This struck me as a catastrophic move, turning a vaccine developed by a nonprofit institution into a way to make a company lots of money, with no clear upside. (I think if Oxford stuck to their original plan, they could control the IP and require that their manufacturing partner sell the vaccines at cost).
Both AstraZeneca and J&J have agreed that they will sell the vaccines at cost during the pandemic; this is mentioned in one of the articles you linked.
Unfortunately, this agreement has had major downsides. By preventing AstraZeneca from making a profit, it has undermined their ability to invest in capacity, and is one of the causes of the numerous production setbacks we have seen. I think it would have been much better if AstraZeneca was allowed to charge higher prices to incentivise them to produce more! If there is a shortage, that suggests that prices are too low, not too high.
Companies that own rights to vaccines developed with enormous public investment and massive guaranteed government contracts are fighting any efforts to share the knowledge that could be used make more vaccines in more parts of the world.
AstraZeneca signed a voluntary licensing agreement with various Indian manufacturers to allow them to produce its vaccine. This fact was pointed out to you when you wrote about this subject on facebook.
In fact, the novel technology at the heart of the Moderna vaccine, for example, was developed partly by the National Institutes of Health using U.S. federal funds. Moderna then received a total of some $2.5 billion in taxpayer money for research support and as preorders for vaccines; by the company’s own admission, the $1 billion contribution it received for research covered 100 percent of those costs.
As it happens, I doubt this will be that important a move. Manufacturing mRNA vaccines is a very advanced business that requires a lot of expertise; these are not small molecule drugs! Even with the IP waiver I suspect most others would struggle to do what Moderna and Pfizer have achieved. There just is not a huge amount of currently idle capacity in this supply chain. For more detail on the manufacturing details, I recommend reading this article.
In practice, pharma companies are far more focused on boosting their share price than on developing new drugs. For example, in 2018, “the 10 biggest pharmaceutical companies spent nearly 170 percent of their net income (tapping cash reserves and borrowing) on payments to shareholders and executives through stock buybacks and dividends”.
Developing new drugs and ‘boosting the share price’ are not in opposition. If a company develops a promising new drug, the expectation of future profits will cause the share price to increase. This is why biotech companies can see their share prices go up even if they are not doing any cash return at all.
I also think you have misunderstood how accounting works. Net Income is after R&D expense. The more a company spends on R&D, the lower Net Income will be. The fact that Net Income is low compared to cash return doesn’t mean that the company isn’t doing R&D.
As an example, take a look at Pfizer. In 2020 they spent about $9.4bn on R&D vs Net Income of around $9.6bn. This exceeded their dividends and buybacks, which were around $8.4bn. And we should probably also included M&A, which is basically indirect R&D. This is lumpy but large—e.g. over $10bn for 2019 for example.
I actually think that it is a major problem how low the prices for the vaccines have been. These drug companies have provided us with a way out of the pandemic that many people thought was impossible—and very few expected as quickly as this. For this they should have been richly rewarded—we want to incentivise companies to work on the world’s biggest problems for the future! Unfortunately, if you look at the share prices of Pfizer or AstraZeneca and compare them to the broader market, you can see this was not the case. Given the amount these companies have been attacked by politicians, I think it is plausible that AstraZeneca leadership might regard this entire endeavour as a mistake.
(Thanks, I thought that was a really useful comment for me to read. I had suspected that the OP was off in various ways—e.g. the “shortages suggest prices are too low” point seemed clear—but haven’t followed the situation closely enough to know for sure what to think about some of the details, and this comment helped with that.)
Agree with your concern that waiving IP rights is disincentive for pharmaceutical industry to R&D future medicines and vaccines, but it does not negate the fact that vaccines in a pandemic are a global public good. It is about human rights.
Regarding the financial status of the vaccine companies, half of Pfizer’s record-setting revenue in 2021 were from their vaccine.
Although I agree fundamentally with the OP’s suggestion for a fully public vaccine development, a concession might be a one year limit on TRIPs patents for vaccine, allowing profit before sharing the tech.
Vaccines are excludable (it is easy to largely prevent people from accessing them) and rivalrous (most of the benefit of the vaccine goes to the person being vaccinated, as transmission is reduced but still significant) and hence while they may have positive externalities they are not public goods.
True, my mistake. Herd immunity is the public good. I would still suggest vaccines are the cheapest, safest, fastest, most equitable route to herd immunity.
It’s not too surprising that the top comment is a rehashing of market fundamentalism. Going through point by point.
Unfortunately, this agreement has had major downsides. By preventing AstraZeneca from making a profit, it has undermined their ability to invest in capacity, and is one of the causes of the numerous production setbacks we have seen. I think it would have been much better if AstraZeneca was allowed to charge higher prices to incentivise them to produce more! If there is a shortage, that suggests that prices are too low, not too high.
