At a press briefing in early April, New York Governor Andrew Cuomo held up a hospital-green N95 respiratory mask. He had just delivered the day’s updated Covid-19 fatality figures, a number exacerbated in New York and elsewhere by a national shortage of the masks and other protective equipment. “We talk about them as if they are very complicated,” the governor said, rolling the material between his fingers with a kind of contempt for its flimsiness. “It’s fabric, it’s material, the FDA has the specifications, and then it’s two pieces of elastic cord. It can’t be that we can’t make these.” Noting that the market price of an N95 had shot from 70 cents to $7, Cuomo pledged to finance their manufacture in-state, where they will join NYS-Clean hand sanitizer in a growing Empire State–branded pandemic product line.
The scarcity of more complicated tools to address a catastrophic public health crisis—including ventilator machines, other medical devices, and, most elusive of all, a vaccine—doesn’t have such simple state-level answers. But these shortages do raise a similar set of questions: about the patent system, about pandemic preparedness policy, about the value of a private health sector structurally incapable of prioritizing high-risk, low-probability events. From the frustration of Cuomo and his fellow governors to White House interest in the powers of the Defense Production Act of 1950, American officials are remembering that the government can make things. As the ultimate provider and often source of intellectual property rights, it can make them quickly, cheaply, and without the concern for shareholder value that led (to take a pair of notorious recent examples) the medical device giant Covidien to shelve a public contract for emergency mobile ventilators, or 3M to claim at least eight patents related to its respiratory masks between March 3 and April 7.
As the world shifts its focus from containment to a cure, it’s become urgent to face up to the dangers of our reliance on pharmaceutical and biotech industries built to serve Wall Street and shareholder value over human needs and public health. The case for removing patent-barriers and expanding government control over drug research and development was already strong and gaining traction before the Covid-19 pandemic. The events of recent months, says a growing alliance of public health experts and industry reform advocates, have further exposed the faults of the current model and bolstered the case for alternatives. “Under the patent-model that drives the behavior and priorities of the drug industry, companies have no reason to focus resources on a potential pandemic-level virus like Ebola and coronavirus, because the chances of it being used within the term of a patent is too low,” said Rohit Malpani, the former policy director for the Médecins Sans Frontières Access Campaign who has advised Oxfam. “It’s never been clearer that something has to change.”
For the last half-century, the American pharmaceutical industry has steadily abandoned research and development to support new vaccines in favor of whatever products will return the highest profits during the legally standard 20 years of monopoly ownership. At the same time, a profusion of intellectual property claims has become a progress-obstructing asteroid field for nonprofit research efforts geared toward public health. The industry has produced staggeringly high margins by pushing prices to their breaking point on drugs developed through a $42 billion annual subsidy dispersed by the National Institutes of Health. That the same companies are now posturing before an anxious world as avatars of innovation and selflessness is the crowning irony of the coronavirus crisis.
The mask of public-spiritedness is a bad fit for Big Pharma, which is why it keeps slipping. In March, Gilead Sciences looked like a good corporate citizen when it reported that one of its patented investigational drugs, remdesivir—an antiviral treatment mostly invented and researched by a consortium of NIH-funded academic labs—had potential as a Covid-19 cure. With its stock enjoying a market-defying 8-point bounce, the company quietly attempted to extend its monopoly on remdesivir and gain extra tax credits using a loophole that closes after 200,000 patients are infected by the disease targeted by the drug. After Public Citizen and other groups reported the scheme, Gilead was shamed into declining the granted extension.
Two days after Gilead’s March 25 retreat, the Swiss drug giant Roche announced its surrender to public outrage in the Netherlands, where it had initially refused an emergency request by the Dutch government to share the proprietary ingredients and specifications necessary for a Covid-19 test.
