February 10, 2020
It is often said that intellectuals have a hard time dealing with new ideas. This is perhaps nowhere better demonstrated with the fixation with patent monopolies as the primary mechanism for financing the development of new drugs.
Bloomberg gave us a beautiful example of this narrow mindedness with a column from Max Nisen on the possibility that China may require the compulsory licensing of a patent on a drug developed by Gilead, in order to produce a treatment for the Coronavirus. A compulsory license means that sacrificing the monopoly Gilead had expected, which means it will only get a small fraction of the revenue it might have otherwise anticipated. Nisen is concerned that this lost revenue will reduce expected profit in the future, meaning that companies like Gilead would have much less incentive in developing cures for epidemics like the Coronavirus.
While drug companies do operate to make a profit, the part of the story that Nisen misses is that the profit does not have to be gained through patent monopolies. Suppose that the U.S. and other governments put up research funding, which private corporations like Gilead could bid on based on their expertise and track record. In this case, a condition of the research is that all patents would be in the public domain (the companies were already paid for their work) and all results would be fully public as soon as practical.
If anyone was seriously concerned about combating epidemics like the Coronavirus, this would seem to be the best route to go. We should want researchers all around the world to be sharing results and in other ways cooperating to solve a common problem. Advanced funding would encourage this sort of cooperation as opposed to the patent system, which encourages researchers to squirrel away findings so as not to give an edge to competitors.
That fact, and the other benefits should be obvious to anyone who writes on this issue, but as we know, intellectuals have a hard time dealing with new ideas.