post
in a way that even a policy wonk can figure it out.
The basic idea of government-funded research should not be hard to grasp
since the government already funds a large share of biomedical research. The
National Institutes of Health gets over $40 billion a year in federal
funding, with the Biomedical Advanced Research and Development Agency
(BARDA) and other government agencies getting several billion more. This
puts the government's total spending in the $45 to $50 billion range,
compared to a bit over $90 billion from the industry. So the idea that the
government would fund research really should not be that strange.
Most of the public funding does go to more basic research, but there are
plenty of instances where the government has actually funded the development
of new drugs and also done clinical testing. But under the current system,
most of the later stage funding does come from the industry and is funded
through patent-monopoly pricing. Relying on open-source, government-funded
research for later-stage development and testing would be a major change.
The Outlines of a System of Government-Funded Research
To my view, the best way for the government to support the development of
new drugs is through long-term contracts (10-12 years), which would be
awarded through competitive bids for research in specific areas, like cancer
or heart disease. The plan would be for the contracts to be relatively
large, with the idea that the winners would be comparable to prime
contractors for the military. (I describe this system in somewhat more
detail in chapter 5 of Rigged [it's free].)
Major military contractors, like Lockheed or Boeing, typically contract out
to many smaller companies in specific areas. This is a good model. Most of
the major innovations in the development of new drugs have come from
start-ups, who are often bought out by major pharmaceutical companies like
Pfizer or Merck. The winners of prime contracts under this system would be
foolish not to look to award contracts to innovative start-ups to ensure
they have something to show for their work.
One condition that would apply to both prime contractors and any
subcontractors is that all research findings would have to be fully open,
meaning that they are posted on the Internet as soon as practical. This
would apply both to preclinical research and the results of clinical trials.
The posting of trial results would mean that researchers around the world
would be able to independently analyze the data and assess the effectiveness
and risks of drugs and vaccines for different populations.
I have had many people ask me what the incentive would be for the companies
that win contracts to actually innovate as opposed to just spinning their
wheels. Since they presumably would want to renew their contracts when they
expire, that should provide substantial incentive for them to have something
to show.
Also, the researchers would presumably want to actually do something with
their time rather than just looking to collect a paycheck. I have also
suggested having a large pot of money (e.g., $200 million a year) to pay out
as prizes, similar to a Nobel Prize. If a researcher, or group of
researchers, has a major breakthrough that will radically improve the
treatment of heart attack victims, why not give them $10 million? But this
prize would be on top of their ordinary pay, not a replacement.
People have often raised the problem of political influence determining the
awarding of contracts. There is always a risk of political interference,
which of course arises under the current system as well. One advantage of
this system is that the full public posting of results should at the least
make blatantly political decisions difficult, if not impossible. If a
company had received $30 billion to research lung cancer over a ten-year
period and had nothing to show in terms of new drugs or major innovations,
it would be hard to justify another long-term contract to the same company.
All of the drugs developed through this system (the funding would include
carrying new drugs through the FDA approval process) would be available as
generics from the day they are approved. This would mean that new drugs that
may sell for thousands of dollars, or even tens of thousands of dollars,
under the patent monopoly system are likely to sell for ten or twenty
dollars. Drugs are rarely expensive to manufacture and distribute; under a
system of government-financed, open-source research, they would also be
cheap to buy.
Government Funding in the Pandemic
The pandemic provided a great opportunity to experiment with open-source
government funding. While we did the government funding part, with the US
government alone putting up $10 billion through Operation Warp Speed, we did
not get the open-source part. The government effectively paid for much or
all of the research, but still gave private companies patent monopolies.
Ideally, we would have negotiated an international pact, where all countries
would contribute to research, based on their size and relative wealth, and
all findings would be fully open to researchers around the world. I've heard
people object that it's difficult to negotiate these sorts of deals, and we
needed to act in a hurry. Some people have also insisted that China and
Russia never would have agreed to such a deal.
