Home > Uncategorized > Patent monopolies and inequality: When we give rich people money, why does inequality surprise us?

Patent monopolies and inequality: When we give rich people money, why does inequality surprise us?

from Dean Baker

In recent weeks there have been several articles noting the enormous wealth that a small number of people have made off of the vaccines and treatments developed to control the pandemic. Many see this as an unfortunate outcome of our efforts to contain the pandemic. In that view, containing the pandemic is an immensely important goal, if some people get incredibly rich as result, it’s a price well worth paying. After all, maybe we can even tax back some of their wealth after the fact.

The infuriating part of this story is that it is so obviously not true. But, just as followers of Donald Trump are prepared to believe any crazy story he tells about the stolen election, our intellectual types are willing to accept the idea that the only way we could have gotten vaccines as quickly as we did was by granting a small number of companies and individuals patent monopolies. And, just as no amount of evidence can dissuade Trumpers from believing their guy actually won the election, it is not possible to get most people involved in policy debates to consider the possibility that we don’t need patent monopolies to finance the development of drugs or vaccines.

This is especially disturbing in the case of the current crop of vaccines developed in the United States and Europe. The development of mRNA technology was done overwhelming on the public dime. This is hardly a secret. In fact, the NIH owns one of the key patents that Moderna used in the development of its vaccine.

The New York Times even recently featured a piece highlighting the work of Dr. Kato Kariko, who it claims spent her whole career working on government grants and never earned more than $60,000 a year. Of course, it is reasonable to pay top notch researchers like Dr. Kariko considerably more than $60,000 a year, but the point is that researchers can be motivated by money (as well, as the commitment of many to help humanity), they don’t need government-granted patent monopolies.

The development of the Oxford-AstraZeneca vaccine was also paid for almost entirely with public money. AstraZeneca was in fact brought on after the fact as a partner, at the urging of Bill Gates. The vaccine itself was developed by a team of researchers at Oxford.

In the case of both the mRNA vaccines and the Oxford-AstraZeneca vaccine we could have just contracted with the companies to do the work, we didn’t have to give them patent monopolies. If this sounds strange, go outside and look at the street in front of your house. The company that paved the street was paid on a contract with the government, it did not get a patent monopoly on the street.

For some reason, we cannot even get a serious discussion in policy circles about alternatives to patent monopolies for financing the development of drugs and vaccines. To my view, we should be looking to alternatives to patent and copyright monopolies as government funding mechanisms everywhere, but the case for alternatives is especially compelling in the case of biomedical research.[1]

The problem with biomedical research is that the proprietary nature of the knowledge, coupled with the enormous incentive to sell products at patent protected prices, is a huge invitation to corruption. The most dramatic example of this problem is with the opioid crisis, where the leading manufacturers have billions of dollars in settlements based on the allegation that they deliberately misled doctors and the general public about the addictiveness of the new generation of opioids. If OxyContin and other opioids had been selling as cheap generics, there would have been little incentive to lie about their addictiveness. And, of course if all the clinical trial results were fully public, they would not have been able to get away with lying in any case.

There is also the issue with drugs that the government or private insurers, regulated by the government, pick up the vast majority of the tab. For this reason, who don’t have to worry about direct government funding of research over-riding individual consumer decisions, as might be the case with items like cars or smart phones. Demand for a particular drug is already not determined by individuals, so there is nothing to usurp.

The great fortunes created by patent and copyright monopolies go well beyond the current crop of Covid vaccine billionaires. There are many people who have gotten tremendously rich developing software and other information technologies, medical equipment, and genetically modified plants, as a result of patent or copyright monopolies. Bill Gates has volunteered to be the poster child here.

While many of the contributions made by these rich people have been socially valuable, we have to recognize that the rewards they received were a policy choice. We could have made their patent and copyright monopolies shorter and/or weaker. We also could have relied more on direct funding for open-source research.

That is a basic logical point. Patent and copyright monopolies are not given by god, or even the constitution (go read Article 1, Section 8). We can structure them anyway we like and we can integrate them with other mechanisms for supporting research. Our decision to structure patent and copyright monopolies in a way that allows for a small number of people to get incredibly rich is because we have politicians who like very rich people.

There is nothing inherent in the market or any requirement of technology that requires this outcome. And, this outcome is justified by economists and reporters who are too lazy or incompetent to think for themselves. Just like any good Trumper, they repeat what they are told.

Vaccine Failure in the Pandemic

In spite of the celebration of the success of our vaccines in controlling the spread of the virus among people who get them, we have done an abysmal job in vaccinating the world. At this point, Africa, which has more than 15 percent of the world’s population, has received just 1.7 percent of the world’s vaccines. The situation in much of Latin America is not much better, as is the case in some of the poorer countries in Asia. India is of course suffering terribly from a shortage of vaccines, even though it is one of the world’s leading manufacturers and has a vaccine it developed itself.

China has been able to distribute 460 million vaccines domestically, in the last month. This is in addition to providing tens of millions off doses to countries around the world. At that pace, it will be able to produce enough vaccines to cover most of the world’s unvaccinated population early in 2022. By contrast, our experts insist that we can’t possibly make the U.S.-European vaccines any more rapidly than we already are, even if we suspend patent protections and share technology. In fact. Thomas Cueni, the director general of the International Federation of Pharmaceutical Manufacturers and Associations, insists that we can’t even produce items like syringes and vials that are needed to distribute the vaccines. (This assertion can be found at 21.10 here.)

The implication is that China’s scientists and engineers must be much more competent than the U.S. ones. (I realize the mRNA vaccines are more effective, but the Chinese vaccines have been very effective in bringing the pandemic under control in countries where they have been widely distributed, like Serbia and Hungary.) It’s too bad that we have such second-rate people in charge of our anti-pandemic efforts. (Bill Gates played a leading role with his foundation.) Maybe next time we should outsource the job to China.