If Oxford had required that their partner sell the vaccines for say 10% over the cost of production and distribution for the lifecycle of the patent, there would be no incentive to slow-roll production until the pandemic is deemed to be “over” so they can really start cashing in. The problem here is the cliff, not the price cap. Generic drugs are widely available even though the companies that make them don’t have a legal monopoly. Better yet, a public sector pharma sector could just pursue research and production that has the highest social impact, with no concern for whether it’s profitable (cures and vaccines will be less profitable than treatments and drugs that require indefinite prescriptions).
The paragraph after my quote from the NYT op-ed addresses this directly:
“Moderna has pledged not to enforce its “Covid-19 related patents against those making vaccines intended to combat the pandemic.” But as Doctors Without Borders has pointed out, that offer is less generous than it seems since other types of intellectual property, such as know-how or trade secrets, typically are needed to develop and produce vaccines.”
As it happens, I doubt this will be that important a move. Manufacturing mRNA vaccines is a very advanced business that requires a lot of expertise; these are not small molecule drugs! Even with the IP waiver I suspect most others would struggle to do what Moderna and Pfizer have achieved. There just is not a huge amount of currently idle capacity in this supply chain. For more detail on the manufacturing details, I recommend reading this article.
I agree that some of the rhetoric around how easy it would be to spin up new manufacturing capacity, especially that which is related to novel tech, is probably inaccurate. But these problems were foreseen a year ago. Licensing and coordinating new production takes time, deals have to be negotiated and struck. If the IP were public, every company and govt with the capacity to manufacture vaccines could be working on it (or have begun retrofitting plants to build that capacity) . The fact that no companies contributed to knowledge sharing efforts is mentioned in many of the articles I linked.
The article you linked also doesn’t say that other plants couldn’t make the vaccines on a timeline that could impact the course of the pandemic, it just says that it’s a myth that dozens of facilities stand ready to make more vaccine right now (which may actually be true of vaccines that aren’t using mRNA approaches).
I also think you have misunderstood how accounting works. Net Income is after R&D expense. The more a company spends on R&D, the lower Net Income will be. The fact that Net Income is low compared to cash return doesn’t mean that the company isn’t doing R&D.
No, I understand this. Net income could be reinvested in R&D if a company chose to do so. The point is that vaccine development isn’t as profitable as other, less socially useful drugs (like things to treat male pattern baldness). This article goes into a lot of detail on how market forces have diminished our research and production capacities over time:
“The AIDS pandemic focused attention on America’s own disappearing base of vaccine R&D, even as Washington accelerated the trend worldwide. In 1985, the nonprofit Institute of Medicine warned that America’s “reliance on market incentives to ensure vaccine availability may lead to a failure to meet public health needs [and] may not result in optimal levels of vaccine innovation.” Douglas MacMaster, the president of Merck, delivered a similar message before Congress a year later, warning that his company, one of the last to maintain a vaccine research program, might not be able to fund it much longer, given the “profitability of such products.”
Merck ended up keeping its vaccine department. But despite claims by the industry, U.S. drug companies have not produced a “renaissance” of infectious disease research on par with the achievements of the last century. Hoyt made a study of pharma’s post-1970 vaccine record and published her findings in her 2012 book, Long Shot: Vaccines for National Defense, revealing that vaccine innovation had in fact been in a decades-long slide—one tracking precisely to the rise of monopoly science and the related financialization of the drug business. ”
I actually think that it is a major problem how low the prices for the vaccines have been. These drug companies have provided us with a way out of the pandemic that many people thought was impossible—and very few expected as quickly as this. For this they should have been richly rewarded—we want to incentivise companies to work on the world’s biggest problems for the future! Unfortunately, if you look at the share prices of Pfizer or AstraZeneca and compare them to the broader market, you can see this was not the case. Given the amount these companies have been attacked by politicians, I think it is plausible that AstraZeneca leadership might regard this entire endeavour as a mistake.
If you think this is true, how do you expect the world to get vaccinated? It’s already cost prohibitive for poor countries to secure enough vaccine for their citizens. Almost no one in the global South has been vaccinated and COVAX is underfunded and only promises to vaccinated 20% of the population of the countries it covers. How would these companies making even more money off of the vaccines improve this situation?
