Material World: Vaccine development: another market failure

‘There is just not enough profit margin in it for pharma companies. They live by profits and the rules of capitalism. And capitalism has no interest in human beings other than as consumers’

(Nobel laureate and immunologist, Professor Peter Doherty, Sydney Morning Herald, 13 April).

The pharmaceutical corporations would have us believe that without their investments in scientific research, millions of people would not benefit from the medicine they sell. These businesses are built upon a business model of maximising shareholder value — and hinges on short-term returns to seek maximum profits so their investors can achieve higher prices for their stocks and pursue higher returns for their dividends. We are told that without the pressure from competition and the promise of riches, drug companies would not invest in research.

Capitalists imagine a world in which free enterprise and free markets promotes a race to the top but this isn’t quite how things are in practice. It may sound counter-intuitive but the laws of capitalism deliberately restrict innovation, information and knowledge. Many in the pharmaceutical industry are bound by non-compete agreements in their employment contracts which prevent employees when switching jobs using prior experience to make meaningful contributions to a new employer. Patent protection allows the patent holder to charge high fees for the direct use or licensing of their discovery and to sue anyone who doesn’t buy this permission. Competitors are discouraged from trying to improve on products, knowing they would need legal permission and considerable time and money is spent on acquiring such permission. So the patent system shrinks the overall pool of innovators, slowing down progress.

Public health experts have warned for years that the world is at risk of a major pandemic, and the drug corporations showed little interest in preparation until this latest outbreak of COVID-19 offered an opportunity to rake in government subsidies and enjoy profits with minimal risk. Governments have eliminated many risks that had dissuaded drug companies from vaccine investments by bankrolling research, sponsoring clinical trials, and reducing liability for drug corporations.

Back in 2016, doctors at the Texas Children’s Hospital Center for Vaccine Development created a potential vaccine for one deadly strain of coronavirus which they believed could be effective against the strain we face now but the project stalled when it struggled to secure funding for human trials. The lead researcher, Dr Hotez, told NBC, ‘We’ve had some conversations with big pharma companies in recent weeks about our vaccine, and literally one said, ‘Well, we’re holding back to see if this thing comes back year after year.’”
It is business logic which reflects the belief that vaccines for recurring seasonal illnesses, like the flu, are the more attractive investment. They promise a client base that can be mined over and over again. Capitalism steers R&D toward the largest profit in the shortest amount of time.

In 2017 a plan to speed up the development and approval of vaccines for priority diseases such as MERS and SARS, both of them coronaviruses, was put forward by EU officials on the Innovative Medicines Initiative (IMI), a public-private partnership, but it was rejected by industry representatives of the European Federation of Pharmaceutical Industries. Informed sources commented that rather than compensating for market failures by speeding up the development of medicine, as per its remit, the IMI has been ‘more about business-as-usual market priorities’ and that the influence of pharmaceutical companies has led IMI’s agenda to becoming dominated by industry priorities, and side-lining poverty-related and neglected diseases, including coronaviruses. Drug companies have historically pleased investors by promoting vaccine development projects during disease outbreaks, then quietly dropping them later. Had there been more sustained interest, researchers would have more tools for combating the current outbreak.

The COVID-19 pandemic has revealed the workings of capitalist economics, laying bare the pharmaceutical industry. When faced with a global threat, one would expect worldwide cooperation and collaboration to contain it. The United Nations, International Red Cross and others said it was a ‘moral imperative’ that everyone have access to a ‘people’s vaccine.’ Sadly, such aspirations are unenforceable, despite the launching of some international initiatives.

While the World Health Organization has called for a COVID-19 ‘patents pool’ where intellectual property rights would be surrendered so pharmaceuticals could freely share data and technical knowledge and numerous participating countries have begun revising their licensing laws to allow them to suspend intellectual property rights, the response from the industry has been cool. Pfizer and some other major drug makers say they oppose suspending patent rights for potential COVID-19 vaccines.

The UK and the US refuse to support the WHO initiative and are more interested in siding with big pharmaceutical corporations than turning vaccine research into a genuinely collective endeavour. For the British and American governments the patent system is sacrosanct and they appear determined not to upset their own pharmaceutical corporations or the financial sector that makes substantial returns from these companies, which spend more money on share buybacks than on researching drugs. Now, a new term has entered our lexicon – ‘vaccine nationalism.’

National governments are neglecting the most effective and safe route to discovering speedy cures for coronavirus: by forgoing corporate profitability and intellectual property rights in favour of global cooperation through open and shared research.

The minority interests of economic and financial groups has placed profits for themselves above the common good. The chaos of the market must be superseded by a more rational system of planning – a socialist system, where drugs are produced to meet the needs of humanity. When it comes to the crunch, pharmaceutical companies treat healthcare as a commodity. For the pharmaceutical companies Covid-19 is a business opportunity.

Our competitive capitalist market is not a suitable approach for solving the problem. Socialism would apply an open, collaborative strategy to coronavirus vaccine development to assure a safe and effective vaccine will be made accessible to all and it would speed up the process of discovery as well.


Socialist Standard September 2020

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