COVID-19 has exposed the limits of the pharmaceutical market model. This week, patent law expert Tahir Amin joins the show to explain why vaccine development needs new incentives.

Tahir Amin is an attorney dedicated to reshaping patent law to better serve the public. He is the Co-Founder and Co-ED of the Initiative for Medicines, Access, and Knowledge (I-MAK), a global nonprofit organization of attorneys, scientists, and health experts working on systemic changes to intellectual property and the political economy of pharmaceutical innovation.

Twitter: @realtahiramin

Further reading:

Covid-19 has exposed the limits of the pharmaceutical market model: https://www.statnews.com/2020/05/19/covid-19-exposed-limits-drug-development-model/

No vaccine in sight: https://newrepublic.com/article/157594/no-coronavirus-vaccine-big-pharma-drug-patent-system

Democrats punt on drug-pricing overhaul in virus relief measure: https://news.bloomberglaw.com/health-law-and-business/democrats-punt-on-drug-pricing-overhaul-in-virus-relief-measure

Website: http://pitchforkeconomics.com/

Twitter: @PitchforkEcon

Instagram: @pitchforkeconomics

Nick’s twitter: @NickHanauer

 

Nick Hanauer:

… Really obvious that in a completely profit driven market, investments in pandemics and preparedness, that just… It doesn’t pay.

Tahir Amin:

The neoliberal ideology is that basically, the market’s govern, profit is best. And I think we’ve seen in this instance that entire theory being heavily questioned.

Jessyn Farrell:

[Big Pharma 00:00:19] has gotten really good at gaming the system. And as a consequence, we’re in this moment where we do not have what we need to be able to get out of it.

Speaker 4:

From the offices of Civic Ventures in Downtown Seattle, this is Pitchfork Economics with Nick Hanauer, a pointed conversation about who gets what and why, with one of America’s most provocative capitalists.

Nick Hanauer:

I’m Nick Hanauer, Founder of Civic Ventures.

Jessyn Farrell:

I’m Jessyn Farrell, and I’m Senior Pice President at Civic Ventures and a former state legislator.

Nick Hanauer:

So Jessyn, today, we’re going to explore one of the best examples of neoliberal overreach, which is Big Pharma. And in particular, explore the past and present of Big Pharma in the context of the COVID crisis and the pandemic. The challenge of course is that a lot of the things that we need today to address the COVID crisis weren’t things that the pharma industry felt were profitable to explore or research prior to it coming along. Botox, yes.

Jessyn Farrell:

Viagra, yes.

Nick Hanauer:

Yeah, exactly. Vaccines, not so much. Or antivirals, not so much.

Jessyn Farrell:

It really exposes how outdated our patent system is, and how a lack of rules and transparency have really allowed Big Pharma to exploit loopholes and the frailties in the patent system. The way lawyers have figured out how to extend patents as long as possible. What used to be a 20-year patent becomes a 40-year patent. And Big Pharma has gotten really good at gaming the system. And as a consequence, we’re in this moment where we do not have what we need to be able to get out of it from a vaccine standpoint.

Nick Hanauer:

One of the things that’s super depressing is that since the early 2000, since 2002 I think, we’ve had a bunch of these epidemics caused by SARS, swine flu, MERS, Zika, Ebola, etc. And I think these diseases collectively have killed 600,000 people. And when these things emerge, there’s a little bit of a scramble to see what we can do. And fortunately, those diseases waned. But in spite of the fact that it was super obvious to lots of people, and it should have been obvious certainly to the pharmaceutical industry, that other epidemics or a potential pandemic would emerge, the industry failed to sustain any investment into these treatments or vaccines. And there we are. And that failure may surprise the public, but it absolutely doesn’t surprise people working on these public health issues. It’s really, really obvious that in a completely profit-driven market, investments in pandemics and preparedness, that just… It doesn’t pay

Jessyn Farrell:

It doesn’t pay, and there’s also a whole lot of barriers beyond just the profit issue. There’s a almost a black box in terms of where public funding goes. We allocate a chunk of money every year, and it goes into corporations R&D arms. And we have no ability to get at the benefits of what those public dollars create. So it’s not just an outdated patent system, it’s not just a change in rules like stock buybacks that limit private sector investment in R&D, it’s also this lack of transparency with our public dollars. So there are a lot of specific things that could be fixed.

