A Theft By Any Other Name

Over at The Intercept, Lee Fang complains that former Governor and Presidential candidate Howard Dean is working for the pharmaceutical lobby to discourage President Biden from giving away COVID-19 vaccine rights:

Howard Dean, the former progressive champion, is calling on President Joe Biden to reject a special intellectual property waiver that would allow low-cost, generic coronavirus vaccines to be produced to meet the needs of low-income countries. Currently, a small number of companies hold the formulas for the Covid-19 vaccines, limiting distribution to many parts of the world.

I find this phrase fascinating: “A small number of companies hold the formulas for the Covid-19 vaccines.”

It’s technically correct, but it it leaves out something important: The reason a small number of companies own the vaccine formulas is because those companies invented the vaccine formulas. In this way, Fang’s writing is eerily similar to the style some journalists use when writing about police killings: “Police entered the home. Shots were fired. Bullets traveled down a hallway and struck a 32-year old male who died at the scene.”

In both cases, the writing style obscures the agency of the people involved. In the case of the cops, it tends to erase any sense that they are to blame for the death they caused. And in Fang’s case, it tends to erase any credit that pharmaceutical companies deserve for creating world-changing vaccines. It makes it sound like there’s something unjust about these companies owning vaccines that wouldn’t exist without their efforts.

The idea of an intellectual property “waiver” for vaccines is also supported by the World Health Organization:

The director general of the World Health Organization on Friday renewed calls to waive some intellectual property rights for coronavirus vaccines, a move he said is needed to boost global supply and ensure greater access for poorer countries — requisites for ending the coronavirus pandemic.

I understand that much of the world population has not yet been vaccinated, and perhaps “waiving” intellectual property rights for the vaccine would boost the global supply.

But what about next time?

This time, the Covid pandemic spurred vaccine labs to launch development of more than 80 different attempts at a COVID vaccine. Barely a year later, we have three of them approved for use here in the United States, with two more (Novavax and AstraZeneca) likely to be approved in a month or two. In addition, seven more vaccines are in use elsewhere in the world. That’s an astounding result: Less than a year and a half after discover of the SARS-CoV-2 virus, we have 12 different vaccines to fight it.

If we allow those vaccines to be stolen from the people who invented them, then what are the chances that so many pharmaceutical companies will step up to invent the next batch of vaccines for the next pandemic? Heck, we may not have to wait for the next pandemic to see the harm of this short-sighted policy: The original Wuhan variant of SARS-CoV-2 has mutated into several more dangerous variants, which may require the development of modified vaccines. So what are the chances that vaccine inventors will go through the trouble of inventing booster vaccines for the new variants if we allow their first vaccine inventions to be stolen?

“Flexibilities in trade regulations exist for emergencies, and surely a global pandemic, which has forced many societies to shut down and caused so much harm to business — both large and small — qualifies,” Tedros Adhanom Ghebreyesus wrote in an op-ed in the Guardian published Friday, railing against “a me-first approach” to vaccination.

“We need to be on a war footing, and it’s important to be clear about what is needed,” he wrote.

A global pandemic, like a global war, is certainly an exception to a lot of rules, but the Law of Supply probably shouldn’t be one of them: No matter how urgent the need for a vaccine is now, confiscating the intellectual property of vaccine laboratories is still going to discourage future vaccine development. And those future vaccines may be just as urgently needed. If you think having an expensive vaccine is hard on poor countries, try having no vaccine at all.

Nevertheless, Médecins Sans Frontières (Doctors without Borders) has also joined the call for a waiver, as has the editorial board of Nature. The latter is particularly depressing, because they seem to understand the problem, but believe they can solve it through the magic of a “temporary” waiver:

This idea needs to be considered seriously because a temporary IP waiver could have a role in accelerating the end of the pandemic. […] The campaign for a temporary IP waiver is called the People’s Vaccine and is backed by non-governmental organizations, as well as the United Nations’ HIV/AIDS agency, UNAIDS. […] And that once the pandemic is over, IP protections would be restored.

In other words, they promise to stop stealing the intellectual property when they no longer need it. But if no one needs the vaccine, then the vaccine is worthless. Telling vaccine laboratories they can have their intellectual property rights back once they’re worthless is a terrible way to encourage the labs to be ready to make more vaccines in the future.

