March 16, 2023
It really is bizarre how elite policy types have such a hard time thinking clearly about intellectual property. Earlier this week, I was beating up on the NYT for having two columns on preparing for the next pandemic, neither of which mentioned even once the issue of intellectual property.
This issue of intellectual property in a pandemic should not seem like an obscure topic. In the fall of 2020, India and South Africa proposed a resolution at the WTO that all intellectual property claims on vaccines, tests, and treatments be suspended for the duration of the pandemic.
More than 100 countries eventually signed on to the resolution. The United States and other wealthy countries subsequently filibustered the resolution to the point of irrelevance.
However, the idea that questions of intellectual property might be important in the next pandemic should not seem far-fetched. If we had eliminated all IP barriers (this would include both suspending patent monopolies and other forms of exclusivity, as well as not enforcing non-disclosure agreements), we quite likely could have had enough people around the world vaccinated quickly enough to have prevented the development of the Omicron strain of the coronavirus. It is even possible that we could have slowed the spread enough to prevent the Delta strain.
Imagine the millions of lives that could have been saved and the trillions of dollars of economic losses that would have been averted if these mutations had not developed. You might think this would be sufficient to interest the great minds that write about pandemics for the New York Times.
Just to be clear — suspending IP doesn’t mean that companies forego their profits from these claims. The idea is that the suspension would allow for the free flow of knowledge and technology to address the pandemic. After the fact, the companies would receive compensation from the government, and of course they would have every right to sue in court if they felt the compensation was inadequate. The point is that all effort should be focused on stopping the pandemic, and the money issues can be dealt with later.
Okay, it was pretty amazing to see this extraordinary neglect in the NYT, but Planet Money on NPR arguably went one better. It actually had a very interesting piece on drug costs and innovation, but then walked away from the big question it raised.
The piece pointed out that the United States pays more than any other country in the world because we grant drug companies patent monopolies and then let them charge whatever they want for their drugs. It then discussed President Biden’s plan to negotiate drug prices in Medicare, which the Congressional Budget Office (CBO) projected would save $25 billion a year.
It also noted that CBO projected that the reduction in drug company profits would result in a reduction of one percent in the number of drugs being developed. Since we develop roughly 45 new drugs a year, this would mean one less drug every two years. If that lost drug was an important treatment for cancer, diabetes, or some other serious illness, that would be a big loss.
But then the NPR piece cites another CBO study that calculates that we could offset the reduction in drug company research spending by increasing spending on NIH research by $1 billion. The piece then comments:
“So the policies together would save the government billions of dollars overall with minimal harm to innovation,” and then moves on.
Okay folks, let’s slow down and look at what NPR just told us. They said that $1 billion in government spending on research would offset the impact of a $25 billion reduction in drug prices. That is a 25 to 1 return on investment. In cost-benefit analyses, this would be off-the-charts crazy. A ratio of 1.1 is considered good, and 1.5 to 1 is great. If you can get to 2 to 1, that’s really fantastic. This is 25 to 1.
Maybe we should be asking if we can push this further and have the government pick up the whole tab for the research that is currently supported by patent monopolies (a bit over $100 billion a year at present), and let all new drugs be sold as cheap generics as soon as they are approved by the FDA. This could easily save us over $400 billion a year in spending on prescription drugs.
And, not only would drugs be cheap, we would also have removed the enormous incentive to be dishonest about the safety and effectiveness of drugs which results from patent monopoly pricing. We would also radically reduce the amount of money spent researching copycat drugs, and could instead direct more money into exploring cures and treatments that may not involve patentable products.
I wouldn’t necessarily expect this piece to go all the way down this road, but it is more than a bit incredible that they tell us that increased spending on NIH research can have a 2500 percent return on investment, and then just walk away from the issue. Is it not possible for people to think clearly about alternatives to patent monopolies for supporting the development of new drugs?
There is a lot of money, as well as peoples’ lives and health, at issue. It should be possible for our leading news outlets to think about the problem seriously and not let prejudices about intellectual property get in the way.
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