Nick Hanauer:

We had that fantastic conversation about a lot of these practices with Priti Krishtel, who took us through a lot of this stuff. And today, we’re talking Tahir Amin, who along with Priti co-founded the Initiative for Medicines, Access, and Knowledge, which is a global nonprofit dedicated to changing the intellectual property and political economy of pharmaceutical innovation. And Tahir is an attorney dedicated to reshaping patent law to better serve the public. Anyway, it should be a really interesting conversation.

Tahir Amin:

My name is Tahir Amin. I’m co-founder and co-executive director of an organization called the Initiative for Medicines, Access, and Knowledge. And our work revolves around looking at reforming the patent system, but also intellectual property laws, and also looking at the political economy of innovation and how that model works in the current economic climate.

Nick Hanauer:

Well, you’re in an interesting spot at an interesting time, aren’t you?

Tahir Amin:

Yeah. No, this is… COVID has certainly unleashed or opened up every possible conversation.

Nick Hanauer:

You have this terrific piece out in the way that COVID has exposed the limits of the pharmaceutical market model, which I suppose reflects the core of your perspective on this. And so, why don’t you help take our listeners through that argument.

Tahir Amin:

Yeah, I think the pharmaceutical model is broken and it’s shown its limits in COVID-19, and we could have been much better prepared for this pandemic. I think it goes to the fact that there’s a disconnect between the actual need, the real public health needs, and the action that gets taken. The outbreaks are often unpredictable, not long enough to generate a sufficient market for a new drug discovery or a new treatment. And what gets in the way of that also is the fact that pharmaceutical companies these days are much more focused on the profitability aspects of things, and practicing things such as shareholder profits and boosting those and executive pay instead of putting all those dollars back into real R&D. And that’s why we’ve come up short. The market, the way it works, is not incentivized to put the research dollars into potential pandemic situations or real public health needs. And this is something that we have to fix. We have largely been caught with our pants down because of the various proprietary natures of the pharmaceutical market that exists largely to extract as much as possible, but only in places that it can.

Jessyn Farrell:

So then you talk a little bit about market forces and that framing, but what specifically was happening to limit our ability to be ready in this moment?

Tahir Amin:

So I think a big part of this problem is the patent system. The patent system, the way it works today, it encourages companies to take out many different types of patents on existing drugs rather than actually really developing new potential treatments, such as for COVID. Instead, they are basically re-patenting the same product over and over again in different ways, and they build up these patents on an existing franchise, an existing product. And that can mean hundreds of patents on the same product, instead of actually using the efforts and time and research dollars for real public health needs such as now with COVID. So the way the patent system is supposed to work is, you come up with an invention and you get a patent. And that’s great. You get 20 years of an exclusivity period. But the system we have today is really gone well beyond that.

It’s where companies are looking to… If I’ve got a cancer drug and it’s really a blockbuster, I’m going to try and hang onto that blockbuster for as long as possible. And that means filing as many patents, and doing these little tweaks which I claim to be incremental innovations, which often they’re not. They may be useful, but they’re not real inventions, the purpose of the patent. And that allows me, as a company, to keep prolonging my profits and prolonging my monopoly, which is not what the patent system’s supposed to be about. As a result, we don’t get the real research that we need in it because companies can keep filing patents and keep holding markets, and making huge profits on drugs that actually, they’re useful, but they’re not useful when we have a pandemic situation like this.

When we look at it, the situation of what we’re dealing with now with COVID, and particularly when we’re looking for a vaccine, there’s a lot of [inaudible 00:09:02] of how much effort was being worked on in terms of the previous coronaviruses SARS and MERS, which emerged in 2002 and 2012, and how much work was being done on a vaccine for those particular Coronaviruses. But they weren’t sustained in terms of investment. And as a result, it’s because there’s no markets therefore for them. And so, companies don’t want to actually put money into it, and that’s understandable. But when we’re looking at what we’re dealing with now, it just goes to show the limits of the market in terms of dealing with these issues.

And patents also play a role in this. Because if you look at the way vaccine patents have emerged in other disease areas, we usually have a few actors that hold all the technology and all the knowledge. And I think what we’re seeing now here is where a lot of public money is going now to drive these existing technologies forward now, all of a sudden, in this massive emergency. And why couldn’t we have been investing more in preparedness before hand? And the markets or the companies are only acting now. Because now, governments are actually backing a lot of this research. They won’t put their own dollars in, because they need markets. And now, we’re all of a sudden rushing in a moment where we could have been actually a bit further along the line.

