In mid-July, the U.S. media lit up with a big story about the global race for a Covid-19 vaccine. State-backed Russian hackers, it was alleged, were poking around the vaccine trade secrets of U.S., Canadian, and British drug companies. This was framed as a serious national security issue, as if Moscow was seeking recipes for…

How to Break a Big Pharma Monopoly on a Covid-19 Vaccine

In mid-July, the U.S. media lit up with a big
story about the global race for a Covid-19 vaccine. State-backed Russian hackers,
it was alleged, were poking around the vaccine trade secrets of U.S., Canadian,
and British drug companies. This was framed as a serious national security
issue, as if Moscow was seeking recipes for a Doomsday bioweapon and not data
related to an urgently needed antidote to the pandemic. The straight-faced
intelligence sources driving the story captured perfectly the Strangelovean heart
of corporate vaccine nationalism: “We condemn these despicable attacks against those doing vital
work to combat the coronavirus pandemic,” Paul Chichester, the director of
operations for Britain’s National Cyber Security Center, told
The New York Times.  When the story expanded to include allegations
of Chinese vax hacks, it further distanced the U.S. media from what much of the
world sees as the real issue: Why are rich nations allowing publicly funded Covid-19
research to be treated as objects of corporate secrecy and control in the first
place? Why doesn’t everyone have access to this science as a global public good?This question was closer to the center of the
summer’s second big story involving Covid-19 and intellectual property. On
August 4, attorneys general from 34 states and territories published a letter accusing the California-based drugmaker Gilead Sciences of abusing
its monopoly on remdesivir, the only approved antiviral Covid-19 treatment. “Gilead has not established a reasonable
price, nor has it met
the health and safety needs of the public given the Covid-19 pandemic,” stated
the bipartisan letter, whose signatories included Xavier Becerra, a California
Democrat, and Louisiana Republican Jeff Landry. Citing the federal government’s
crucial role in developing remdesivir, the attorneys general urged federal
health officials to use the regulatory authority written into the 1980 Patent and Trademark Law Amendments Act, better known as
Bayh-Dole. The law sets conditions on property rights on publicly funded
research and related inventions and allows the government to “march-in” on
those rights in the name of the public interest. The attorneys general were correct
to invoke the government’s duty to push Bayh-Dole’s patent-override button, but
it may first need some dusting off; in 40 years, it has never been used.The attorneys
general letter flipped the vaccine espionage story on its head. It describes a
world in which the danger isn’t the intellectual property hoarded
by drug companies falling into the hands of rival nations, but monopoly control
over that I.P. here at home. It was California-based Gilead, not a foreign power,
that developed remdesivir with funds from the U.S. Treasury, all while stashing
its I.P. and profits in Ireland and the
Bahamas to avoid paying U.S. taxes. It was the Nasdaq-listed Gilead, not an
enemy state, that has priced remdesivir at $520 a vial—around 50 times the cost
of manufacture.Gilead’s production of the drug, meanwhile, is
expected to result in national and global shortages through its stingy approach
to licensing, designed to maximize profits during a global public health
emergency. The strategy looks like a success. On the morning the attorneys
general published their letter, a Motley Fool health care reporter explained,
“Investors shouldn’t worry much about Gilead [which] expects full-year revenue
will be between $23 billion and $25 billion.… What’s the main reason for this
optimism? Remdesivir.” The call from the 34 attorneys general to break
Gilead’s remdesivir monopoly by licensing off-patent manufacture is the most
serious political attack on the intellectual property rights of a U.S. drug
company in memory. By spotlighting the broken intersection of patent law and federal
science policy, this appeal has the potential to shift the politics around drug
prices and drug development. The conflict at the center of these debates, between
human needs and private profit, is also driving a global movement centered on the
World Health Organization’s Covid-19 Technology Access Pool. This initiative
was launched in May with a “Solidarity Call to Action” to make vaccine research and technology
available on an open-science and open-license basis. The Pool’s 40 signatory
states brought their entreaty to last month’s meeting of the World Trade
Organization’s Council for Trade-Related Aspects of Intellectual Property
Rights, where South Africa is leading a charge to activate and expand that organization’s I.P. opt-out clause for
states during public health emergencies.South Africa and other less developed
countries have hard-earned experience in how I.P. barriers slow and restrict
access to new inventions. Most notoriously, a 20-year I.P. lag separated the
patenting of the first effective HIV drugs and the arrival of affordable
generics in the global South, which only happened because a determined
worldwide campaign spent years shaming companies like Gilead into submission.