The pandemic has inflicted visible cracks in the prevailing system that serves Gilead and Roche so well. A number of countries, including Germany, Israel, Costa Rica, Canada, and Ecuador, have proclaimed their right to override patents so as to facilitate research and produce affordable treatments. The pharmaceutical industry and its defenders, meanwhile, show few signs of their usual fight. When Israel announced it was ordering generic versions of an AbbVie Inc. HIV drug that shows promise in treating severe Covid-19, despite ongoing patent protections that limit its noncommercial distribution in that country, AbbVie quickly dropped its protest. The United Nations and the World Health Organization have called for patent suspensions and collaborative pooling, ideas that have found an unlikely ally in the business-friendly Financial Times, which favored compulsory licensing, or patent breaking, in a March 27 editorial.
But compulsory licensing is not a comprehensive long-term solution. The multiplying declarations of exceptions to the patent system serve to validate the system in principle, leaving it intact when the sense of high alarm fades. So long as the framework of privatized science exists, R&D will continue to be warped by its logic, and poor nations that can’t afford its products will continue to suffer. If there is an upside to the Covid-19 pandemic, which has ravaged human populations across the planet and brought the world economy to its knees, it is that it may beget a sustained reconsideration of the patent model and the multifaceted failure of the industry that has arisen from its assumptions and rules. This industry is not irrational for fearing what might grow out of this reckoning: the construction of national public drug sectors capable of developing and manufacturing drugs and vaccines on their own.
For four decades, warnings to prepare for infectious pandemics have amassed alongside evidence that the current drug development system is uniquely unsuited to the task. Though there has been a string of near-misses since the 1997 outbreak of H5N1, an avian flu with a mortality rate of 60 percent, these warnings have had little influence on an industry narrowly focused on blockbuster drugs that fuel the cycle of its own financialization.
Regardless of whether one describes this indifference to human suffering and pressing global health threats as sociopathic, criminal, or a necessary precondition for a very profitable industry, it is difficult to find public health experts who believe it has left us better prepared for the Covid-19 pandemic.
“The reason we’re testing Covid-19 with the same drugs we used against Ebola is because we have a system that leaves product development to companies that don’t care about anything lacking an immediate market,” said Tahir Amin, co-executive director of the Initiative for Medicines, Access and Knowledge. “For all their talk about innovation and the drugs of the future, what was Gilead doing with remdesivir before February? Like everything else with the drug companies, the answer is private.”
This lack of transparency is at the center of a scandal dating to the first reports of H5N1 outside Southeast Asia in 2005. As governments scrambled to stockpile drugs that showed promise against the avian flu, Roche presented its drug Tamiflu as the best thing on the market. It based this pitch on in-house clinical trial reports riddled with exaggerated and flat-out falsified data. The fiasco resulted in wasted emergency budgets and multiple ongoing lawsuits. On the plus side, Roche has sold $18 billion worth of Tamiflu since the drug’s 1999 introduction.
A more consequential market failure occurred in the case of an Ebola vaccine developed by a team of academic researchers in Winnipeg, Canada. After the vaccine showed high success rates in animal tests, the Canadian government in 2010 licensed the drug’s development to a small Iowa biotech firm, BioProtection Systems. The company signed the contract and promptly mothballed the potential vaccine without informing the Canadian government. As described by the industry news site STAT, BioProtection Systems never had any interest in “Ebola, or even infectious disease vaccine platforms, [but] was looking for assets to add to its portfolio to generate capital investment.” By this standard, the vaccine was a success story: In 2011, BPS was purchased by NewLink, a bigger biotech concern, which later flipped the rights to the Ebola candidate vaccine to Merck for $50 million.
The deals made a few people rich, but none of them lived in the villages of the Democratic Republic of Congo where Ebola erupted three years after the licensing deal with BioProtection Systems, leaving frontline doctors “fighting a forest fire with spray bottles,” in the words of Ella Watson-Stryker, a Médecins Sans Frontières humanitarian representative dispatched to the region during the outbreak.
“The lesson of the Canadian Ebola vaccine story, and so many others, is relying on industry doesn’t just create failures, it reinforces a vision of public-sector science that is far too limited,” said Matthew Herder, a professor at the Dalhousie University Medical School in Nova Scotia. Herder was one of a team of researchers who acquired internal documents from the Canadian government showing the Ebola vaccine would have been manufactured in time for the 2014 outbreak had late-stage testing and development not been outsourced.
