[Part 1 of this three part article was published in Janata blog in the October 17, 2021 issue.]

How Big Pharma appropriates knowledge and profits in a time of Coronavirus

Patents, TRIPS and Big Pharma…

Knowledge, scientific discoveries, and technical processes ought to be common goods of humankind. Yet, as capitalism has extended its hold, it has favoured private appropriation of knowledge and techniques, notably through patents. Not only does Big Capital not share scientific findings, it grabs them for itself and make others pay for them. It takes over findings of research carried out in universities or public research centres. It also patents seeds that have been developed by peasants through selection throughout the centuries. For instance the agribusiness company Del Monte patented tomatoes produced by Andean farmers and now demands that they pay to use them.

When the World Trade Organization was set up in 1995, the agreement on Trade Related Intellectual Property Rights (TRIPs) reinforced the power of big capitalist corporations. It includes such various fields as computer programming and the design of printed circuits, pharmaceutical products and transgenic cultures. It defines minimal standards on patents, copyrights, trademarks and manufacturing secrets. Such standards are created by legislation in industrialized countries and thus enforce those countries’ level of protection on all WTC member countries.

They are much stricter than the laws enforced in most developing countries before they joined the WTO and often clash with the specific needs of those countries. A country can be forced to implement the TRIPs agreement through the WTOs own dispute settlement system. That means that if a country does not fulfill its obligations in terms of intellectual property rights, it may be subject to trade sanctions, which is a serious threat.

The IMF, the World Bank and the big powers have used all their influence, notably through their position as creditors, to force reluctant developing countries to adhere to the TRIPs conditions. Moreover the European Union, the US and other rich countries signed bilateral agreements that provide an even stricter protection of patents than the standards defined in the TRIPs agreement: they are called TRIPs plus. Since 2020, within the WTO TRIPs committee, several big powers among whom the EU, the UK and Japan have opposed the temporary lifting of patents on various Coronavirus vaccines (see below). The Biden administration on its side, while it had announced back in May 2021 that it was in favour of a temporary lifting of patents, has done nothing tangible so far. The main reason lies in the fact that these patents are the source of juicy profits for the big private pharmaceutical companies. They are protected and favoured by governments that allow them to abuse their position.

As stated by Peter Rossman: “Financialized pharmaceutical companies are best understood as organizations which manage operations as a bundle of financial rather than physical assets. Their greatest financial asset is the patents which generate 80% of their profits.”

“In 1980, the United States passed legislation which authorized small businesses and universities to patent inventions developed with public funding. Previously these had automatically reverted to the government, which licensed them to generic manufacturers, or were injected directly into the public domain. Universities and startups were now integrated into a corporate-driven knowledge complex. ‘Technology transfer’ transformed public research into private patents.” [1] Rossman further writes: “companies are increasingly financialized, reducing expenditure on production capacity, employees and even R&D to free up cash to distribute to shareholders as dividends and share buybacks. [2] For two of the largest, Pfizer and Johnson & Johnson, spending on buybacks and dividends between 2006-2015 exceeded their total net income; they turned to the loan market to finance rising returns to investors and top management using their IP assets as collateral.”

Over that period from 2006 to 2015, Pfizer paid $131 billion to its shareholders while spending $82 billion on R&D. [3]

In the light of the Coronavirus pandemic

Since the global extension of the pandemic, the debate on patents has become central. Within the WTO, in early October 2020, India and South Africa, supported by 62 countries, have proposed that member States be exempted of the obligation to implement the TRIPs agreement on vaccines, medicines or new technologies related to the treatment of Covid-19. However, the proposal was staunchly opposed by HICs, among which the European Commission, which refused to follow a decision voted twice at the European Parliament in favour of lifting patents on vaccines. [4] A year later, at the beginning of October 2021, 105 countries were supporting the proposal to lift patents. [5]

A double dose of inequality

This is literally a life or death issue since, if patents are not lifted, a large part of the population in the global South that might wish to be vaccinated will have no access to vaccines within a reasonable time frame. In August 2021, less than 2% of the 1.3 billion Africans were entirely vaccinated against Covid-19, compared to over 60% in Western Europe and North America. In June 2021, a quarter of the 2.295 billion doses injected in the world had occurred in G7 countries, who account for only 10% of the world population. According to data collected by researchers at the University of Oxford, in September 2021, only 2.1% of the people in low income countries have received one injection of a Covid vaccine. [6] About 700 million people live in low income countries.