Nick Hanauer:

And of course, you don’t know for sure, but SARS, and MERS, and COVID are very, very similar. So a sustained investment in both treating Coronaviruses and a vaccination for them over the last 10 years would have certainly given the world a headstart on this problem?

Tahir Amin:

Exactly. And that’s the proposition that we’re making. We’re not saying that we could have had a final product before it all happened-

Nick Hanauer:

No.

Tahir Amin:

… and just rolled it out. No, by scientific means, that’s not possible. But exactly, we could have been a lot further down the road. But look at [remdesivir 00:10:55], which is this wonderful drug that everybody’s kind of clamoring about. And it’s actually not that good really, when you really look at the data. I’m not trying to be ungrateful here, because obviously, Gilead has put in the effort. But look at the government dollars that went into that way back when it was being tested for Ebola, which was done with the US military.

And then, they switched it to SARS and MERS, which various universities that Gilead collaborated with got government funding to the tune of at least what we can see transparently around 17 million dollars. And they were testing SARS and MERS and seeing potential there. And then that was up until about 2018, I think, the last published paper I saw on the SARS and MERS. And then all of a sudden, COVID breaks out. And then, boom. We’ve got this injection effort. And [inaudible 00:11:43] was happening with the universities with those grants on SARS and MERS? We don’t know, it’s not transparent.

Nick Hanauer:

Our podcast is devoted to exposing the weaknesses of market fundamentalism or neoliberalism, right? This sort of worship at the alter of markets has blinded us. And to be clear, markets have a function in society, and they produce a lot of good. But markets alone cannot solve broad-scale collective action problems usually. And this seems like a canonical example of that, exactly the kind of problem that markets fail at or the kinds of problems that can bring down civilizations.

Tahir Amin:

I completely agree.

Nick Hanauer:

Pharma is an immensely profitable industry. So profitable, in fact, that they’re spending in the range of 50 billion a year in aggregate on stock buybacks.

Tahir Amin:

Right.

Nick Hanauer:

I mean, they spend almost as much on stock buybacks as they do on R&D as an industry. So the money is there to do the research. It’s just that the people running the companies would prefer to enrich themselves rather than solve these problems. I mean, it does really come down to that.

Tahir Amin:

Yeah. I think we do live in a maximize capital, but not maximize it in a place where we could be actually generating new products. It’s more of the capital’s flowing too, so it’s an area where it’s not to the benefit of the larger society.

Jessyn Farrell:

So related to stock buybacks and other policies, what’s wrong with the patent system that could be changed to make it work better?

Tahir Amin:

There’s so many components to this conundrum though. This is the situation that we’re in. The patent system, the intellectual property system, is a key driver of a lot of this. We talk about [inaudible 00:13:43] neoliberalism. If you look at the last 40 years, the rate that the intellectual property system has grown globally and the levels that it’s kind of allowed the types of knowledge to be proprietized has grown significantly. We really think about… We talk about the gig economy now. The precursor to that was a knowledge economy, and that’s what the patent system and the IP systems developed. They basically locked down so much knowledge that’s held by so few players. And what we’re seeing now is that anybody who’s trying to develop a vaccine…

And forget about the COVID-19 vaccine. This has been a problem even when I did some research for Gavi, which is an institute for vaccines on pneumococcal, rotavirus and papillomavirus vaccines. And there’s only a few players that hold all the proprietary knowledge. And you can imagine now you’ve got… Supposedly, there are 110 actors trying to find a vaccine globally this time. But a lot of that knowledge has been its and pieces. It’s like, everyone’s got a little piece of the puzzle, but no one’s got the full puzzle, and that just slows everything down. There is a scientist who’s saying, basically, they can’t work through all these patents. So either research just stops or they get acquired. And so, [inaudible 00:14:50] gets consolidated, and that’s what the intellectual property system has done. It can be an incentivizer, but I think it also locks down and slows progress in many ways as well.