“The standard narrative that the government does discovery work, and only the private sector can advance development, is just wrong,” he added. “We need to scale up new models if we’re going to meet problems like pandemics.”
Rumblings of reform have become louder in recent years, both on the margins of the current system and close to its heart. In the spring of 2005, with that year’s H5N1 outbreak fresh in his mind, Dr. Anthony Fauci, then and still the director of the National Institute of Allergy and Infectious Diseases, asked a gathering of medical school deans, “If faced with the choice of putting $200 million into a new area, will pharmaceutical companies make a product to combat an emerging microbe, for which there is an uncertain market, or will they develop a new Viagra or a better Lipitor?”
In early March of this year, Peter Hotez, a vaccine specialist and dean of the National School of Tropical Medicine in Houston, made the same crucial point in testimony before Congress. Hotez described how he and his colleagues developed promising potential vaccines for SARS (2003) and MERS (2012) as part of a collaboration with the Walter Reed Army Institute of Research and Galveston National Laboratory. But work on the vaccines abruptly stopped when the pandemic receded and drugmakers lost interest. “We must recognize that vaccines for neglected and emerging infections fall through the cracks because they are not a priority for pharma and biotechs,” he said. Hotez and his colleagues are currently repurposing their old research for the genetically similar SARS descendent that causes Covid-19. He urged Congress not only to invest more in nonprofit and academic research, but also to protect that research from the logic and pressures of a drug market built around extracting maximum value from the most expensive drugs for as long as possible.
Even within the best buffered research environments, the patent system intrudes. It hides knowledge within legal labyrinths and seals it within proprietary black boxes, complicating cross-laboratory cooperation and impeding the natural flow of scientific discovery. “When researchers have to navigate multiple patents to assemble the knowledge required to develop a vaccine, it slows progress,” said Kendall Hoyt, an expert on vaccine development policy and strategy at the Geisel School of Medicine at Dartmouth College and a former member of the National Academy of Sciences Committee on the Department of Defense’s Programs to Counter Biological Threats. “Because upstream discoveries and tools are blocked by a tangle of IP protections, the current system is not well suited to responding to global public health needs.”
In his 2005 speech to the medical school deans, Fauci called for “a new paradigm” to compensate for the lack of “marketplace demand for countermeasures for emerging infections” and ensure ongoing R&D into high-risk pandemic preparedness.
As the 79-year-old Fauci knows better than most, nations, including the United States, need not look far for inspiration in building alternative paradigms. Well into the twentieth century, a number of developed countries maintained innovative, full-cycle public drug sectors. Many still do. But more have been privatized or weakened during the U.S.-led process, beginning in the 1970s, of sanctifying biomedical intellectual property.
“People in countries like the Netherlands are asking, ‘Didn’t we used to have a national vaccine institute and production facilities? Why did we ever get rid of that?’” said Ellen ‘t Hoen, director of Medicines Law & Policy and a former senior policy adviser at UNITAID, where she led and helped to found the pioneering Medicines Patent Pool to facilitate access to medicines for the treatment of HIV/AIDS and other infectious diseases.
“The Covid-19 crisis lays bare the faults in the drug system in the most painful manner possible,” she continued. “It’s not news for the global south, but now rich countries are waking up very harshly to the consequences of the belief that market forces will deliver the needed biomedical solutions.”
In the United States, too, the pandemic has awakened faint memories of another way and another time, when the government kept engines warm on the production of medical equipment and vaccine R&D. These efforts included a federal drug pipeline responsible for the most storied run of breakthroughs in the history of modern medicine.
The so-called golden age of U.S. vaccine R&D was inspired by a ghost. The Spanish flu pandemic of 1918 left some of its deepest scars on the military, where it tore through densely packed barracks and ships, accounting for as much as 80 percent of all service casualties during World War I, according to some historians. Memories of influenza decimating entire divisions haunted Franklin D. Roosevelt as war clouds gathered during his second term. His team resolved to plan for another wartime outbreak of something like the Spanish flu: Along with military offices dedicated to the design and production of tanks and planes, they established a federal biomedical R&D infrastructure to invent needed medicines and vaccines.