Arguably the strongest argument for a temporary waiver is that patents were never designed for use during global emergencies such as wars or pandemics.

A policy of not enforcing patents during war or pandemic is an excellent way of discouraging the development of innovative technologies that might help during a war or pandemic. How can you not see that?

A patent rewards inventors by protecting their inventions from unfair competition for a limited time. The key word here is ‘competition’. A pandemic is not a competition between companies, but a race between humanity and a virus. Instead of competing, countries and companies need to do all they can to cooperate to bring the pandemic to an end.

The more I stare at that paragraph, the less sense it makes to me. A pandemic isn’t a competition, but the production and distribution of vaccines most definitely is. Vaccine companies compete for investment dollars, scientific talent, production supplies, factory equipment, and vaccine markets.

In recent days Tedros has made his most pointed plea yet for the waiver of some patents — the intellectual property protections behind vaccine formulations — for coronavirus vaccines and medical supplies. The 164-member World Trade Organization is deadlocked over a proposal to do so put forward by India and South Africa on behalf of countries with little or no vaccine doses. The idea has been roundly opposed by the United States and largely other western countries, where major pharmaceutical companies are based.

I don’t know why pharmaceutical companies are based in largely western countries, but it seems plausible that strong protection for intellectual property might have drawn them to those countries.

Meanwhile, Fang repeats the argument that

Despite publicly funded research and huge infusions of government cash for the development and delivery of vaccines, drugmakers have carefully guarded their monopoly on the intellectual property rights and signaled to investors that they plan to soon hike prices.

I am suspicious about the “publicly funded” argument. If these vaccines really were developed on the public dime, why didn’t the government claim ownership of the intellectual property? If the private cost of research for the vaccine is so small, why is it also a barrier that must be overcome by a “waiver”? I haven’t been able to do enough research on vaccine production to understand what’s really going on, and I’m willing to be convinced that this really was a big giveaway to big pharma, but I’d like to see the work. And in any case, if this was a giveaway, that’s the deal we made. Would the vaccine producers have been motivated to make the vaccine if we hadn’t offered them that deal?

Finally, the “waiver” argument is disingenuous on two levels:

First, it’s a bait-and-switch game. Neither the World Health Organization nor any other public health agency can claim to be surprised by this pandemic: They’ve been warning us about it for years, and urging us to prepare. But I don’t recall any of them telling us in the years before the pandemic that our preparation should include stripping vaccine formulas of intellectual property protection. I’m sure all but the dullest socialists understood that no high-tech pharmaceutical corporations would be interested in doing vaccine research and development if there was no way to get paid.

Second, the term “waiver” is…deceptive. Like the use of the term “cancel” for college tuition debt, calling this a “waiver” tends to obscure the fact that someone somewhere will be left holding the bag. This is inevitable. The development of COVID-19 vaccines is a costly process that someone has to pay for.

That brings us to the crux of the problem: Who should pay for the vaccine.

For most purposes, the free market provides an excellent answer: Production of goods and services should be paid for by the people who benefit from consuming those goods and services. You eat a hamburger? You pay for the hamburger. You use a computer? You pay for the computer. You want to sail the world on a private yacht? You pay the cost of owning and operating the yacht. It’s simple, efficient, and just.

In a world where insulin costs a couple of hundred dollars and specialized medicines cost thousands, vaccines are surprisingly cheap. My first dose of the Pfizer’s vaccine hit my insurance company for $16.94. Based on bulk purchase agreements that’s a common price for it. Moderna’s vaccine costs about $37 per dose, Johnson & Johnson goes for $10 and only takes one dose, and the AstraZeneca vaccine goes for about $4 per dose. Most people in the industrialized world can afford these prices, or will have them paid for out of public health spending.

But that can be a lot of money for people living in poorer countries. And don’t forget we’re also talking about vaccine production: These countries want to set up manufacturing plants to make COVID-19 vaccine so they can get it to their people faster, and the intellectual property costs can be prohibitively expensive, meaning those factories may never be built. It doesn’t seem right to make billions of people wait longer for the vaccine because they live in countries that can’t afford to pay for the right to manufacture the vaccine.