Nick Hanauer:

I think another useful thing to understand is the relative scale of the kinds of investments necessary to make good progress on these things. You write that the global funding for basic research for these [inaudible 00:15:24] diseases and so on and so forth is only about $4 billion. But 64% of that 4 billion comes from public tax dollars, and another 20% comes from philanthropic organizations. So the private pharmaceutical sector contributes just 17% of that $650 million, which sounds like a lot of money until you consider that the industry is $661 billion, right?

Tahir Amin:

That’s just the top 20 companies revenue for 2019. So that’s probably-

Nick Hanauer:

Oh, so that’s the top 20? Oh, top 20, right. Oh my God. So it’s-

Tahir Amin:

It’s only the top 20, yeah.

Nick Hanauer:

Golly, it’s 800, or a trillion, or whatever it is.

Tahir Amin:

Oh, yeah. We’re probably in the trillions.

Nick Hanauer:

Yeah. So what is 650 million on a trillion? Is that… No, that’s one-tenth of a percent. It’s a 10th of a percent.

Tahir Amin:

Exactly, yeah.

Nick Hanauer:

It’s in the 10th of a percent or less on the global pharmaceutical sales. And so, if there was a 1% global tax on the pharmaceutical industry devoted to research on these sorts of things, you could spend not 650 million a year, but 10 billion a year plus or minus, on developing solutions to these problems which the world will inevitably face, right?

Tahir Amin:

Right, yeah. Neglected diseases have been neglected. That’s where they’re termed neglected because they don’t happen in the rich countries. But in an event, with climate change and things that are happening, we saw that with Zika, the virus. Next thing, it started migrating and we still don’t have a treatment for Zika today, despite all the claims that companies have said that, Oh, we learned from the Zika experience and now we are applying that to COVID. And you see these adverts on Twitter by [PhRMA 00:17:13] itself saying [inaudible 00:17:16] are using their Zika experience and SARS experience and those experience to fight COVID. And I’m thinking, yeah, but we still don’t have treatment for those.

Nick Hanauer:

But there are more serious problems like antibiotics, new antibiotics, right?

Tahir Amin:

Exactly, yeah.

Nick Hanauer:

Which is another challenge that the market is not addressing very effectively?

Tahir Amin:

Yeah, because there’s no long-term market. I mean, as we say, in the [inaudible 00:17:41] and as we’ve done it in my organizations other work is, if you look at the amount of effort that goes into keeping an existing product franchise going, the life cycle management of it, you keep piling patents and patents and patents. You’re investing in the lowest effort to get the maximum gains in terms of keeping those monopolies longer. A drug like Humira, which you can get 30, 40 years of patent on it, keep your competition off by a bit of litigation for as long as possible. Eventually, your competition goes on. But then you’re raking in $20 billion a year. That’s more of an incentive for them than really tackling some real public good, public health issues.

Jessyn Farrell:

And what would it take for the US to have a public option for pharmaceuticals?

Tahir Amin:

I think it would be a great idea to have more of a public aspect of this partnership that exists between governments and the private sector. I think that comes down to ideology first. You started this conversation out with what this podcast covers. The neoliberal ideology is that, basically, the market’s govern, profit is best, and that’s the only way we can get progress. And I think we’ve seen in this instance that entire theory being at least heavily questioned. And then you look at all the billions that governments are now pouring in to incentivize the market to come up with the goods. If we were putting those billions into preparedness as some kind of government body, which used to happen in the US for example back in the 40s, they used to do this.

And even all the military work that’s gone into, for example, remdesivir. Remdesivir, a lot of that initial research was done by the military. And so, the government agents is already doing this. So it begs the question, why can’t we go a bit further, and at least for pandemic preparedness and situations like this get the basic research, and get it made through to some kind of almost ready end product that can atleast be adapted as needed. Now, I’m not saying that the public sector is going to solve every problem either, but we do need an alternative mechanism because we can’t just then provide all the incentives to the industry all at once and throw money away. I mean, there was an announcement yesterday to… Because as there’s a lot of nationalism that’s going around into the drug supply.

So there’s this company, Flow, that has been given lots of money. It’s an unheard of company. And it’s got almost potentially up to $800 million that’s going to be thrown at it. And this is what the government is doing, the US government. And I think that money could be better spent if we build these infrastructures. At the moment, the way it works is everything that the public invests, whether it’d be through the government, it ends up in private hands and they decide what they do with it. We’ve seen that with some of the treatments that had actually being tested and approved, like Gilead’s remdesivir.