Although I think it’s unfortunate this comment is so downvoted, I’m not surprised to be honest. As a rhetorical matter more generally, I would recommend two major things:
“Narrow the sale” (and soften the language): perhaps the post and this comment aren’t extremely expansive, but I do think they try challenging too many orthodox beliefs at once and/or otherwise have unnecessary baggage. For example, see the title itself which, like I argued, seems to beg the question. See also the language in the quote: “This struck me as a catastrophic move, turning a vaccine developed by a nonprofit institution into a way to make a company lots of money, with no clear upside.” Instead, you should be very clear up front what 2-3 main claims you are arguing for up front; in this case, I think the main points are things like “we ought to develop an alternative market mechanism for incentivizing R&D and distribution of vaccines”.
Engage more deeply in market-mechanism reasoning or within “market” frameworks, including by agreeing where you need to agree / indicating more clearly that, for example, you understand that patents are better than nothing. For example, if I were in your position I would probably have lead with something like “I am generally in favor of typical market solutions, but in the case of IP regulations and the market for vaccine R&D/production there are specific points of market failure that patents inefficiently address: X, Y, Z. This is why I think one of two alternatives would be better: A1; A2. Because...” This helps to make your propositions clearer and more familiar to the primary audience you are trying to persuade: people who would support patents because of market dynamics. This really also ties into my previous point, about avoiding charged language and a wide array of potential weak spots.
Both AstraZeneca and J&J have agreed that they will sell the vaccines at cost during the pandemic; this is mentioned in one of the articles you linked.
Unfortunately, this agreement has had major downsides. By preventing AstraZeneca from making a profit, it has undermined their ability to invest in capacity, and is one of the causes of the numerous production setbacks we have seen. I think it would have been much better if AstraZeneca was allowed to charge higher prices to incentivise them to produce more! If there is a shortage, that suggests that prices are too low, not too high.
AstraZeneca signed a voluntary licensing agreement with various Indian manufacturers to allow them to produce its vaccine. This fact was pointed out to you when you wrote about this subject on facebook.
Given you highlight Moderna, why did you not mention that they have in fact agreed not to enforce their vaccine IP rights during the pandemic?
As it happens, I doubt this will be that important a move. Manufacturing mRNA vaccines is a very advanced business that requires a lot of expertise; these are not small molecule drugs! Even with the IP waiver I suspect most others would struggle to do what Moderna and Pfizer have achieved. There just is not a huge amount of currently idle capacity in this supply chain. For more detail on the manufacturing details, I recommend reading this article.
Developing new drugs and ‘boosting the share price’ are not in opposition. If a company develops a promising new drug, the expectation of future profits will cause the share price to increase. This is why biotech companies can see their share prices go up even if they are not doing any cash return at all.
I also think you have misunderstood how accounting works. Net Income is after R&D expense. The more a company spends on R&D, the lower Net Income will be. The fact that Net Income is low compared to cash return doesn’t mean that the company isn’t doing R&D.
As an example, take a look at Pfizer. In 2020 they spent about $9.4bn on R&D vs Net Income of around $9.6bn. This exceeded their dividends and buybacks, which were around $8.4bn. And we should probably also included M&A, which is basically indirect R&D. This is lumpy but large—e.g. over $10bn for 2019 for example.
I actually think that it is a major problem how low the prices for the vaccines have been. These drug companies have provided us with a way out of the pandemic that many people thought was impossible—and very few expected as quickly as this. For this they should have been richly rewarded—we want to incentivise companies to work on the world’s biggest problems for the future! Unfortunately, if you look at the share prices of Pfizer or AstraZeneca and compare them to the broader market, you can see this was not the case. Given the amount these companies have been attacked by politicians, I think it is plausible that AstraZeneca leadership might regard this entire endeavour as a mistake.
(Thanks, I thought that was a really useful comment for me to read. I had suspected that the OP was off in various ways—e.g. the “shortages suggest prices are too low” point seemed clear—but haven’t followed the situation closely enough to know for sure what to think about some of the details, and this comment helped with that.)
Agree with your concern that waiving IP rights is disincentive for pharmaceutical industry to R&D future medicines and vaccines, but it does not negate the fact that vaccines in a pandemic are a global public good. It is about human rights.
Regarding the financial status of the vaccine companies, half of Pfizer’s record-setting revenue in 2021 were from their vaccine.
Although I agree fundamentally with the OP’s suggestion for a fully public vaccine development, a concession might be a one year limit on TRIPs patents for vaccine, allowing profit before sharing the tech.
Also this report that big pharma R&D costs are vastly overblown; it is what I had suspected, now upheld by research.
Vaccines are excludable (it is easy to largely prevent people from accessing them) and rivalrous (most of the benefit of the vaccine goes to the person being vaccinated, as transmission is reduced but still significant) and hence while they may have positive externalities they are not public goods.
True, my mistake. Herd immunity is the public good. I would still suggest vaccines are the cheapest, safest, fastest, most equitable route to herd immunity.
