Dismantling pharmaceutical monopolies begins with repealing his 1987 Executive Order giveaway...
By Ernest A. Canning on 9/14/2022, 11:05am PT  

We should be both relieved and outraged!

Relieved that, earlier this month, the Center for Disease Control (CDC) and Food & Drug Administration (FDA) approved a new round of booster shots specifically re-designed to address new variants of the deadly COVID virus.

Outraged because, despite the expenditure of tens of billions of U.S. taxpayer dollars on research and development (R&D), the pharmaceutical industry's refusal to waive its "gifted" patent rights prevented a global rollout of the COVID vaccines. In turn, that refusal resulted in the need for the new booster shots.

Outraged because the industry's refusal to waive their patent rights has produced "excess mortality" with COVID that, as of the beginning of this month, has killed at least 6.5 million people worldwide, with no end in sight.

Outraged because this will, in all likelihood, not be the last newly reconstituted booster shot needed. It is the considered opinion of two thirds of the world's epidemiologists that the failure to provide global vaccinations will give rise to mutations that "could render current COVID vaccines ineffective."

And, yes, the patent rights were, indeed, a gift --- from the United States to the Pharmaceutical Industry...

Reagan's giveaway

In 1987, President Ronald Reagan issued an Executive Order that amounted to nothing less than a huge giveaway to Big Pharma, to wit: a grant of patent rights over medications and vaccines that previously became the property of the federal government whenever U.S. taxpayer dollars were utilized for their R&D.

Instead of gratitude for the billions in taxpayer largess granted to commercial pharmaceutical R&D every year, the industry went on to lock-in its "gifted" Intellectual Property (IP) rights via the World Trade Organization's TRIPS Agreement, requiring unanimous consent of every member State of the WTO to approve even a temporary waiver of the industry's IP rights.

With massive R&D expenditures from U.S. taxpayers and a formal U.S. declaration by the Biden Administration for waiving patent rights during this "global health crisis, and the extraordinary circumstances of the COVID-19 pandemic," the WTO hasn't budged. According to Democracy Now!, the WTO has left "in place intellectual property barriers that will continue to limit global access to COVID-19 vaccines."

That has worked out very well for Big Pharma's bottom line.

In 2021, Pfizer, for example, doubled its annual profits to $22 billion. That same year Pfizer CEO Albert Bourla received $24.5 million in total compensation. Pfizer, which also now offers a COVID anti-viral pill, Paxlovid, "forecast a bumper year in 2022.

But humanity's need for a healthy planet took a big hit in the bargain.

"While 80 percent of people living in the richest countries on Earth have received at least one dose of a COVID vaccine, the corresponding figure for those in the poorest countries is just 18 percent," according to Scientific American in July. This hasn't just placed the citizens of the developing world at risk. All of humanity remains at risk thanks to the continuing likelihood that new variants will render the new round of vaccines obsolete.

While it won't be easy, especially given the barriers erected by global trade agreements, the U.S. government should take a hard look both at how we arrived at this unhappy circumstance and at the means by which it could begin dismantling our rapacious pharmaceutical monopolies.

Bayh-Dole

In December 1980, Congress passed and President Jimmy Carter signed the Bayh-Dole Act into law. It looked like a sensible change to U.S. patent law.

"Prior to the Bayh-Dole Act in 1980", according to the Cornell Legal Institute, "if someone created an invention with the help of federal funding, then the patent for that invention would be assigned to the federal government." Under the pre-Bayh-Dole system, less than 5% of some 28,000 patents the government had accumulated had been licensed for commercial use.

In order to stimulate "the transfer of technology from the lab to the market", Drexel University's Office of Research & Innovation observed, Bayh-Dole allowed small businesses, nonprofits and Universities "to retain ownership of any inventions created as a result of federal funding, unless the funding agency informs the [small business, nonprofit or university] up front that the agency will retain title to inventions derived from the funded projects because of specifically identified "exceptional circumstances". Bayh-Dole, Drexel added, also contained "march-in" rights that permit the federal government "to take control of the invention...to alleviate health and safety concerns."

