The vaccine makers have solved for the equilibrium

GSK has made a corporate decision that while it wants to help in public health emergencies, it cannot continue to do so in the way it has in the past. Sanofi Pasteur has said its attempt to respond to Zika has served only to mar the company’s reputation. Merck has said while it is committed to getting its Ebola vaccine across the finish line it will not try to develop a vaccine that protects against other strains of Ebola and the related Marburg virus.

Drug makers “have very clearly articulated that … the current way of approaching this — to call them during an emergency and demand that they do this and that they reallocate resources, disrupt their daily operations in order to respond to these events — is completely unsustainable,” said Richard Hatchett, CEO of CEPI, an organization set up after the Ebola crisis to fund early-stage development of vaccines to protect against emerging disease threats.

Hatchett and others who plan for disease emergencies worry that, without the involvement of these types of companies, there will be no emergency response vaccines.

Here is more from Helen Branswell, you can follow her on Twitter here on the evolving coronavirus situation, she is maybe the single best follow on that topic?


Not all vaccines are developed by companies - 'Russia and China are working to develop a coronavirus vaccine and Beijing has handed over the genome of the virus to Moscow, a Russian diplomatic mission in China said on Wednesday.'

Russia has highly developed biology programs, not based on profit concerns.

As a Russian working in biotech, I can add comments to your idea. Yes, Russia has sufficiently developed biology programs. No, it's still not 100% as good as the best in Europe, USA and Japan. Mostly, our logistics are crap. Most chemicals and equipment is still imported from USA and it takes 3 month at minimum to arrive. Our best labs can almost match the best in other places, but their number is much smaller. So yeah, we will most likely be able to develop vaccine (as with any vaccine, there is no 100% certainty), but it will simply take more time. Which can be improtant if the outbreak is developing much quicker. Hopefully, that will not endanger anyone. But as always, it would have been nice to have extra options.

Should the companies drop everything and try to respond to the latest emergency?

Sounds like a weapons exchange.

Sounds like it might be time for some state capacity building.

Or simply removing government granted monopolies on manufacturing and selling pharmaceuticals, since it is obvious that pharmaceutical companies are considerably more concerned with profit than the public good.

Sounds like the sort of position that a state capacity libertarian would have no problem getting behind, as patents are a government granted monopoly, whose sole justification is that it serves the public good, not the goal of making the rich richer.

I'm going with "yes, and."

Stand up the Postal Service of generic pharma, and expand the NIH into discovery and practical manufacturing research. Maybe try to find a biotech VC who feels patriotic.

This stuff takes time to build, and even if a credible threat just scares some civic-mindedness into some folks, it will have done some good.

I'm not saying try to shut down private pharma, but if they won't fill public interest niches, that's simply a market failure that leads to potential public health crises, exactly the sort of thing we theoretically keep government around to fix.

public interest niches. . . market failure, , , potential public health crises

Would the failing eyesight of a growing class of geriatrics best be solved by a government program to supply them with eyeglasses? Has there been a "market failure" in eyeglass development and distribution? After all, there are no eyeglass suppliers just inside the door of the local Walmart or other big retailers, are there?

What relationship might there be between public interest niches and market failures anyway? Is the US Interstate Highway System a response to a market failure? If a resident of bush Alaska can't get a watermelon at the local general store in January is it a market failure? If a person can't get a direct flight from Toledo to Sioux Falls is it a market failure?

There was no public knowledge of the Coronavirus until just a few days ago and evidently not much more restricted knowledge. Should pharma have an antidote for poisons that haven't been invented yet?

The obvious problem here is that the expected revenue from the years under patent is what funds (very expensive) drug development. If patent protection is removed, drug development will drastically reduce.
Providing an incentive for innovation is exactly the "public good" that the patent system exists for.

Yes, this space is messed up and needs fixing. I think the biggest problems are:

1) the U.S. health insurance system preventing a functioning market in which competition and cost/benefit calculations lower prices (I would include in this Medicare and Medicaid being forbidden to negotiate on drug prices).

2) Drug development getting far too expensive due to excess regulation.

Sounds good in theory, but empiricism is not on your side. Remember, until recently drugs were considered scientific discoveries, and as such not patentable. Look at the rate of new drug discovery before and after the change and then consider your statement again.

Interesting, do you have a reference to this case being made?

I want to learn more, but the reasons I would be initially skeptical of this claim are that 1) a lot of low hanging fruit was gobbled up on earlier drug development. There was potential to make big progress at lower cost/effort, which is no longer there. 2) skyrocketing drug development costs due to regulation are also recent, and they are what would make much research fail a cost/benefit calculation without patents.