At the World Trade Organization meeting in July, South Africa’s representative described how the
familiar script was already playing out with Covid-19, beginning with
Gilead’s profit-driven handling of remdesivir. The representative said the company’s
limited licensing strategy is “an attempt to contain competition by creating an
oligopoly. Generic manufacturers globally that can contribute to expanding
global supply have been excluded. The lack of transparency and accountability
in the present dire times is extremely worrying and dangerous.” Donald Trump and Mike Pence appeared with Gilead CEO Daniel O’Day (center) at the White House on May 1 to announce emergency approval of the drug remdesivir to treat Covid-19.Erin Schaff-Pool/Getty ImagesFor now, the process of moving the U.S. drug debate closer to the
global one can be advanced by pursuing the attorneys general case against
Gilead and demanding that federal health officials break its remdesivir
monopoly. But while the attorneys general make a strong case based on the
government’s role in developing remdesivir, multiple recent studies suggest the
public’s claim on it and other drugs—and, crucially, a future vaccine for
Covid-19—is far greater than generally understood. If a future Democratic
administration were to be interested in breaking Big Pharma’s stranglehold on
medicine, this is where it could begin. The federal contribution to remdesivir’s
clinical development is well-known. The attorney generals evoke the $75 million
in government grants  that spurred the drug’s
inception as a Covid-19 treatment, from the initial identification of its potential by a Centers for
Disease Control and Prevention scientist in 2014 to its Emergency Use Authorization
approved by the Food and Drug Administration in May. Those grants, while
significant enough to justify action under Bayh-Dole, likely represent but a
fraction of the actual federal subsidy, according to recent research that challenges
the accounting metrics traditionally used to measure the contribution of government
science.In a study published last month, researchers
at Bentley University’s Center for Integration of Science and Industry examined
the development process for drugs, using the timely case study of remdesivir. They
found that breakthrough inventions generally only happen after an enormous body
of foundational research reaches a “maturity threshold”—a process that can take
30 years or more. In the case of remdesivir, the authors tallied the total
federal contribution to the matured foundational research related to the
antiviral’s biological target (a class of RNA replicator proteins) and parent
chemical structure. The authors estimated the U.S. government’s total financial
contribution to the development of this research, upon which the invention of remdesivir
rests, at $6.5 billion. These
billions were dispersed through thousands of grants that altogether comprised
some 6,800 project years, most of them
running concurrently.Fred Ledley, the lead author on the study, told me, “It
is a fundamental flaw in our system that the critical role played by government
funding in establishing the scientific and technological foundation for the
products developed by industry goes ignored.”He added, “There is currently no recognition of the
decades of basic, foundational research that make remdesivir and other discoveries
possible. The government was an early investor in research that produced
antiviral drugs for HIV, hepatitis, and now Covid. We need mechanisms to ensure
a more equitable distribution of the value created by these investments and
ensure they are appropriately rewarded in public value.” In two earlier studies, Ledley’s team used a similar methodology
to demonstrate that all the new drugs approved by the FDA between 2010 and 2019
rested on an edifice of research built with $200 billion in government money.The Bentley team is not alone in tracking the pathways through
which government-funded science leads to breakthroughs in medicine. In June of 2019, a
team led by Lee Fleming of the University of California at Berkley found the
number of patents relying on public science has grown at a quickening pace in
recent decades, doubling between 2008 and 2017. Corporate patents that grew out
of federal research, Fleming and his co-authors found, are almost always “more
important” than those that didn’t, as measured by future citations. “From a
societal viewpoint, the discoveries from research are best distributed widely
throughout the economy, rather than being kept in a single firm,” the authors
concluded.These findings support a simple and intuitive idea: The advance of
medical science, like all forms of knowledge, is an incremental and cumulative
project. It applies especially to drug and vaccine breakthroughs requiring enormous
multi-decadal investments in research that gestates slowly. The pharma and
biotech industries understand this very well, as evidenced by their alarmed
reaction to the deep cuts to National Institutes of Health research
budgets (later reversed) in early drafts of the 2018 federal budget.Harley Kilgore, a U.S. senator from West Virginia, was part of a group of New Dealers who wanted to keep federally funded inventions under government control. Fabian Bachrach/Dominion NewsThe issue is not whether the government has legitimate claims on
many of the drugs the public now pays for twice (first as a massive permanent research
subsidy, then again at huge retail mark-ups that enrich investors and
executives). The question is whether we can muster the political power and will
to exercise these claims. Doing so begins with recovering a truth the drug
industry has successfully consigned to the national memory hole: Medical monopolies,
especially federally subsidized ones, were widely considered profoundly un-American
for most of this country’s history. This