Amnesty International’s 22 September report [7] establishes that less than 1% of the population in low-income countries have been fully vaccinated and that out of the 5.76 billion doses injected in the world, only 0.3% have been used in those countries. In this report, suggestively entitled ‘A Double Dose of Inequality’ Amnesty International exposes the attitude of six big private companies producing the majority of anti-Covid vaccines in rich countries (AstraZeneca, BioNTech, Johnson & Johnson, Moderna, Novavax and Pfizer): “Six companies at the helm of the global Covid-19 vaccine roll-out are fuelling an unprecedented human rights crisis because of their refusal to waive intellectual property rights and share vaccine technology, with most of the companies failing to prioritise vaccine deliveries to poorer countries.” [8]

COVAX is not a solution

Governments in countries of the South who wish to give their population the possibility of getting vaccinated will have to contract debts since COVAX-type initiatives are blatantly wanting and actually reinforce the hold of the private sector. COVAX is run jointly by three entities: 1. The GAVI Alliance, which is a private structure that brings together companies and States, 2. The Coalition for Epidemic Preparedness Innovations (CEPI), which is another private structure that also includes capitalist companies and States, and 3. The WHO, which is a UN specialized agency.

Among the companies that finance and influence GAVI we find the Bill & Melinda Gates Foundation, the Rockefeller Foundation, Blackberry, Coca Cola, Google, the International Federation of Pharmaceutical Wholesalers, the Spanish bank Caixa, the Swiss bank UBS (the biggest asset management bank in the world), financial companies such as Mastercard and Visa, the aerospace manufacturer Pratt & Whitney, the American multinational consumer goods corporation Procter & Gamble, the British multinational consumer goods company Unilever, the oil company Shell International, the Swedish musical streaming company Spotify, the Chinese company TikTok and the car manufacturer Toyota. [9]

The second entity which co-directs COVAX is the Coalition for Epidemic Preparedness Innovations (CEPI), which was founded in 2017 at Davos on the occasion of a meeting of the World Economic Forum. Among the private companies who finance and strongly influence the CEPI we find, once again, the Bill & Melinda Gates Foundation, which has invested $ 460 million.

The membership of the COVAX initiative reveals much about the unwillingness of the various WHO member States to take responsibility for the struggle against the pandemic, in particular as regards public health. Such an attitude is typical of the damage done by the neoliberal groundswell that has swept the planet since the 1980s. The Secretariat General of the United Nations and the leadership of the specialized agencies within the UN system (for example the WHO in the area of health and the FAO for agriculture and food) have been moving in the wrong direction for the past thirty to forty years by relying more and more on private initiatives directed by a limited number of big global companies. Heads of State and of government have moved in the same direction. In fact it can even be said that they have made the first move. In so acting, they have allowed major private companies to be associated in decisions and derive advantages from the choices that are made. [10]

Remember that over 20 years ago researchers and social movements specialized in the health field proposed that the public authorities should invest sufficient amounts to create effective remedies and vaccines against the “new generation” viruses stemming from the increase in zoonoses. The overwhelming majority of States have chosen to rely on the private sector and have given them access to the results of research conducted by public entities, when they should have invested directly in the production of vaccines and treatments within the framework of a public health service.

As we have seen, the COVAX initiative is not the solution that is needed.

COVAX had promised to supply, by the end of 2021, 2 billion doses to the countries of the South who request them and who are associated with the initiative. In reality, figures show that at the beginning of September 2021 only 243 million doses had been shipped. [11] As a result the goal of 2 billion doses has been pushed back to the first semester of 2022. All the major powers of the North have fallen short of the promises they made. For example, the European Union, which had committed to delivering 200 million doses to the poorest countries by the end of 2021, has sent only “around 20 million” as France’s secretary of state for European Affairs, Clément Beaune, admitted on 7 September 2021. [12]

C-TAP (Covid-19 Technology Access Pool) is another disappointing WHO initiative. C-TAP includes the same protagonists as COVAX. It was created to pool intellectual property, data and fabrication processes by encouraging pharmaceutical companies who hold patents to cede to other companies the right to produce the vaccine, medicines or treatments by facilitating technology transfer.

Yet so far not a single vaccine producer has shared patents or know-how via C-TAP. [13]

Faced with the failure of COVAX and C-TAP, the signers of the Manifesto ‘End the system of private patents!’ launched by the CADTM in May 2021 are right in saying that:

“Initiatives such as COVAX or C-TAP have failed miserably, not only because of their inadequacy, but above all because they reflect the failure of the current system of global governance in which rich countries and multinationals, often in the form of foundations, seek to reshape the world order to their liking. Philanthropy and burgeoning public-private initiatives are not the answer. They are even less so in the face of today’s global challenges in a world dominated by states and industries driven solely by market forces and seeking maximum profits.” [14]

We will return to the alternatives in the third part of this series.