France made the switch from patentable to nonpatentable in 1844. The effect on drug discovery was not positive. In the prior decades we had the discovery of the major drugs of the 19th century: morphine, quinine, and chloral hydrate.

Prior to patent laws changing back, there was no great boon in drugs discovered. Most of what was found in that era was just a biological extract, often hormones, and required exceedingly little R&D. Of course the quality control was terrible and people routinely died from impure preparations, but what are a few dead kids to the system?

After the patent system we started getting targeted drugs aimed at specific illnesses. Good luck waiting around for serendipity to show you compounds that help with anything aside from infections.

There have been plenty of places that do not respect international patents or where state enforcement is weak. None pull above their weight in drug discovery. Heck, even places with Beveridge health systems typically punch below their weight for drug R&D.

At the end of the day, you get what you pay for. Drug discovery and production should be highly profitable, we want it soaking up capital faster than social media "innovation".

Drug makers are snowflakes. When FDR ask the nation's manufacturers to switch out assembly lines to fight global totalitarianism, did they balk? No, they were patriots that loved freedom. Where is the public spirit these days? This is why Trump is President and populism will continue to defeat the establishment.

And those patriots got well paid for doing so.
Which is all right!

This is a national security issue. If this is a problem for the private sector, then the government has to do it.

I think the problem is that government doesn't want to pay for it and can't do it itself.

I'm sure the government CAN do it, a lot of research is done by the NIH. An expansion and more funding would be needed but if the private pharmaceutical industry as constructed cannot respond to emergencies than it seems alternative mechanisms are needed.

The pharmaceutical as currently constructed is only interested in saving lives when they can make enough money from it. Even cost neutrality is not something that they want to be forced into, as lives are worth less than their bottom line.

And this is the structure that people like Cowen and Tabarrok are dedicated to defending, since doing things another way would be akin to IP confiscation, or something equally nefarious sounding.

If you can draft a man, why can't you draft a company?

Would you have to acknowledge their rights to free speech if you could draft them?

I’m sure slaves will produce vaccines very quickly. I assume this idiocy is why no intelligent person wants to enter this industry.

Implement as Bill describes below, beginning on comment 27.

So what you are saying drug companies are a decided step up from the NHS where they literally decided to let people die instead of funding drugs that they, themselves, said were cost effect?

End the end of the day, pharma saves lives, and if there is an alternative to avaricious capitalists making drugs, I have yet to see it be effective. After all China is socialist, where are their contributions to new drugs? The NHS is the largest employer on the planet, but they can barely stock no brainers like HPV vaccines in a timely fashion.

For profit drug companies are the worst way to develop new drugs except all the others that have been tried.

Given the size of the national debt, the government loves to pay for stuff. Print more if it needs to.

Gotta have those tax cuts! Right, Mr. Fiscal Conservative?

Sanofi and GSK didn't need emergency vaccines to ruin their reputation. Their leadership, or lack thereof, already did that.

Sanofi stole US taxpayer money in 2017:\

Sanofi and GSK took bribes in Europe, Middle East, and China:

Blessed are the vaccine makers for they are the real anti-vaxxers.

The latest scandal in science is accepting money from China, many respected academics and researchers in the U.S. losing their jobs and reputations because they may have unknowingly participated in Chinese espionage. That contrasts with the offer made Tuesday by the U.S. Centers for Disease Control and Prevention to send a team to China to help with the coronavirus outbreak. Now the leading U.S. pharmaceutical companies have taken a stand, a stand against helping control the outbreak of a deadly virus by developing a vaccine. What's going on here? Why would science organizations, which is what the pharmaceutical companies claim to be, refuse to, you know, work on science when it's needed the most. Politics and profits, if one doesn't get you the other one will.

"they may have unknowingly participated in Chinese espionage": ah yes, those yokels at Harvard had as little idea why they were being paid $50k per month as Joe Biden's son had about the motives behind his nice little earner.

So it's not okay for U.S. scientists (at Harvard or wherever) to work with China to develop a vaccine for coronavirus?

So China unleashes a bioweapon of mass destruction into the world and all multinationals can do is shrug their shoulders and say "Don't look at me"?

They only care about money.

The government supports drug companies and their scientific research by early stage R and D support, which leads to subsequent private development.

If you want to get a license for a product of government or state sponsored research, expect that you might have conditions thrown on the license, such as making capacity available for vaccine production.