All public money that went into it to drive it forward, but then it rest with Gilead’s hands in terms of how it’s going to be taken forward. And I think if we look back in history, back to after the Second World War or during the Second World War, when there was a real public investment into real public health needs and other aspects that were in the public benefit, that system really did drive what was really needed in the market, and private actors responded to that. Today, we’ve left it completely in the hands of the private pharmaceutical sector.

Jessyn Farrell:

And so, if you were to deliver a message to policy makers who are listening to this show, what specific things should we change going forward, maybe particularly around the patent system or transparency? What would you suggest?

Tahir Amin:

Well, I think first of all, we need to know all the government dollars and the types of research that are going on on all the different types of disease. I think at the moment, you get bits of information, but it’s very hard to find what’s going on, how much is going in from government funding. I think we need to also change the way you can get patents in terms of what is really deemed an invention. Because a lot of patents that get granted are repeat knowledge, but applied in slightly different way. And so, what it does, it keeps locking that knowledge down in different ways. And I think we need to raise the bar in terms of what is considered inventive to get a patent. And by doing so, I think we’ll open up a lot more research space.

I think also within that, what companies do when they are researching an area is… And what they do is they kind of fence off a huge research area by filing overly broad patents. It’s essentially like, I’m going to scorch the earth and no one can come on this territory. And by doing so, you’re preventing researchers from going in. And so, essentially, you have no competition even before a product’s being launched, because that just totally could [inaudible 00:22:14] whole area off. I think that’s another area that we need to really look at in order to free up more scientific knowledge that has been captured in a privatized way. And then ultimately, I think there needs to be an investigation post-COVID as to what the market didn’t do coming into this, and what could a government sector do as a way of alleviating some of that pressure that we’re all now feeling as we rush to try and find the solution.

Nick Hanauer:

Well, maybe it’s not a 1% global tax on pharma, maybe it’s a 5% global tax on pharma. And then-

Tahir Amin:

Yeah.

Nick Hanauer:

… recycle those dollars back into things that address the public good. This has been a fascinating conversation. Thank you so much for spending the time with us.

Jessyn Farrell:

Yeah, thank you.

Nick Hanauer:

Best of luck in your work. Go get them.

Tahir Amin:

No, I appreciate it. Thanks for covering these issues. Cheers.

Jessyn Farrell:

Take care.

Nick Hanauer:

Bye. So Jessyn, what did we learn from Tahir?

Jessyn Farrell:

Well, I think we really talked about why we don’t have adequate vaccines or the adequate foundation for vaccine research in this moment when we need it so much. And the bottom line is that the market model for pharmaceuticals is really lacking, and that we need to reform a lot of different elements of that.

Nick Hanauer:

Yeah, there is, to you use the term charitably, a profound market failure here. It’s just super clear that we have to find a way to either require the pharmaceutical industry to invest more in these things or to tax the pharmaceutical industry a lot more and let public institutions do that research. But to do nothing seems insane.

Jessyn Farrell:

Yeah. This moment really lays bare how high the stakes are for not getting this right. And this really rigid adherence to neoliberal ideology in this moment has had tragic consequences. And fairly simple reforms like fixing the patent system and raising the bar on what new patents need to be protecting are not rocket science. These are things that we can and should do, and yet preserve the creativity and innovation of the private sector. There’s a way to balance this far better than we have in the last 30 years. So this issue is actionable right now. The House Democrats just passed a $3 trillion stimulus measure, and they did not include drug pricing changes for pharmaceuticals that were going to be getting public dollars and including transparency, price controls, reforms to the patent system, which they could have done. And they didn’t. And so, there’s this moment where we need to be raising these issues and getting some of these changes made.

Nick Hanauer:

That’s right. And voters need to let their elected representatives know that we’d like to see industry price controls for things like COVID vaccines, that these industries do need to be more robustly regulated and just controlled. Because the truth is that, at the end of the day, governments are ultimately responsible for the system that incentivizes the pharmaceutical industry or any industry to behave in a way that serves the public interest and not just a protection racket for rich people. This is a good thing to be involved in. It’s a good thing to be knowledgeable about, and it’s a good thing to keep your elected representatives on their toes about.

Speaker 4:

Pitchfork Economics is produced by Civic Ventures. If you liked the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on Medium at Civic Skunk Works, and peek behind the podcast scenes on Instagram @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.