Big Pharma rakes in colossal profits

The gross income and net profits Big Pharma companies are now raking in thanks to patents are colossal. According to the Amnesty report cited above, three of the six biggest companies producing Covid vaccines – BioNTech, Moderna and Pfizer – will take in $130 billion in income by the end of 2022. That amounts to two and a half times the Gross Domestic Product of the Democratic Republic of Congo (RDC), which has a population of over 100 million. Another comparison: $130 billion is 20 times the budget of the RDC for 2021. $130 billion is also the equivalent of two thirds of the total budget of the European Union for 2021. $130 billion is 10 times the budget of India for the year 2020–2021. [15]

Generally speaking, the cost of production of a dose of Covid vaccine varies between 1 and 2 euros, but when it is purchased by the public authorities in the North the price is between 10 and 20 times that amount. [16] Pfizer charges the State of Israel 23 euros for a single dose, and the European Union pays 19.50 euros.

Note that the price paid by the European Commission for a dose of the Pfizer vaccine increased from 15.50 to 19.50 euros between the end of 2020 and the summer of 2021. Moderna’s vaccine, which was priced at 19 euros, rose to 21.50 euros. [17] And keep in mind that production costs are decreasing. That is because as the quantities produced increase the unit production cost decreases.

Action can produce positive results

The pharmaceutical industry would have us believe that the patents it holds and the profits it makes are indispensable for conducting research and ensuring human health. But the Pretoria trial in 2001 shows that the opposite is true! The industry is ready to accept hundreds of thousands of deaths to defend its profits and its patents. In 1997 South Africa adopted a law that enabled parallel importations and compulsory licences or substitution with generic drugs to face the AIDS emergency. The 39 largest pharmaceutical groups worldwide attacked the law in 1998. They claimed that it contravened the rights to exclusivity granted by the patents. A vigorous mobilization by South African organizations including TAC (Treatment Action Campaign), relayed around the world by petition campaigns and statements denouncing the Pharma lobby’s action (campaigns that involved Médecins Sans Frontières, Aides and Act-Up) showed that because blocking the law denied them antiviral treatment, 400,000 South Africans had died of HIV. Faced with this worldwide scandal, the pharmaceutical companies had no choice but to withdraw their action, even though the trial was already under way. On that occasion, the right to health won out over the right to patents. [18] That example needs to be followed now during the Covid pandemic.

Footnotes

[1] Peter Rossman, “Multinational Corporations and Covid-19: Intellectual Property rights vs. Human rights” https://www.cadtm.org/Multinational-Corporations-and-Covid-19-Intellectual-property-rights-vs-human 11 September 2021.

[2] Share buybacks reduce the number of circulating shares, which increases the profit made on each share. Buybacks also increase top management income since it mostly consists of stock options. Between 2006 and 2015 the 18 largest pharmaceutical companies in the US distributed 99% of their profits to shareholders, half of them as buybacks. The issue of share buybacks and of the distribution of dividends in the US is examined in Éric Toussaint, “The mountain of corporate debt will be the seed of the next financial crisis,” published on 3 May 2019, https://www.cadtm.org/The-mountain-of-corporate-debt-will-be-the-seed-of-the-next-financial-crisis.

[3] The figures quoted by Rossman can be found in Lazonick et al. « US Pharma’s Financialized Business Model” Institute for New Economic Thinking, July 2017 https://www.ineteconomics.org/uploads/papers/WP_60-Lazonick-et-al-US-Pharma-Business-Model.pdf

[4] Miguel Urbán Crespo, Beatriz Ortiz Martínez, « Le fait que, pour la première fois, il existe un texte du Parlement européen demandant la suspension des brevets met la pression dans l’UE », https://www.cadtm.org/Le-fait-que-pour-la-premiere-fois-il-existe-un-texte-du-Parlement-europeen (in French and Spanish)

[5] Amnesty International, “Covid-19. Il est temps que les États qui bloquent la proposition de dérogation à l’Accord sur les ADPIC appuient la levée des restrictions”, publié le 1er octobre 2021, https://www.amnesty.org/fr/latest/news/2021/10/covid-19-time-for-countries-blocking-trips-waiver-to-support-lifting-of-restrictions-2/

[6] Our World in Data, Coronavirus (Covid-19) Vaccinations – Statistics and Research – https://ourworldindata.org/covid-vaccinations. The data collected on this website by the Univerity of Oxford team show that in some countries the rate of vaccination is below 2% in September 2021: 1.6% in Zambia, 1.6% in Niger, 1.5% in Somalia, 1.5% in Mali, 1.4 % in the Sudan, 1.4% in Cameroon, 1% in Yemen, 0.69% in Madagascar, 0.58% in Chad, 0.57% in Tanzania, 0.11% in the Democatic Republic of the Congo.