Going from the initial research to an approved drug costs vast piles of money. If the pharmaceutical companies don't expect to
make that money back, then they won't do that expensive work, or if they do they will end up bankrupt.

Some of the cost is probably dumb regulatory compliance stuff, but a lot is doing trials that let us know whether the drug works and is safe, and that will always be expensive.

If we want the pharma companies to spend big piles of money developing something, we need to make it a good investment--make sure developing a needed vaccine or drug will get a payoff.

Their response (we won’t / can’t provide repeated on-demand emergency services for free) is rational. They would probably entertain a contract to maintain a defined development and manufacturing capability, with an annually extendable 10 year term. Which could be kept busy at other times working an non-crisis vaccines.

Expensive? Subject to all kinds of waste and abuse? Probably. TANSSAAFL.

There are obvious analogs in providing relatively rarely used crisis or surge capacity for power generation, flood control, snow removal, hurricane response, insurance, and of course defense.

I’m reminded of a the phrase “Failure to plan ahead on your part does not constitute an emergency on my part.”

+1 Similarly, if drug production is outside of the US, then you also need to provide that they have sufficient surge capacity in the US or will be able to meet the needs of the US from foreign sited facilities.

Each country will hoard in times of emergency, so plan for it.

"There are obvious analogs in providing relatively rarely used crisis or surge capacity "

That's pretty much the definition of military spending.

Judging from the comments, public opinion has indeed hit an equilibrium that the vaccine makers might not want to solve for.

I agree and would also note the majority of the commenters have no clue at all about vaccine R&D and production. Those who say the government can do this have forgotten how much money NIH spent chasing after an HIV vaccine only to find out after spending several hundred million dollars (don't know the exact cost) that the science was defeating every single candidate. Manufacturing vaccines is not as simple as producing solid oral dosage medicines. It's costly and sterility has to be maintained.

It's also unclear how long a vaccine against this coronavirus will be effective. Will mutations lead to new strains that such that require constant changes to the seed culture (this is what happens with the yearly flu vaccine which is really just an educated guess at which strains will be most virulent and needed in the vaccine). the majority of vaccines are given to health people which is why safety trials tend to be large so that unlikely adverse events can be found before going out into the broader public.

Pharma companies do step up to the plate and address public health emergencies but they have a bottom line that has to be addressed as well.

Those who say the government can do this are aware that the first approved Ebola vaccine was not developed by Merck. 'VSV-EBOV or rVSV-ZEBOV, sold under the brand name Ervebo, is a vaccine based on the vesicular stomatitis virus which was genetically modified to express a surface glycoprotein of Zaire Ebola virus. In November 2019, the European Commission granted a conditional marketing authorization. The WHO prequalification came fewer than 48 hours later, making it the fastest vaccine prequalification process ever conducted by WHO. In December 2019 it was approved for medical use in the United States.

It was developed by the Public Health Agency of Canada, with development subsequently taken over by Merck Inc.'

Note that Merck, in the linked article, is basically complaining it is not making as much money as it wishes

Drug makers “have very clearly articulated that … the current way of approaching this — to call them during an emergency and demand that they do this and that they reallocate resources, disrupt their daily operations in order to respond to these events — is completely unsustainable,”

They previously went through this situation during the HIV explosion when they were expected by the gay bath house community to produce an immediate cure for a new affliction.

Solution: U.S. and/or other countries should set up an endowed foundation. When a dangerous new virus is identified, the foundation may give an award to the entity that most quickly produces a viable vaccine in the quantities needed. The award will be large enough to provide more profits than a company would normally earn on such a vaccine. Perhaps it could be shareable if multiple firms or individuals made important contributions.

Per usual, Nick is correct. And it doesn’t need to be just vaccines. If drugs are a public good, then the patents should be purchased by government after the drug has been established. Pay the drug creator a tidy profit and license the manufacturing to anyone able to meet regulatory standards.

Good idea. Lets give Gates and Bezos a pass, and suggest Soros put up the $10 billion to endow this.

The foundation can create, maintain, and fund a core technical bio and manufacturing staff and capability. Just having money in the event of a crisis doesn’t solve the lack of available surge capacity problem - that needs to already be in existence.

Better yet, he can fund 2. One in the US, one in Switzerland. Redundancy is good.

The entire premise of pharmaceutical patents is that the government steps in to protect a firm's monopoly, in order to incentivize research and development of new treatments. If under this system, a firm blatantly refuses to innovate, then it seems that the firm's patents should be voided.

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