The Niskanen Center is proud to join Public Citizen, healthcare providers, public health experts, community groups, and other organizations to implore the Trump Administration to ensure that any forthcoming vaccines or treatments for the coronavirus (COVID-19) developed with R&D financed by taxpayers are affordable and available.
Vague assurances [such as those offered by HHS Secretary Alex Azar] are not enough. We need clear and firm commitments across all funding agencies, and for all types of products. Specifically, we call on your administration to require open, non-exclusive licenses. All manufacturers who can produce high-quality products and commit to reasonable pricing should be allowed to develop vaccines and treatments. At a minimum, your administration must require reasonable pricing globally through clear and well-defined conditions in all coronavirus government grants, contracts and licensing arrangements.
Due to patent monopolies, pharmaceuticals cost $300 billion more than they would under free and competitive market, according to research conducted by the Center for Economic Policy Research’s Dean Baker. To add insult to injury, many of these drugs are developed with support from taxpayers through grants to public and private institutions. From 2010 to 2016, all new molecular entities (NMEs) approved by the Food and Drug Administration were associated with over $100 billion National Institutes of Health-financed research.
In the case of coronavirus research specifically, from 2003 to 2020, over $700 million has been spent by the NIH on research related to the coronavirus. Of this $700 million, over $100 million was dedicated to for-profit institutions.
Apologetics for the pharmaceutical industry’s reliance on the (ab)use of patents employ the argument that due to the high costs of R&D and the drug approval process, in addition to the relative ease with which pharmaceuticals can be reverse-engineered cheaply, exclusivity must be granted. This argument is true, but misleading. Despite PhRMA’s claims that the development of a new drug costs an average of $2.6 billion, new research from Journal of the American Medical Association found that the median development cost per product (including the costs of failed trails) was around $985 million. There is, of course, significant variation in these findings. The same study found the mean cost was around $1.3 billion, only half of the value estimated by PhRMA.
Despite the high costs of R&D and the risks in drug development claimed by PhRMA, the median net income of 35 largest pharmaceutical companies as a share of total revenue was 13.8%, compared to 7.7% for 357 large non-pharmaceutical companies from 2000 to 2018. These large profits relative to other firms, combined with significant government support over the past two decades for coronavirus research, means policymakers should insist on a guarantee from developers of any vaccine or treatment that it will be offered at a reasonable price, including a promise of free or low-cost licensing for vaccine manufacturers.
For more research on the role of government in research related to treatments and cures for coronavirus, and the abuse of patent monopolies by large pharmaceutical manufacturers, be sure to read Public Citizen’s report “Blind Spot: How the COVID-19 Outbreak Shows the Limits of Pharma’s Monopoly Model.”