At the top of the hierarchy was the newly formed Office of Scientific Research and Development, headed up by the M.I.T. prodigy and Boston inventor Vannevar Bush. Established in 1941, the OSRD oversaw hundreds of projects across dozens of agencies that managed a sprawling network of affiliated labs working on everything from fermented penicillin to the atomic bomb. The system was designed to produce basic science and then apply it to practical problems prioritized by the OSRD. James Conant, another guiding force in wartime research, described the government’s role as “picking men of genius, backing them heavily, and keeping their aim on the target chosen.”
The wartime network produced a culture of collaboration and public service that persisted a quarter-century after the war, a period coterminous with a historically fecund stretch of vaccine innovation. All told, the U.S. military played a significant role in developing more than half of all the vaccines invented last century, including 18 of 28 vaccines for preventable diseases. Vaccines for flu, measles, and rubella are only the most famous.
The government’s role was essential during the war, and it remained influential after the war ended, said Kendall Hoyt, the vaccine development expert at Dartmouth. “Before the 1980s, vaccine programs were less constrained by intellectual property concerns and market demands,” she said. “The top-down federally directed programs integrated vaccine research and development across disciplines, facilitating information exchange and technology transfer and [fostering] a culture of freewheeling collegiality and trust. Today’s system is more stovepiped. It’s harder to consolidate and apply relevant knowledge to vaccine development, even though the stock of knowledge is much greater.”
Harry Truman dissolved the OSRD in 1947. Three years later, Congress divided its former authority and oversight roles into a newly bifurcated bureaucratic design, with the National Science Foundation focused on basic science, and the National Institutes of Health tasked with applying those discoveries and developing medicines. Around the time of Richard Nixon’s election, ideologues and bureaucrats at NIH, notably patent counsel Norman Latker, initiated a systemic shift in drug R&D by greasing the transfer of government science into private hands. Expanded opportunities and terms on monopoly patents incentivized research into the most profitable drugs, a list that has never included vaccines and antibiotics. While a polio shot can change history, people only need one, and government agencies are often the main buyer, driving down prices.
In retrospect, the effects of this shift were predictable. In 1967, dozens of U.S. companies had vaccine research departments and manufacturing capabilities, not because they were always profitable, said Hoyt, but out of a lingering commitment to wartime partnerships and a sense of public duty. That number had fallen to single digits by 1979, the year that the Office of Technology Assessment tried to raise an alarm with a report that concluded, “The apparently diminishing commitment—and possibly capacity—of the American pharmaceutical industry to research, develop, and produce vaccines may … be reaching levels of real concern.” The following year, Congress, gripped by the privatization fervor that would become the hallmark of the dawning era of Reaganomics, passed the Bayh-Dole Act, supercharging the shift toward patent monopolies and away from public control over government-funded science.
Washington wasted no time pushing the rest of the world to get in line. The privatization and shuttering of state drug industries began in the 1980s, following the Big Pharma–supported 1984 U.S. Trade Act, which threatened sanctions against countries that failed to give “adequate and effective” protection to U.S. patents, including 20-year patents on medical inventions. A decade later, the World Trade Organization bound 123 nations to a strict new intellectual property regime, known as TRIPS. It was an apt acronym. TRIPS allowed the U.S. Trade Representative to knock down, obstruct, and generally bully generic drug producers in rich and poor nations alike. After years of protest and organized campaigns, WTO policy was amended in 2001 to carve out a compulsory licensing exception that permitted countries to break patents in certain cases, such as public health crises. However, countries that used this right found themselves on the “Special 301 Report,” an annual naughty-or-nice list issued by the U.S. Trade Representative, timed with a wink to “World Intellectual Property Day,” a holiday established by the industry-backed World Intellectual Property Organization.
The sanctions countries receive after too much time on the “Special 301 Report” can take a number of forms. In 2016, Washington punished Colombia for breaking patent on a pricey Novartis cancer treatment by canceling a bilateral trade agreement and threatening to withhold diplomatic and financial support for its peace deal with FARC rebels. Constant pressure against India—the so-called pharmacy of the developing world, which produces most generics used to treat HIV, malaria, and TB in the global south—has succeeded in whittling down the country’s Patents Act of 1970, the law that long served as a global beacon signifying the possibility of alternative systems and values.