Which brings us back to the main question again: Who pays? If we want the people of these counties to receive the benefit of the vaccine without paying the full cost, then who should pay instead?

It’s not obvious to me that “make the vaccine inventors pay” is the right answer. In fact, for reasons I’ve already explained, stealing the intellectual property from the inventors is a terrible policy, because it will discourage pharmaceutical companies from stepping up to invent the vaccines for our next pandemic.

Keep in mind that much of the work of inventing vaccines occurs ahead of time. Our modern vaccines may have been developed super-fast for the COVID-19 pandemic, but that’s only because the manufacturers spent a fortune over the past decade to develop the capability, so they would be ready when disaster struck. Without the prospect of financial profit, they won’t be able to attract investors to fund their vaccine development capabilities. So it’s not that stealing their intellectual property will make them refuse to develop the next vaccine. Rather, without the ability to protect their intellectual property, they won’t be able to raise money to create it in the first place.

It’s not a perfect analogy, but if your state is prone to bad forest fire seasons, would it be wise to impose a special income tax on firefighters to pay for the cost of fighting the fires? Do you think that would actually improve your state’s forest fire management?

So what’s the answer? Who pays?

I think we all should. If the American people, as represented by our government, believe that the world’s poorest nations should have access to the vaccine, then we should be willing to pay to give it to them. Just buy the vaccine and give it to the world.

As I said, vaccines aren’t that expensive. As I write this, there are about 7.86 billion people in the world. About 5% of them have been vaccinated so far. In addition, contracts are already in place to buy enough vaccine to cover half the population of the planet. Based on published bulk purchased costs, we could buy a 2-dose course of the AstraZeneca vaccine for the remaining half of the world for about $32 billion. That is less than 5% of the U.S. defense budget. It’s less than 2% of the just-passed stimulus bill.

(It appears as I write this that the AstraZeneca vaccine might be linked to blood clots. Tentatively, it looks like it could be fatal for about 1 in a million people. If that holds up, then the vaccine would kill about 4000 people if we give it to half the world. COVID-19 killed three times that many people yesterday. But we could switch to the Pfizer vaccine for $134 billion. That would be about 7% of the just-passed stimulus bill. For the record, my back-of-the-envelope calculations are $291 billion for Moderna and $40 billion for Johnson & Johnson.)

These figures are based on the published cost per dose of finished vaccine. But the policy discussion above is actually just about the intellectual property rights for the vaccines, not full production and distribution. Presumably, the intellectual property rights to produce doses for 4 billion people could be acquired for somewhat less than the full cost of production, making it even more affordable. But even if we funded the full production and distribution of the vaccine, given the enormous economic cost of the pandemic here in the U.S. alone, it seems well worth it to spend as much as a few billion dollars to wipe out COVID-19 everywhere in the world as fast as possible.

The ideal way to do this would be to negotiate with the vaccine manufacturers to produce enough for everyone in the world. With multiple manufacturers in the market, it ought to be possible to play them off of each other to get a reasonable price. The United States could probably do this unilaterally, but there are already global organizations working the problem, and we’ve already pledged $4 billion to COVAX, so maybe all we need to do is write a bigger check.

If that seems unsatisfactory, another approach might be to use eminent domain to seize the intellectual property from the vaccine manufacturers. As far as I can tell, this is a murky legal field without a lot of precedent, but it seems feasible. The Fifth Amendment’s takings clause requires that when property is taken for public use, the owner is given “just compensation.” This would probably involve a court battle to determine the amount of compensation. The eminent domain approach is definitely coercive, but it’s a lot more honest than the so-called “waiver”.

Note that nations can make use of a similar mechanism under the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The agreement includes provisions for compulsory licensing of intellectual property for public health purposes. So if nations want to manufacture vaccines using proprietary technology, they can use legal processes to compel vaccine manufacturers to grant them licenses. There are even provisions for export, so that countries that don’t have the ability to make the vaccine can import it from other countries using a compelled license. As with eminent domain, the governments would have to pay for the license, and there would probably be a court battle to determine the cost of licensing the vaccine technology.

Between TRIPS and COVAX and the vast spending power of major world governments, including the United States, we have a lot of different ways to get the vaccine to everybody without resorting to stealing it from the people who made it possible.