was true up until the middle decades of the last century when today’s federal research
infrastructure was being built.Following the Second World War, advocates seeking
to keep the fruits of public science under public control adhered to a view of scientific
discovery as gradual and cumulative. The era was full of breakthrough vaccines
and medicines, but this understanding of science underlay a view of patent
policy that prioritized broad public benefit over the ownership rights of a
single “inventing” person or institution. This is why the findings of Ledley
and Fleming matter. The quickest route to break illegitimate patents and reduce
the power of Big Pharma runs through the public-interest language in U.S. law
and patent code. Expanding the definition of government support widens the road
for state and federal patent challenges and dramatically narrows it for monopoly
claims on medical inventions aided by public money. It also advances the argument
for a public option
in pharmaceuticals. If lawmakers are looking for playbooks on how
to connect these dots, they’ll find them in the fierce postwar debate over science
and patent policy.In the half-century leading up to the New
Deal, Populists and Progressives waged an unceasing, multi-front war against the
only legalized form of monopoly: the patent. The intensity of this war waxed
and waned, tracking to shifting balances of forces in Congress and the courts. The
executive branch became decisive with Franklin Roosevelt’s 1938 choice of Thurman Arnold to head
the Antitrust Division in the Department of Justice. The appointment signaled a
shift in New Deal economic policy: Competition, not just planning, was now a focus and antitrust law the tool.   Arnold and the New Dealers’ approach to
patent claims was informed by a skeptical view on the idea of solitary
invention. The classic New Dealer statement of this skepticism was an article published
in the September 1940 issue of The
American Economic Review called “Deficiencies of American Patent Law.” The
essay, by an economics graduate student named Alfred Kahn, argued that the rise
of the corporate research lab effectively severed the patent system from its original
constitutional mandate to spur invention and produce widespread social benefits
for the public good. “From the business standpoint [the great research
laboratories] are patent factories,” he wrote. “Their product often is nothing
but [a] basis for threatening infringement suit and scaring off competitors.” Kahn further argued that the consequences of patent
monopolies—retarding technological progress, further entrenching concentrated
economic power—flow from the anachronistic fallacy of the lone inventor. “In
order to look upon a single inventive contribution as patentable and exploitable,”
Kahn wrote, “one must look upon each invention as an entity, self-contained and
distinct from all others.” In an age of complex multidisciplinary technological
advance, he argued, the act of invention more closely resembled an organic cooperative
process containing “within itself the dynamic factors that make for constant
cumulative movement … The man who brought to a certain stage of fruition the
efforts of myriad predecessors may have made a great contribution. But seen in
its proper setting and perspective, that contribution is something less than
cataclysmic.… The individual does not construct new chains; he fills missing
links.” Just as James Watt struck upon his world-shaking
idea of the modern steam engine while repairing Newcomen’s earlier design, the Gilead
scientists who patented GS-5734—as remdesivir was known during the years it
languished in the company’s offshore I.P. vault—were working atop 6,800 federally
funded project years of research into RNA proteins and analog nucleosides. This
process, Kahn believed, supported the vigorous application of antitrust law by
Arnold’s office (which later hired Kahn) “to set up a cleavage between
desirable essence and predatory excrescence” in patent law.  When the war ended, the definition of “predatory
excrescence” took center stage in a five-year, front-page contest to determine the
fate of intellectual property emerging from the nascent postwar federal
research apparatus. On the side of public control were the New Dealers, led by
West Virginia Senator Harley Kilgore. They wanted to extend the wartime policy
of the Office of Scientific Research and Development, which retained rights on federally
funded inventions for the government. Arguing for a more flexible policy was a Hooverite
coalition of business associations, industrial trade groups, and influential
conservatives who straddled the worlds of government, elite research
institutions, and corporate boardrooms. The conservatives were led by the
imposing chief of wartime research, Vannever Bush, who promoted the I.P. regime
sought by drug giants like Merck, whose board Bush joined in 1949.Reading the 75-year-old transcripts of Kilgore’s
hearings, it’s striking to note how clearly the participants anticipated
contemporary debates around federal research, private patents, and monopoly
pricing. “It is really quite unthinkable,” said Horace M. Gray, a dean at the
University of Illinois, “that the Federal Government should tax the citizens of
this country to secure funds for scientific research, on the ground that such
research promotes the general good, and then turn the results of such research
over to some private corporation on an exclusive, monopoly basis.” Gray went on: “This amounts to public
taxation for private privilege and violates one of the basic tenets of our
democratic faith.” A speaker representing the Congress of
Industrial Organizations made a similar appeal, saying the transfer of publicly
subsidized science to industry control “offends American democratic
principles.” Two years later, in 1947, the issue was still