“For decades, the U.S. Trade Representative has aggressively used patent laws to deny developing countries the chance to produce drugs more cheaply for their own people, and enabling price gouging by multinationals and U.S.-based pharma companies,” said Jayati Ghosh, a professor at the Center for Economic Studies and Planning at the Jawaharlal Nehru University in New Delhi. “This was already a problem for patients in rich countries. Covid-19 shows how this strategy can boomerang very badly.”
Within the WTO, this boomerang has assumed the form of a 2017 amendment that left 37 mostly rich countries ineligible to import drugs produced under compulsory licenses elsewhere. More than 30 groups, in addition to numerous individuals, are now petitioning the signatory countries to reject the amendment and allow for the free flow of medicines and science related to potential Covid-19 vaccines and treatments.
“The ability of countries to import and export these technologies may prove critically important during the COVID-19 pandemic, as well as under future health emergencies,” states an open letter signed by the groups. “Because of global supply chains, countries may need access to active pharmaceutical ingredients and other essential medical components, manufactured elsewhere but patent-protected at home.”
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.
Though early shifts in IP law set the stage for this financialization, it soon became a self-fueling cycle. Pharma today is a creature of Wall Street, where high drug prices are not intended to fund future R&D so much as lure hedge funds and supercharge stock buybacks and executive payouts. In their study of the industry’s financialization since the 1970s, economists Öner Tulum and William Lazonick conclude that “the strategic goal of the [modern drug company] is profits, not products, and the purpose of the profits is to boost the company’s stock price.” These enticing market valuations have in the last decade served as chum for the biggest and most predatory institutional investors on Wall Street, which demand further cranks of the cycle.
Before the race for a Covid-19 vaccine hit the news, this cycle—growing price-gouging by companies owned in part by hedge funds, private equity, or venture capital firms—was approaching terminal velocity. And despite a generally complacent business press, the financial takeover of American pharma threatened to become the industry’s biggest story line. Justifiably so. A recent analysis by the Roosevelt Institute shows that 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 in 2018, a 75 percent increase from the previous year.
Though their CEOs keep an emergency stash of Jonas Salk talking points behind glass for use during emergencies, this is not how institutions that are centered on innovation spend their money. It is, rather, how an industry with an algorithmic focus on predatory value extraction rewards itself for winning a game whose stakes include the lives and deaths of untold millions of human beings.
In 2000, three years after the first H5N1 outbreak, the National Intelligence Estimate highlighted a doubling in American deaths from infectious diseases since 1980. Though overtaken by a narrower focus on bioterrorism after 9/11, the document’s broader attention to contagious pathogens was validated in subsequent years with multiple Ebola outbreaks, the avian flu pandemic, and the breakouts of MERS and SARS, both genetic ancestors of the SARS-CoV-2 virus that causes Covid-19.
The George W. Bush administration built the current federal framework for pandemic preparedness and intelligence (“biosurveillance” in Pentagon-speak). Its signature contribution was the All-Hazards Preparedness Act of 2006 establishing the Biomedical Advanced Research and Development Authority (BARDA) inside the Department of Health and Human Services. By then, nine years had passed since the Pentagon contracted a Maryland-based subsidiary of General Dynamic, DynPort Vaccine Co., to develop new treatments for biological agents and new infectious diseases. The failure of that contract to produce any new treatments, at the expense of $700 million to the taxpayer, led the Bush and Obama administrations to at least briefly consider building a state vaccine manufacturing capability for the new century.
A 2013 Los Angeles Times report by David Willman describes how concern over DynPort’s lack of progress inspired a group of researchers at the NIH-supported University of Pittsburgh Medical Center to recommend, in 2008, that the Department of Defense construct its own full-cycle vaccine manufacturing capability. The outgoing Bush administration was intrigued by the idea, but it had critics inside the Pentagon, notably Major General Stephen V. Reeves, a program manager in charge of biological and chemical threats. Reeves, who retired the following year to consult for private defense contractors, urged the White House to get a second opinion.
