14 February 2021 4:45 PM (politics | economics | COVID-19 | pharmaceuticals)
Kaiser Health network has written an article on the current economics of vaccine manufacture.
One of the things the article doesn't mention, but a New York Times piece does, is that Oxford was motivated to make an exclusive deal with AstraZenica because they doubted whether they could handle clinical trials. This indicates a systemic failure, with the resources and knowledge to navigate pharmaceutical approvals not being available outside of large pharmaceutical corporations. This accentuates the falsehood of the claim that patent protection and exorbitant prices are necessary for research on new drugs to continue. In several ways:
- It's actually difficult to get drug companies to work on vaccines, they're taken once or twice and prevent disease and don't provide a constant, high input stream. The vaccine endgame is for them to be universally administered, wipe out the disease, and never be needed again.
- The research behind the Oxford vaccine was done by a university, not a for-profit corporation.
- The thing AstraZenica was given exclusive rights for was actually clinical trials.
- Other corporations received heavy funding from governments to subsidize their research.
First, this shows more than ever that abolishing drug patents and directly funding research is a good idea. Not only would it save money over the current system even if only the direct cost to Medicare of prescription drugs is considered (let alone the drag on GDP from private drug purchases), but the kind of research pharmaceutical companies fund is often not the funding that is needed. This is both because vaccines do not fit their desired product model, but because so much of research consists of minor tweaks to existing drugs to create new, in-patent derivatives that can be pushed by advertising and buying doctors lunch.
Yes, your precious market has grossly and hugely misallocated resources. Where is your capitalist god now?
The systemic problems around COVID-19 also suggest that drug trials and manufacturing should exist as public utilities. Not that we should ban private manufacture or trials, but that we need a direct, publicly funded path from laboratory to distribution for drugs. A public agency to carry out approvals could have saved Oxford's vaccine from falling being handed over as exclusive intellectual property.
The need of direct public manufacture of drugs has been apparent for some time, with orphan drugs. Orphan drug laws as they exist are insufficient, as they try to incentivize manufacture by offering exclusivity and tax breaks, essentially offering any company that takes them up on the offer a competition-free market where they can charge high prices, while other government programs subsidize patient purchase of orphan drugs. It's simply inefficient compared to direct manufacture and sale at-cost. (Ideally sale at-cost to the free-at-the-point-of-care public universal health system, but that's a discussion for another time.)
Vaccines would also benefit from being manufactured and distributed directly. Having the infrastructure in place for orphan drugs and yearly flu vaccines would mean that we can adapt the competence and capacity we already have in the event of a pandemic rather than having to scramble to either establish it or be limited to directing resource allocations of private companies once we're in a ‘war footing’. While some middle income countries like India, China, and South Africa have local public (or public-private partnership) drug manufacture that can product drugs in quantity on out-of-patent drugs (or when they ignore or are excused from intellectual property law), the high-income nations of North America and Europe are dependent on multinationals and have to compete with each other during crises.
Government™ Brand Vials and Government™ brand pill-fillers would be silly, but it's important to learn the lesson of COVID-19 when it comes to on-shoring. In the beginning of the pandemic there were shortages of necessary supplies and equipment like masks, sanitizer, and respirators. One cause of this was that long, global supply lines break more easily when disrupted. Another was that, since our supply lines had many stages at long removes, they couldn't adapt to shifting demands as quickly. A third was ‘lean manufacturing’ being poorly adapted to handling sudden spikes in demand, as the supply of raw materials kept on site was low. The fourth, and probably the most damaging, was that countries in the rich-world had ceased to think of themselves as manufacturing centers. They snobbishly thought of themselves as idea creators with the grubby work of making things being farmed out somewhere else. This meant that there was little local knowledge about how to set up and quickly adapt manufacturing. What manufacturing is done in the rich world is, more and more with time, highly specialized, with special purpose automation that can't be adapted well.
Keeping a local manufacturing capacity would mean that in the event of a global catastrophe (or pandemic) rather than every rich nation trying to grab the same goods from the same sources all at once, they could kick into high gear and start making them for their own use, selling them to each other, and giving them away to the hardest hit nations. While I think there's a case for drug manufacture as a continuous operation due to market failures, in other domains the best approach might be what we could call a Reserve Manufacturing Corps. Similar to the army reserves, people could be called up to spend a few months running drills on adapting assembly lines to new products, working on the line, inspecting and maintaining factories, and generally cultivating the skill and practice needed to make a variety of things on short notice, so that in an emergency the system could be activated and the reserve factories spun up at short notice.