On the first point, it really should not have taken very long to negotiate a
pact. We are throwing money around all over the place. No one thinks that we
are getting things exactly right. Some industries and individuals are
getting compensated in ways that they probably don't need or deserve and,
undoubtedly, some people are being left behind. If the United States or some
other country chips in 20 percent too much or too little, it would be chump
change relative to the costs of the pandemics and various rescue packages
being put forward.
As far as including China and Russia in a deal, I have no idea whether they
would be anxious to join if given the opportunity. They have joined in many
other international agreements, so there would be no prima facie reason to
assume that they would not want to be parties to this sort of arrangement.
We also can't know for certain that they could be counted on to contribute
their agreed-upon share and to make results fully open, but as a practical
matter, both countries have been reasonably good about adhering to other
agreements to which they are a party.
It would have been enormously advantageous if China and Russia would have
been included in a pact with open-source research. Ideally, if all the
successful vaccines were fully open, including their production processes,
manufacturers anywhere in the world that had the ability to produce these
vaccines could have done so.
And they could have begun to ramp up production even before the vaccines had
been determined to be safe and effective. The cost of manufacturing one
billion vaccines that turned out not to be approved is trivial, in both
lives and money, compared to the cost of waiting to have one billion
vaccines become available so that they can be administered.
While we can never know how much more quickly we could have learned about
the effectiveness of vaccines and arranged their distribution, in an
open-source world, we can have some idea just from what we have learned over
the last several months.
For example, Pfizer discovered that it is possible to get six shots out of a
standard shipping vial, not the five they originally believed. This means
getting 20 percent more vaccines. If this knowledge was available sooner, it
might have meant hundreds of thousands or even millions of additional
vaccines.
There is also evidence, based on data from Israel, that the Pfizer vaccine
is highly effective after just one shot. It is possible that if all the
clinical trial data was fully public that this result could have been
discovered sooner. This would have allowed countries to adopt a one-shot
strategy with the second shot coming after most people had received their
initial shot.
Pfizer also discovered that its vaccine can be kept in a normal freezer for
up to two weeks, instead of requiring super-cold storage. If this was known
sooner, it would have greatly facilitated the storage and distribution of
the vaccine.
And Pfizer reported last month that it had discovered a way to alter its
production process to nearly double its output of vaccines. It's hard to
believe that if engineers all over the world were familiar with Pfizer's
production process, not one would have been able to realize this potential
improvement more quickly.
We also got an interesting lesson about incentives with reports that
AstraZeneca cherry-picked the data it presented to the Food and Drug
Administration (FDA) to gain approval of its vaccines. While AstraZeneca
denies the charge, this problem would not exist in an open-source world.
First, the company that developed a vaccine or drug would have no special
incentive to see it approved if it was not safe and effective. While it
would like to have something to show when a contract came up, the risk of
having a drug approved that later turned out not to be safe or effective
would likely far exceed any potential benefit.
More importantly, the clinical trials would not be under its control. The
data from these trials would be fully public so that any researcher anywhere
in the world could analyze it independently. If the FDA or some other
regulatory agency misread the data and made the wrong call, it is virtually
certain that independent researchers would be able to recognize the mistake
and call public attention to it.
We would not have stories like Purdue Pharma misleading physicians about the
addictiveness of its opioids. Under a system of open-source research, they
would have neither the incentive nor the opportunity.
If People Act the Way Economic Theory Predicts, We Should Want Open-Source
Research
Economists always want to look at the incentive structures that we create
with our policies. While patent monopolies do create incentives to develop
drugs and vaccines, they also create incentives to keep as much research as
possible secret, so as not to benefit competitors. The huge markups allowed
by patent monopolies also create an enormous incentive for drug companies to
lie about the safety and effectiveness of their products.
Open-source, publicly funded research radically alters the structure of
incentives. The incentive is to try to have research results spread as
widely and quickly as possible in the hope that others can build on them.
And there is no incentive or opportunity to push drugs that are unsafe or
ineffective. This is a big deal.