The White House agreed, and the Pentagon and HHS contracted the Tufts Center for the Study of Drug Development to produce an alternative assessment of the proposal. The Tufts Center has deep ties to the drug industry going back decades and has provided the script for generations of “free-market” industry talking points, including those credited with convincing Bush to sign away the government’s right to negotiate drug prices in the Medicare Modernization Act of 2003. Asking it if the government should relinquish a public drug option and stick with contractors is an exercise in seeking out a foregone conclusion, not unlike asking Burger King’s in-house PR team if french fries are a nutritious and delicious snack.
The Tufts Center’s report came back negative, ranking a government-run vaccine infrastructure the worst available option. It advised the Pentagon and HHS to double down on the use of private contractors that are “less costly and timelier.”
In December of 2010, the Obama administration floated the idea of state-led vaccine manufacturing plants, known as Advanced Development and Manufacturing (or ADMs). But the proposal was a compromise between conflicting views within the bureaucracies, a variation on the public-private partnership. At four sites around the country—one run by the Department of Defense in Florida, and three by HHS officials in Maryland, Texas, and North Carolina—the government invited private-sector bids to build and operate facilities equipped for vaccine research and emergency surge production. When it came to choosing partners for the sites, the last of which came on line earlier this year, the government’s options were limited to a narrow applicant pool.
“Your large pharmaceutical vaccine manufacturers aren’t interested in working in areas like surge capacity, so the government ends up using a bunch of little guys who lack the necessary experience and knowledge,” said a former senior government official with intimate knowledge of medical countermeasures efforts, including the ADM facilities. (The official declined to be identified because they were not authorized to speak to the press while in government.) “Everybody involved knows the ADMs aren’t working. Are all of these places ready to produce 50 million vaccine doses in four months? I’m guessing no.”
Two program reviews have given the ADMs poor early performance ratings, citing tepid enthusiasm among private partners and less than robust investment by the government—more proof that the contractor model is not getting the job done.
A March story in The Washington Post captured the disconnect between, on the one hand, a project at the intersection of national defense and public health, and on the other, the concerns and interest-levels of ADM contractors. GlaxoSmithKline canceled its involvement in the Texas ADM within the first year. A Defense Department memo shows officials anxious that the Florida site’s corporate partner is wavering due to a “cash flow problem.”
As the ground shifts under the debate over government R&D, the Obama administration’s reluctance to build a federal vaccine plant on par with those of major commercial vaccine manufacturers will likely be Exhibit A in the case against the neoliberal default position to outsource crucial aspects of pandemic preparedness. “The major vaccine makers tend to step in when something like Ebola is all over the news,” said the former official. “Relying on a Johnson & Johnson to save the day is not a preparedness strategy.”
“To prepare for a major public health crisis,” the official continued, “we need a government-operated and -owned facility, staffed with people from the private sector with technical and regulatory expertise. Hire them. This entity could provide other readiness capabilities and save us a ton of money. Why are we paying companies to develop medical countermeasures, and then buying those products back from them at a premium? The model makes zero sense.”
A public option in pharma wouldn’t require starting from scratch. A ready-made foundation exists in the Department of Health and Human Services and the NIH system, already the world’s biggest investor in biomedical research. HHS is the natural home for a new directing body with authority, stature, and funding on par with the wartime OSRD, argues Dana Brown, director of the Next System Project at the Democracy Collaborative, a think tank. A 2019 report written by Brown, Medicine for All: The Case for a Public Option in the Pharmaceutical Industry, provides a blueprint for how a national pharmaceutical institute positioned inside NIH could coordinate with federal, state, and local public entities, including university and federal labs, Department of Veterans Affairs supply depots, and Postal Service offices. “The power is there, as is a good bit of the infrastructure, to build a public pharma sector that reprioritizes R&D and eliminates issues of cost-related access,” said Brown.