[7] https://www.amnesty.org/en/wp-content/uploads/2021/09/POL4046212021ENGLISH.pdf

[8] Amnesty International, “Covid-19: Big Pharma fuelling unprecedented human rights crisis”, published 22 September 2021, https://www.amnesty.org.uk/press-releases/covid-19-big-pharma-fuelling-unprecedented-human-rights-crisis-new-report. See note 6 for the full report.

[9] GAVI, Donor profiles, https://www.gavi.org/investing-gavi/funding/donor-profiles

[10] As this is being written a Food Systems Summit convened by the United Nations is just ending. The major agribusiness corporations invited themselves to it and played an important part, when in fact they are one of the causes of, and not a solution to, the worldwide food and environmental crises. A number of movements have pointed this out. See The Guardian, “‘Corporate colonization’: small producers boycott UN food summit,” https://www.theguardian.com/environment/2021/sep/23/small-producers-boycott-un-food-summit-corporate-interests. See also the news report by Democracynow.org from New York: https://www.democracynow.org/shows/2021/9/23. See also (in French) CCFD-Terre Solidaire, “Food system summit : alerte sur un sommet coopté par le secteur (…)” https://ccfd-terresolidaire.org/nos-publications/edm/2021/317-juin-2021/food-system-summit-7109

[11] See page 5 of the Amnesty International report https://www.amnesty.be/IMG/pdf/20210922_rapport_vaccins.pdf cited above.

Also https://www.politico.eu/article/coronavirus-vaccine-donations-europe-pledges-failure/.

[12] Ouest France, “Covax. Seulement 20 millions de doses déjà livrées par l’Union européenne, selon Clément Beaune” https://www.ouest-france.fr/sante/vaccin/covax-seulement-20-millions-de-doses-livrees-par-l-union-europeenne-selon-clement-beaune-0970704e-0fb1-11ec-ab09-00c403164e98 (French only)

[13] See page 5 of the Amnesty International report https://www.amnesty.be/IMG/pdf/20210922_rapport_vaccins.pdf cited above

[14] From the Manifesto “End the System of Private Patents!” https://www.cadtm.org/End-the-system-of-private-patents

[15] These comparisons are the responsibility of the author of this article. for the RDC https://www.financialafrik.com/2021/01/02/rdc-promulgation-de-la-loi-de-finances-gestion-2021/ , for the budget of the EU https://ec.europa.eu/info/strategy/eu-budget/annual-eu-budget/all-annual-budgets/2021_fr , for India’s health budget in 202–-2021 https://www.lesechos.fr/monde/asie-pacifique/linde-double-ses-depenses-de-sante-et-mise-sur-les-infrastructures-pour-relancer-leconomie-1286382

[16] Mathilde Damgé, “Covid-19 : comprendre le prix d’un vaccin, de la recherche au flacon,” Le Monde, published 09 June 2021 https://www.lemonde.fr/les-decodeurs/article/2021/06/09/covid-19-de-la-recherche-au-flacon-comprendre-le-prix-d-un-vaccin_6083481_4355770.html

[17] Rtbf and Agence Belga, “Coronavirus: Pfizer et Moderna augmentent le prix de leur vaccin pour l’Europe,” published 1 August 2021, https://www.rtbf.be/info/societe/detail_coronavirus-pfizer-et-moderna-augmentent-le-prix-de-leur-vaccin-pour-l-europe?id=10815946.

[18] The Guardian, Shamed and humiliated – the drugs firms back down , published on 19 Apr 2001, https://www.theguardian.com/uk/2001/apr/19/highereducation.world BBC News | AFRICA | SA victory in Aids drugs case, published on 19 April, 2001, http://news.bbc.co.uk/2/hi/africa/1285097.stm ,

Fred Eboko, “Le droit contre la morale ? L’accès aux médicaments contre le sida en Afrique,” Revue internationale des sciences sociales 2005/4 (n° 186), pages 789-798 https://www.cairn.info/revue-internationale-des-sciences-sociales-2005-4-page-789.htm

[Eric Toussaint is a historian and political scientist. He is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France. Courtesy: Committee for the Abolition of Illegitimate Debt (CADTM).]