It’s not too surprising that the top comment is a rehashing of market fundamentalism. Going through point by point.
If Oxford had required that their partner sell the vaccines for say 10% over the cost of production and distribution for the lifecycle of the patent, there would be no incentive to slow-roll production until the pandemic is deemed to be “over” so they can really start cashing in. The problem here is the cliff, not the price cap. Generic drugs are widely available even though the companies that make them don’t have a legal monopoly. Better yet, a public sector pharma sector could just pursue research and production that has the highest social impact, with no concern for whether it’s profitable (cures and vaccines will be less profitable than treatments and drugs that require indefinite prescriptions).
The paragraph after my quote from the NYT op-ed addresses this directly:
“Moderna has pledged not to enforce its “Covid-19 related patents against those making vaccines intended to combat the pandemic.” But as Doctors Without Borders has pointed out, that offer is less generous than it seems since other types of intellectual property, such as know-how or trade secrets, typically are needed to develop and produce vaccines.”
I agree that some of the rhetoric around how easy it would be to spin up new manufacturing capacity, especially that which is related to novel tech, is probably inaccurate. But these problems were foreseen a year ago. Licensing and coordinating new production takes time, deals have to be negotiated and struck. If the IP were public, every company and govt with the capacity to manufacture vaccines could be working on it (or have begun retrofitting plants to build that capacity) . The fact that no companies contributed to knowledge sharing efforts is mentioned in many of the articles I linked.
The article you linked also doesn’t say that other plants couldn’t make the vaccines on a timeline that could impact the course of the pandemic, it just says that it’s a myth that dozens of facilities stand ready to make more vaccine right now (which may actually be true of vaccines that aren’t using mRNA approaches).
No, I understand this. Net income could be reinvested in R&D if a company chose to do so. The point is that vaccine development isn’t as profitable as other, less socially useful drugs (like things to treat male pattern baldness). This article goes into a lot of detail on how market forces have diminished our research and production capacities over time:
“The AIDS pandemic focused attention on America’s own disappearing base of vaccine R&D, even as Washington accelerated the trend worldwide. In 1985, the nonprofit Institute of Medicine warned that America’s “reliance on market incentives to ensure vaccine availability may lead to a failure to meet public health needs [and] may not result in optimal levels of vaccine innovation.” Douglas MacMaster, the president of Merck, delivered a similar message before Congress a year later, warning that his company, one of the last to maintain a vaccine research program, might not be able to fund it much longer, given the “profitability of such products.”
Merck ended up keeping its vaccine department. But despite claims by the industry, U.S. drug companies have not produced a “renaissance” of infectious disease research on par with the achievements of the last century. Hoyt made a study of pharma’s post-1970 vaccine record and published her findings in her 2012 book, Long Shot: Vaccines for National Defense, revealing that vaccine innovation had in fact been in a decades-long slide—one tracking precisely to the rise of monopoly science and the related financialization of the drug business. ”
If you think this is true, how do you expect the world to get vaccinated? It’s already cost prohibitive for poor countries to secure enough vaccine for their citizens. Almost no one in the global South has been vaccinated and COVAX is underfunded and only promises to vaccinated 20% of the population of the countries it covers. How would these companies making even more money off of the vaccines improve this situation?
Although I think it’s unfortunate this comment is so downvoted, I’m not surprised to be honest. As a rhetorical matter more generally, I would recommend two major things:
“Narrow the sale” (and soften the language): perhaps the post and this comment aren’t extremely expansive, but I do think they try challenging too many orthodox beliefs at once and/or otherwise have unnecessary baggage. For example, see the title itself which, like I argued, seems to beg the question. See also the language in the quote: “This struck me as a catastrophic move, turning a vaccine developed by a nonprofit institution into a way to make a company lots of money, with no clear upside.” Instead, you should be very clear up front what 2-3 main claims you are arguing for up front; in this case, I think the main points are things like “we ought to develop an alternative market mechanism for incentivizing R&D and distribution of vaccines”.
Engage more deeply in market-mechanism reasoning or within “market” frameworks, including by agreeing where you need to agree / indicating more clearly that, for example, you understand that patents are better than nothing. For example, if I were in your position I would probably have lead with something like “I am generally in favor of typical market solutions, but in the case of IP regulations and the market for vaccine R&D/production there are specific points of market failure that patents inefficiently address: X, Y, Z. This is why I think one of two alternatives would be better: A1; A2. Because...” This helps to make your propositions clearer and more familiar to the primary audience you are trying to persuade: people who would support patents because of market dynamics. This really also ties into my previous point, about avoiding charged language and a wide array of potential weak spots.