Can coronavirus force policy types to think clearly about intellectual property?

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from Dean Baker

It will be hard to decide the most Trumpian moment in his dealing with the coronavirus pandemic, but my nomination is Trump’s meeting with executives from several pharmaceutical companies, where he discussed developing a vaccine. According to Trump, he asked them to “speed it up,” and they said that they would.

The idea that Trump’s admonition to hasten the development of a vaccine would have any impact on these companies’ efforts is too loony to envision for anyone outside of Trumpland. These companies have every incentive in the world to move as quickly as possible to develop a vaccine. It can be hugely profitable for them to be the first company with an effective vaccine and I’m sure at least some of them also care about public health.

In this context, Trump’s urgings probably had about the same impact as the advice to “keep breathing.” It’s sound advice, but you don’t really need someone to tell you.

Anyhow, it is not just Donald Trump who has cloudy thinking about the development of vaccines, it’s pretty much the whole policy elite. In this situation we have a worldwide health crisis, with more than 100,000 people already affected and many tens of millions threatened. In this context, developing a vaccine as quickly as possible should be a top priority for the whole world.

While there are researchers all over the world working on developing a vaccine, they are to a large extent working in competition. Each team wants to be the first to develop a vaccine so that they can secure a patent and get immensely rich.

The prospect of a high-priced vaccine has already caught public attention, as Health and Human Services Secretary Alex Azar testified that he couldn’t guarantee that a vaccine would be affordable. As Azar said, drug companies will have to recover their research costs.

This is one of the great absurdities of our system of relying on patent monopolies to finance the development of new drugs and vaccines. (This argument is laid out in chapter 5 of Rigged [it’s free.]) These government-granted monopolies make something that would almost invariably be cheap, into items that are very expensive. We then hope the government will take steps, such as price controls, to make drugs and vaccines affordable. But if the government didn’t grant the monopoly in the first place then there would be no problem. Drugs would be cheap, like paper clips or plastic cups.

But making drugs expensive is only part of the problem with patent financed research. Science advances most quickly when it is open and widely shared. Rather than having teams in China, Korea, Europe, the United States and elsewhere competing to develop a vaccine first, why wouldn’t we want them cooperating so that they all learned from each other’s successes and failures?

There is actually a good model for this sort of cooperation. The scientists working on the Human Genome Project posted their results on the web nightly. This rule was the centerpiece of the Bermuda Principles. The idea was that the mapping of the genome was a common project that people worked on collectively.

There should be a similar logic to developing a vaccine against coronavirus. And, since much of the research funding is already coming from the government, there is no reason that anyone should effectively be paid twice with a patent monopoly.  You get paid once for the research: full stop. If any researchers have a problem with that, they should go into a different line of work.

In making this argument with policy types, I am usually confronted with the argument that we want to pay people for results, not just twiddling their thumbs. This has always struck me as an unbelievably bizarre argument. I have known many academics over my life. The vast majority take considerable pride in their work, they would not just twiddle their thumbs even if they had the option to do so and still collect a paycheck.

But stepping beyond the idea of researchers being intrinsically motivated, they are working for pharmaceutical companies who have an incentive to produce actual results. Suppose that Acme Pharmaceutical Company got a big chunk of the funding for developing a vaccine and it hired researchers who just twiddled their thumbs rather than produce anything of value. Sure, the Acme folks could have a big laugh, but would the company ever get another dime of public money? (Okay, if the execs were members of Mar a Lago, but probably not in a normal world.)

This is more or less the logic of military contractors. They are awarded contracts to do work developing weapons, they don’t get a patent on a weapon system and then try to convince the government it is a good product. There are plenty of abuses in military contracts, but at the end of the day, contractors do generally develop effective systems. (I am not endorsing how they are used.)

And, this sort of advance payment system in developing drugs and vaccines would have a huge advantage over military research in that there is no excuse for secrecy. While we don’t want ISIS to get all the details on the latest weapon system the Pentagon is developing, we do want every researcher in the world, as well as interested lay people, to be able to learn of the latest developments in drug or vaccine research. It would likely be clear very quickly if a company was just paying people to twiddle their thumbs.

This sort of cooperative approach has troubled many people who worry that someone responsible for a great innovation may not get properly rewarded. After all, if someone makes a major breakthrough in developing a drug or vaccine that could save millions of lives, shouldn’t that person get incredibly rich?

This one is hard for me to understand. First of all, this person is already being paid for their work. If they didn’t consider the pay adequate, they shouldn’t have taken the job.

Second, there is little reason to think that we could actually identify the person who was responsible for an important breakthrough. After all, under the patent system, the party that gets the patent is often not the party that made the key breakthrough. Furthermore, since it will typically be a pharmaceutical company that gets the patent, there is little reason to believe that the scientist responsible for the breakthrough is actually getting the big bucks out the deal.

But does the researcher in some sense “deserve” a huge reward? This is one that is better left to philosophers than economists. Many people do things that have enormous value and don’t get paid commensurately. The firefighter who rescues two young children from a burning building should perhaps be paid millions, but they aren’t. Does this bother us?

How about the anti-smoking activists who led what must have often seemed like a quixotic campaign to restrict smoking in public places? As a result of their work, millions of people are living longer and healthier lives. How much did these people get paid? Does anyone even know their names?

Intellectual types seem really bothered by the idea that someone is not getting a reward that they think is due. I remember many years ago when I was teaching at a small college, we had a small award (I think it was $1,000 – which would be around $2,000 in today’s dollars) to give to the best senior economics major.

When our department voted we had a tie vote with four professors voting for one student and four voting for another. It seemed that none of us had both students so that they were in a position to make a direct comparison.

I suggested flipping a coin. Everyone then laughed. When I tried to get them to take the idea seriously they got angry at me, saying that they could not leave it to random chance. Instead, they had to pretend that they were really determining the best student, when they were actually engaged in a process whose outcome was going to depend on which side was more persistent in carrying through their argument.

Anyhow, we should just be prepared to accept that our system of rewards will not correspond perfectly to what people have contributed. If you have a problem with this, grow up.

There is one other point worth hammering home. People will invariably complain that it will be hard to work out appropriate mechanisms for sharing research costs internationally. That is correct, and anyone who has followed trade deals for the last quarter century knows that it is hard to work out mechanisms for sharing costs with the patent monopoly system as well.

Rules on intellectual property have been major sticking points in all our trade deals. In fact, the Trans—Pacific Partnership would almost certainly have been signed and approved under the Obama administration had it not been for the time it took to work out a deal on data exclusivity for biological drugs.

So yes, we would have to negotiate rules on the sharing of research costs. There will be conflicts and the rules will not be perfect, but so what?

One final point, if someone is really a “globalizer” they should support open research freely shared across borders. This is not Alice in Wonderland where the pharmaceutical industry and their elite supporters get to change the language to suit their purposes.

Those folks who support longer and stronger patent and related protections are anti-globalizers, trying to lock down technology. They are welcome to hold that position, but they are liars if they call themselves “globalizers.”