Like state pharma sectors around the world, a U.S. Pharma could pay for itself, and possibly then some, through drug sales and savings to the government. All revenue would flow back into the federal, state, and municipal entities that produced the medicines, as opposed to funding private pharma’s billion-dollar marketing campaigns and stock buybacks. It would also ensure the revenue stayed inside the country. As revealed by the Panama Papers, the 30 U.S. companies hiding the most money offshore included nine drugmakers shielding more than $500 billion in combined assets from taxation. Pfizer alone operates 157 offshore subsidiaries hiding nearly $200 billion from the same Uncle Sam that signs its 20-year monopoly patents.
A public pharma sector would operate according to the norms and laws that have governed science for most of history. Because the system would not be based on the maximum pricing of drugs artificially protected from competition, there would be no incentive to erect barriers to science. Instead of licensing breakthroughs to private companies, U.S. labs could make contributions to global patent pools, not just when pandemics threaten, but as a matter of permanent policy. While private industry might not survive government competition in, say, the insulin market, companies could focus on lifestyle drugs, or perform niche roles in the public production of essential medicines.
Pharma executives claim that the potential riches made possible by monopoly patents can alone incentivize innovation. This understanding of science is belied by the millennia of discovery that occurred before hedge funds entered the medicine business, as well as the records of alternative R&D models already in use, from patent pools and open-source “copyleft” protocols, to prize-based competitions and creative commons licenses.
“Generations of scientists found cures without the hope of becoming billionaires,” said Adam Gaffney, a Boston-area critical care doctor who teaches at Harvard Medical School and is president of Physicians for a National Health Program. “The public financing of pharmaceutical development will allow us to keep scientific knowledge in the public domain, ensure access, and shape research priorities, including therapies to fight the viruses of the future. We’re pouring public money into a Covid-19 therapy. We need a system that can see it all the way through.”
Brown’s blueprint envisions a role for state and municipal authorities as well as federal institutions. Larger states and cities are especially well positioned to quickly establish drug manufacturing industries, seeding them with state loans and voter-approved general obligation bonds. This is how California raised $3 billion to launch the stem-cell–focused Institute for Regenerative Medicine, and how Texas raised the same amount for its prized Cancer Prevention and Research Institute.
There are examples across the country of states effectively managing warehousing and distribution logistics, including 18 states with monopoly control over the sale and distribution of beer, wine, and liquor. Brown believes such precedents could provide the basis and inspiration for regional networks built around pharmaceutical production hubs. These networks could coordinate the wholesale and retail sales of medicines with the U.S.P.S. or the Department of Veterans Affairs. The former is already the country’s biggest retail network; the latter manages a national system of drug acquisition and storage. (The conservative project to privatize both of these institutions is likely not unrelated to their strengths and uses in building up the public sector generally.) Prices would be set according to an understanding of medicines as a public good, as they are in countries where public pharma sectors sell drugs at a fraction of the blood prices allowed under the U.S. system.
Establishing a public pharmaceutical archipelago within the current drug economy, said Brown, is “a way to reclaim what medicine was always supposed to be about.” This reclamation would not involve some distant, long-ago past. When the U.N. World Intellectual Property Organization was founded in 1967, no controversy surrounded the decision to exclude medical patents. Even in this country, the patent regime is more of an alien presence than the drug companies would like us to know and remember. “For most of the nineteenth century, scientific innovation and the pursuit of profit were distinct domains for doctors and reputable drug manufacturers,” said Joseph M. Gabriel, a historian at Florida State University and the author of Medical Monopoly: Intellectual Property and the Origins of the Modern Pharmaceutical Industry. “The two could not be joined without risking the destruction of one’s reputation and markets.”
Advocates of a parallel public system predict that the private drug industry would shrink with time under the pressure of competition, and lose the powerful grip over the political process it maintains with one of the richest lobbying operations in Washington.
Covid-19 has changed the way the industrialized West looks at outbreaks. The same emergency teams of infectious disease specialists that formerly deployed to Central African villages have been dispatched to the cobble-stoned streets of Rome. The same forces that keep drug companies from devoting resources to “poor-country” diseases like malaria and tuberculosis—which kills two million people annually—also stop them from sustained research into “once-a-century pandemics” that threaten to become the new normal, equalizing rich and poor nations in the face of threats that mock the meaning of national borders.
