Big pharma

Back in from the cold

An unpopular business has a shot at redemption

 


 

May 23rd 2020 | words 638

 

 

 

FOR MUCH of the past two decades big pharma has been a lost cause. Despised by the public, it became notorious for price-gouging, secretiveness and its neglect of global health problems. Big pharma also lost its lustre with investors, despite its bumper profits. They worried that a business model that relied too much on rent-seeking and too little on innovation was unsustainable, and that citizens would eventually revolt and demand more regulationor even rip up the patent system that gives drugs firms a temporary monopoly over new medicines. As a result, in the five years before the covid crisis the pharmaceutical sector lagged behind Americas S&P 500 index.

 

The pandemic has reminded the world of the industrys strengthsits capacity to innovate and provide drugs on a vast scale. Many of the big firms, such as Johnson & Johnson and Sanofi, are working on covid-19 vaccines and therapies. Scores of smaller companies are at work, too. On May 18th Moderna, an American biotech firm, said that its much-anticipated vaccine has shown positive early results (although some analysts questioned the validity of its tests). AstraZeneca, a big British firm that invests heavily in research and development (R&D), is working on a vaccine with scientists at Oxford University, helped by $1bn of new funding from Americas government. Even before the virus, the industry had started to invest more heavily. In the most recent quarter Americas 30 biggest firms boosted their R&D by a median of 6% year on year. Now medical innovation is back in fashion.

 

It looks like big pharmas moment to shine. However, the pandemic has also created new ethical and political dilemmas. Vaccine nationalism is spreading as governments panic that others may get their hands on crucial drugs first. Frances Sanofi has found itself embroiled in a transatlantic row over who will be first to get any covid-19 vaccine it develops. Paul Hudson, the firms boss, stated last week that because the American government invested in his firms risky scientific efforts, the United States would have early access. This led to a political explosion in France and a dressing-down from Emmanuel Macron, Frances president. And there is mounting pressure to suspend elements of the patent system. A gathering of the World Health Organisation this week passed a resolution urging drugs firms to pool patent rights. Several dozen current and former world leaders released an open letter demanding that any successful covid-19 vaccine should be made available patent-free.

 

There is an alternative to beggar-thy-neighbour nationalism and taking a sledgehammer to the intellectual-property regime. First, a global agreement is needed to govern the manufacture and distribution of a potential vaccine. It could take several years to vaccinate the worlds population; global co-operation will mean that the vaccine is deployed first where it brings most benefit.

 

Second, the patent system should be preserved because, correctly designed, it incentivises investment in new treatments. The big drugs firms have already said they will make any vaccine available at cost-plus prices. Arrangements exist for tiered pricing of medicines and free vaccinations for diseases afflicting the worlds poor that should be extended to covid-19 treatments. If a smaller drugs firm tried to price-gouge, governments in the West and elsewhere have the powers to pass compulsory licensing orders in an emergency. When the pandemic passes, there must be no going back to the bad old days. Governments should seek to authorise new drug patents faster, as the best way to balance innovation and lower prices. And big pharma needs to keep investing. That will help shareholders and global public health, too.








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Economist | Big pharma is having a good crisis

 

 

 

Big pharma

Back in from the cold

An unpopular business has a shot at redemption

 


 

May 23rd 2020 | words 638

 

 

 

FOR MUCH of the past two decades big pharma has been a lost cause. Despised by the public, it became notorious for price-gouging, secretiveness and its neglect of global health problems. Big pharma also lost its lustre with investors, despite its bumper profits. They worried that a business model that relied too much on rent-seeking and too little on innovation was unsustainable, and that citizens would eventually revolt and demand more regulationor even rip up the patent system that gives drugs firms a temporary monopoly over new medicines. As a result, in the five years before the covid crisis the pharmaceutical sector lagged behind Americas S&P 500 index.

 

The pandemic has reminded the world of the industrys strengthsits capacity to innovate and provide drugs on a vast scale. Many of the big firms, such as Johnson & Johnson and Sanofi, are working on covid-19 vaccines and therapies. Scores of smaller companies are at work, too. On May 18th Moderna, an American biotech firm, said that its much-anticipated vaccine has shown positive early results (although some analysts questioned the validity of its tests). AstraZeneca, a big British firm that invests heavily in research and development (R&D), is working on a vaccine with scientists at Oxford University, helped by $1bn of new funding from Americas government. Even before the virus, the industry had started to invest more heavily. In the most recent quarter Americas 30 biggest firms boosted their R&D by a median of 6% year on year. Now medical innovation is back in fashion.

 

It looks like big pharmas moment to shine. However, the pandemic has also created new ethical and political dilemmas. Vaccine nationalism is spreading as governments panic that others may get their hands on crucial drugs first. Frances Sanofi has found itself embroiled in a transatlantic row over who will be first to get any covid-19 vaccine it develops. Paul Hudson, the firms boss, stated last week that because the American government invested in his firms risky scientific efforts, the United States would have early access. This led to a political explosion in France and a dressing-down from Emmanuel Macron, Frances president. And there is mounting pressure to suspend elements of the patent system. A gathering of the World Health Organisation this week passed a resolution urging drugs firms to pool patent rights. Several dozen current and former world leaders released an open letter demanding that any successful covid-19 vaccine should be made available patent-free.

 

There is an alternative to beggar-thy-neighbour nationalism and taking a sledgehammer to the intellectual-property regime. First, a global agreement is needed to govern the manufacture and distribution of a potential vaccine. It could take several years to vaccinate the worlds population; global co-operation will mean that the vaccine is deployed first where it brings most benefit.

 

Second, the patent system should be preserved because, correctly designed, it incentivises investment in new treatments. The big drugs firms have already said they will make any vaccine available at cost-plus prices. Arrangements exist for tiered pricing of medicines and free vaccinations for diseases afflicting the worlds poor that should be extended to covid-19 treatments. If a smaller drugs firm tried to price-gouge, governments in the West and elsewhere have the powers to pass compulsory licensing orders in an emergency. When the pandemic passes, there must be no going back to the bad old days. Governments should seek to authorise new drug patents faster, as the best way to balance innovation and lower prices. And big pharma needs to keep investing. That will help shareholders and global public health, too.








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