[1] I discuss this issue in Chapter 5 of Rigged (it’s free).

  1. June 7, 2021 at 2:04 am

    Yes, thank you, though it is also reasonable to wonder why anyone earns considerably more than $60,000 a year and then seriously consider that economy and its facilitating political structure in relation to a healthy home and healthy people.

  2. Ikonoclast
    June 7, 2021 at 4:54 am

    Dean Baker,

    Absolutely correct on all points. Private monopolies are always an obstacle to efficiency, effectiveness and progress. Western economics is built on lies. Like all structures built on lies it rapidly crumbles under pressure. The West is crumbling under pressure, China is excelling and thriving. China’s performance is orders of magnitude better than the West’s. This ought to be enough to tell us that our economic system is a failed system.

    A key question is whether any country anywhere will be able to combine socialism and democracy. In theory, they are perfectly compatible whereas capitalism and democracy are actually antithetical.

    Western capitalism is actually about giving stupendous amounts of free money to the super-rich. Indeed, that is why they are super rich. It’s precisely what the system does and pretty much all it does. That’s why it is failing at helping most people. That’s why the West is falling to pieces and crumbling before our eyes.

  3. Edward Ross
    June 7, 2021 at 8:10 am

    In reply to Iconoclast the way i see it is on the surface China’s economy is doing very well and the west is crumbling. Ithink if we stop for a moment and look a bit deeper yes the Chinese economy appears to be going very well and the west is falling apart. Thus the way i see it is both systems favour those who hold power over others. Therefore the problem is how to apply a workable democracy to what ever system is entrusted with the working of a nation For my part i would rather try improving the current system that we have before abandoning it to a new idea that could create something jumping out of the frying pan into the fire. Therefore the people have to become motivated and involved in the conversation. And as i have said before this has to begin with conversations with the people and listening to their concerns.Ted

  4. June 7, 2021 at 9:04 am

    This assumes that vaccination is the only, or at least best, way of dealing with the virus. Baker mentions India, whose curve has started going steeply downward in the last few weeks. A study of the Indian states where the curve has gone downward vs. continuing upward shows that these states have been using Ivermectin as a cure vs. those that do not.
    Same thing in Africa, where countries that use Ivermectin are seeing a decline in cases vs. a rise pretty much everywhere else in Africa. No measure of human results is 100% one way, of course, but that’s the preponderance of the evidence.
    Meanwhile, 1000s of people have died within 3 days of getting the vaccine, admittedly out of 100s of millions of doses now, but still that is a much higher death, and complication rate than would be acceptable for any other vaccine.
    The CDC estimates that nearly half the country has had some degree of Covid by now – 150m people – with the vast majority being mildly or asymptomatic. Their natural immunity looks to be as good as that from vaccines, though obviously, whatever complications they were going to have, have already happened, and for the most part were mild and temporary (myself included).
    Before we shovel the most expensive, privately promoted, solution onto the rest of the world, maybe it’s time to ask if other solutions are both cheaper and better.
    This doesn’t mean the patent system isn’t broken, but there are even larger issues here.

  5. Patrick Newman
    June 7, 2021 at 11:47 am

    Lethal pandemic – suspending patentism is a no brainer. We are not talking about a better headache pill but a disease that could kill millions. The large current infection incidence could easily mutate into a more lethal disease – it has already generated more infectious variants. For most medicines, patents are a public health hazard and the associated profits a moral outrage.

  6. June 7, 2021 at 11:55 am

    Yes, I agree with Dean and all the previous commentators. Says Dean:

    “For some reason, we cannot even get a serious discussion in policy circles about alternatives to patent monopolies for financing the development of drugs and vaccines. To my view, we should be looking to alternatives to patent and copyright monopolies as government funding mechanisms everywhere, but the case for alternatives is especially compelling in the case of biomedical research”. And says Ikonoclast:

    “Western capitalism is actually about giving stupendous amounts of free money to the super-rich. Indeed, that is why they are super rich. It’s precisely what the system does and pretty much all it does”.

    So if the system can give free money to the rich it can do so to everybody, i.e. the alternative to patent and copyright monopolies and other rent-seeking is to give everyone the credit they need (any excessive uses being trivial to that now being given to the super-rich), encouraging able and ambitious contributors to compete for honorary prizes like the Nobel awards.

  7. June 8, 2021 at 8:02 am

    So a day later (and indeed a hundred and fifty years later) we still haven’t got a serious discussion of what John Ruskin summarised in two book titles: “Unto This Last” and “The Crown of Wild Olive”. Or indeed of the Biblical story of God wanting children to love and giving Adam a mate so he wouldn’t be lonely. So much for Hume’s individualism. It seems to me Ikonoclast was spot on about our reacting like zombies:

    “It leads me to wonder if genuine fears are deflected by an invocation of the opposite in story-telling. Dystopian and horror fiction give us a delicious thrill of vicarious fear when we actually feel fully secure that “that could never happen”. What people enjoy about disaster storytelling is feeling proof against the specific disaster depicted. It could only happen to others or so we think. We are not so foolish and purblind as the people in the story so that could never happen to us. Actually, we are as foolish and purblind but in a afferent way. The laws of nature would never recoil against us and seriously threaten us with zombies. Actually the laws of nature do recoil against us and are about to do so in a catastrophic manner, though probably not by generating zombies. Although, it must be said that humans infected by capitalist ideology are pretty much like mindless zombies in the way they consume today without thought for a sustainable tomorrow. Are mindless zombies a projection of what we fear we have really become? Are we truly afraid of ourselves, of our inner mindlessness, as we indeed should be?”

    Or are we basically lonely because we are frightened to engage with each other?

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