The patent rights of pharmaceutical giants that accept federal R&D monies were not created by Congress. They arose via an executive fiat, to wit: Reagan's 1987 Executive Order. That EO did not include "march-in" rights, as per Bayh-Dole, that would permit the federal government to take control of a new medication or vaccine created via federally-funded R&D in order to protect public health and safety.

Corporate welfare

"We who live in free market societies believe that growth, prosperity and ultimately human fulfillment, are created from the bottom up, not the government down" - Ronald Reagan
"We all too often have socialism for the rich and rugged free market capitalism for the poor" - Dr. Martin Luther King, Jr.

It's one thing to assign patent rights to a small business that relied upon federally funded R&D; quite another to assign patent rights to a company like Pfizer, net worth $276.52 billion, particularly after they benefited from unprecedented U.S. Government grants of tens of billions of dollars to combat the deadly COVID pandemic. Where a small business or even a university may be hard pressed to carry out R&D without federal funding, giant pharmaceutical companies feeding at the federal R&D trough, now spend more on marketing their patented products than they do on R&D.

Reagan's hypocrisy is underscored by his 1987 Executive Order giveaway on the patent rights for medications and vaccines. It serves as a classic example of "socialism for the rich" --- a "gift" that so enormous its difficult to measure.

On the one hand, we can look at the sums of federal taxpayer monies that have been invested in pharmaceutical R&D. "Between 2008 and 2014 the U.S. government funneled $28 billion/year into basic research carried out by the private pharmaceutical industry," according to the General Accounting Office (GAO). The U.S. Biomedical Research and Development Authority (BARDA), alone, spent $19.3 billion on COVID-19 vaccine development, according to the U.S. Congressional Budget Office (CBO). The federal government paid an additional $2.7 billion to private pharmaceutical companies to cover the cost of human trials for the COVID medications, and the Congressional Research Service reported that an additional $50 billion was made available by the Public Health and Social Services Emergency Fund for "a broad set of medical countermeasures and surge capacity purposes."

This year, the Biden administration, as per the Brooking Instiution, "formally requested an additional $22.5 billion in COVID-19 response funding, most of which would have supported additional investments in the development, manufacturing, and procurement of COVID-19 vaccines and therapeutics."

On the other hand, we can derive some notion of the value of patents that otherwise would have belonged to the U.S. government by the industry's estimate that the expiration of existing patents (often referred to as "patent cliffs") between now and 2028 has put $180 billion in pharmaceutical industry revenues at risk.

Reform

Despite the fact that patent rights were gifted to the pharmaceutical industry via an executive fiat, President Joe Biden cannot secure an immediate waiver of those IP rights via an Executive Order repealing the 1987 EO. Pfizer, for example, has a vested IP right in its mRNA COVID vaccines that is protected by the 5th Amendment to the U.S. Constitution and by TRIPS. Indeed, the industry could argue that the patent rights for any federally-funded medication and vaccine projects already in their developmental pipelines could not be the subject of a repeal because they had accepted federal monies in reliance upon the patent rights created by the 1987 EO.

Biden can do more, however, than simply announce his support for a COVID vaccine IP waiver. He can invite the CEOs of Pfizer and Moderna to the White House. He can inform them that, if they don't voluntarily waive their COVID vaccine IP rights, he will give serious consideration to a repeal of the 1987 EO as to all future pharmaceutical projects.

Regardless of the outcome of that negotiation, Congress needs to step in. Just as Bayh-Dole included "march-in" rights, allowing the U.S. government to assert a right to a federally funded university invention where public health and safety is at issue, at a minimum, the same rule should apply to pharmaceutical patents for vaccines designed to fend off a global pandemic where those patents are the product of federally-funded R&D.

Irrespective of the scope of existing patent rights under TRIPS, surely the U.S. retains the authority to define the scope of future pharmaceutical patent rights within the United States. Indeed, the inclusion of "march-in" rights for pharmaceuticals created by federally funded R&D would be a conservative approach --- one that falls well short of California Governor Gavin Newsom's recent initial step towards socialized medications.

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Ernest A. Canning is a retired attorney, author, and Vietnam Veteran (4th Infantry, Central Highlands 1968). He previously served as a Senior Advisor to Veterans For Bernie. Canning has been a member of the California state bar since 1977. In addition to a juris doctor, he has received both undergraduate and graduate degrees in political science. Follow him on twitter: @cann4ing