unresolved when the Justice Department submitted the results of a four-year
study on federal patent policy to Harry Truman. Justice officials recommended a
strict policy of keeping public science under public control. Noting the wartime
achievements of the Committee on Medical Research—which developed, among other
things, industrial penicillin—the report warned that
allowing private monopolies on government-funded science would restrict access
to important discoveries and related research and would distort R&D agendas by incentivizing
profit over the public good. “The technological problems posed by our present
civilization are of such magnitude … that only by pooling resources and
information on a nation-wide scale can the challenge adequately be met,” the
report concludes. “Inventions financed with public funds should inure to the
benefit of the public, and should not become a purely private monopoly under
which public-financed technology may be suppressed, used restrictively, or made
the basis of an exaction from the public to serve private interests.” For good
measure, the 1947 Justice Department report spends several pages countering that
era’s version of Big Pharma’s standby argument, which hasn’t changed much over
the ensuing decades: that without the lure of monopoly riches, scientists would
not do science. The report concludes, “The weight of informed opinion, and the
evidence of experience, establish that the ownership of patent rights is not a
necessary form of incentive.”Kilgore and the New Dealers lost the argument,
and government patent policies remained “flexible”—that is to say, mostly
determined by the federal contracting agency. The government often retained
non-exclusive rights, but a rising pharmaceutical industry succeeded in beating
back ongoing efforts to curtail its patent power. Aside from a short-lived
attempt by the Kennedy administration to tighten up access to government drug
research, the trend went continually in industry’s favor, culminating in the Reagan-era
construction of a streamlined public-private tech-transfer conveyer belt. The two main engines of that machine, Bayh-Dole
and the Stevenson-Wydler
Technology Innovation Act,
both passed in 1980, were written with public-interest triggers attached to
minimal and vaguely defined social obligations on the part of the patent
holder. The Clinton administration stripped those obligations from Stevenson-Wydler
in 1995. Bayh-Dole’s public-interest language is still there but remains a
monument to four decades of industry’s joint conquest of our political system
and the public’s understanding of its rights under the law. Like every drug company that’s been targeted
by a Bayh-Dole petition, Gilead is disputing the law’s applicability
in the case of remdesivir. They are wrong on that point, but as all drug companies
know, Bayh-Dole is only one of many sources of the government’s broad powers to
break patents in the public interest. Although the attorneys general letter
does not mention it, states also retain a version of “march-in” power and
cannot be sued for patent infringement in federal court without their consent.
A section of the U.S. Code dating to the early twentieth century, meanwhile, grants
the government immunity from infringement claims so long as it gives the patent
victim “reasonable and entire compensation,” as determined by the Court of Federal Claims.
This is more than is required under the “just compensation” language of the
Fifth Amendment’s takings clause, which the government can determine as it sees
fit. In
the Constitution, the takings clause has power over the intellectual property
clause because patent rights were established to serve the national interest,
not the other way around. The architects of the patent system generally understood
private property, intellectual or otherwise, to be “a creature of society, subject to the calls of the society whenever its
necessities require it.” That, at any rate, was the view of Benjamin Franklin, who
makes a good mascot for modern challenges to the assumptions and consequences
of proprietary medical science. Though the country’s most famous
inventor-scientist, Franklin never made use of the U.S. Patent Office and was
always a bit cold to the concept. “That as we
enjoy great advantages from the inventions of others,” Franklin wrote in his Autobiography, “we should be glad of an
opportunity to serve others by any invention of ours, and this we should do
freely and generously.” [1]Two Gilead
scientists patented remdesivir in 2008, but it was rediscovered six years later during a screening of the company’s
molecular library conducted by the CDC. The first animal tests were directed by the U.S. Army Medical Research
Institute of Infectious Disease, followed by trials in four university research centers underwritten by National
Institutes of Health grants totaling $75 million. (The biggest, $35 million, went to the University of Alabama’s
Richard Whitley, a member of Gilead’s board.) In 2015, human trials were funded by Britain’s NHS Foundation Trust, the
Democratic Republic of Congo, the African Coalition for Epidemic Research, the World Health Organization, and several
U.S. federal agencies. Following the outbreak of the novel coronavirus and Gilead’s application for Emergency Use
Authorization, the federal role deepened. This is a common drug pathway. A 2019 study published in BMJ found that
federal funds have played “a major role in late stage development” of one in four new drugs approved since 2009,
including late-stage research, trials, and spin-off companies created from public sector research institutions. The
authors believe the findings “could have implications for policy makers in determining fair prices and revenue flows
for these products.”

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