This realization may come slower in the United States than elsewhere. Under President Donald Trump’s direction, the country is pursuing zero-sum policies that compromise other countries’ access to medicines, tests, vaccines, and even face masks. The administration’s reported effort to acquire a German company’s vaccine candidate was rebuffed, but has put other governments and international agencies on alert. (The German company denied receiving any such offer from Trump or his administration.)
There are also signs of a U.S. media narrative emerging that heralds the contributions of a widely loathed industry. In early April, multiple U.S. media outlets ran reports that cast Johnson & Johnson’s vaccine efforts in a carefully staged heroic light. Seldom mentioned was the fact that, during the first nine months of 2019, the company spent more than $6 billion on stock buybacks to boost its share price, and issued more than $7 billion in stock payouts that year. The company—now receiving a heavy stream of government funding, including $420 million from BARDA in March alone—promises that, should its candidate win the vaccine race, its announced price of $10 per shot will not turn a profit. Advocates and longtime observers of the company, however, warn there is little basis for trusting the pledge.
“Any assurances from J&J that its vaccine price is not-for-profit should be met with skepticism,” said Rohit Malpani, the former Oxfam adviser. “The company has an abysmal track record in ensuring access to new HIV and tuberculosis medicines in poor countries, and has taken an approach to the cost of producing a key TB medicine that means it remains out of the reach of most people suffering from the disease.”
Telling this broader story will be essential to the political project of reforming how drugs are developed, manufactured, and priced in the United States, still the world’s preeminent biomedical power. The NIH is the world’s biggest funder of R&D; the U.S. consumer market is the world’s largest and most lucrative; and Washington remains a formidable, if no longer unchallenged, force in the shaping and enforcing of global intellectual property laws and norms.
It should not be difficult to tell this story. The drug industry is one of the most hated sectors of the U.S. economy. Polls show majority support for the public production of pharmaceuticals. In 2018, two Democrats, Massachusetts Senator Elizabeth Warren and Illinois Representative Jan Schakowsky, introduced legislation to establish an Office of Drug Manufacturing within HHS to oversee the production of affordable generic drugs.
Even the Trump administration has shown signs of being fed up. Last year, it filed a lawsuit against Gilead for failing to obtain licenses and pay royalties on four government patents related to a drug combination to prevent HIV transmission, for which Gilead had charged excessive prices in the United States for nearly a decade. The government rightly complained that Gilead contributed very little to the development of the drugs, which have become a key tool in the global fight against HIV.
Like Brown’s R&D institute, the office proposed by Warren and Schakowsky could be the seed of a larger public drug sector, one freed from the frustrations and contradictions that have plagued attempts to square the public-private circle.
Perhaps the best-known of these attempts is the Coalition for Epidemic Preparedness Innovation (CEPI), launched in 2017 with hundreds of millions of dollars in government and foundation funding to address the yawning R&D gap between global public health threats and the priorities of drug company executives and shareholders. The CEPI research agenda targets the world’s six most threatening infectious diseases, along with an unknown SARS-like pathogen called “Disease X.” Because governments no longer maintain their former research and production capabilities, CEPI contracted for development and testing with private companies, each of which signed the CEPI pledge assuring affordability. But last year, the companies changed their minds. They pressured CEPI to release a reworded and much weaker version of the original pricing pledge, unveiled three years ago to wide acclaim at, of all places, the World Economic Forum in Davos.
For advocates who have been fighting the drug industry for a quarter-century, the companies’ pushback against CEPI’s price guarantee was no surprise. They know the industry won’t willingly help erect (or revive) a rival system of drug production to replace the one that has made it a trillion-dollar business. But as the world continues to absorb the lessons of the coronavirus crisis, change threatens to upend the existing pharma business model, regardless of industry protest and resistance.
“Interest is spreading in models of science that are open and collaborative and built around principles of equitable R&D that meet human needs and gathering threats, such as antimicrobial resistance,” said Merith Basey, North American director for Universities Allied for Essential Medicines, a global network of academic scientists and medical students that is campaigning for Covid-19 vaccine access and mapping the public funds flowing through associated research.
“There is hope in the present crisis. People are starting to understand there should be no going back.”