PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

No Intellectual Property (IP) Protections, No New Vaccines

By at 1 April, 2021, 8:01 am

by Raymond J. Keating-

Well, that didn’t take very long. Various politicians and special interests are back to attacking the pharmaceutical industry.

Let’s quickly review the facts:

First, a deadly, global pandemic breaks out.

Second, as COVID-19 hits, spreads, and takes hundreds of thousands of lives in the U.S., far too many politicians stumble, bumble and play politics.

Third, the pharmaceutical industry gets to work, and vaccines are created – thanks to, for example, Johnson & Johnson, Moderna, Pfizer, BioNTech, AstraZeneca, and Novavax – and start to get distributed in less than a year.

That’s almost miraculous. For good measure, other pharmaceutical companies are partnering to help manufacture the vaccines. And, as a reminder, the dominant share of these companies are small, entrepreneurial firms.  Did you know, for example, that Moderna was merely a startup only 10 years ago?

According to data from the U.S. Census Bureau (2017 latest data), the pharmaceutical manufacturing industry overwhelmingly is about smaller businesses:

Size of Firm by Number of Employees:                           Percent of Employer Firms in Pharmaceutical Sector:

Fewer than 10 employees

      46.1%

Fewer than 20 employees

      58.0%

Fewer than 100 employees

      78.7%

Fewer than 500 employees

      90.4%

Policies need to be encouraging risk taking and innovation through pro-investment policies, reduced bureaucracy and red tape, and protecting the IP rights of these promising startups. Life-saving vaccines and innovative drugs and treatments depend on this favorable policy climate.

Unfortunately, and prior to this pandemic, companies that manufacture prescription drugs, medicines and vaccines that save and improve lives ranked as a favorite punching bag for an assortment of politicians and groups.

Again, even though these companies face enormous uncertainty, risks and costs in researching and developing treatments, a combination of economic ignorance, anti-private-business bias, and cynical political pandering, led to pharmaceutical and medicine manufacturers being targeted in a variety of ways – from threatening to impose price controls to diminishing or stripping away intellectual property protections.

But now, even as companies work to produce vaccines for the U.S. and the world (and some in the political world actually are trying to work constructively to boost that process) there is talk and action underway to weaken intellectual property protections (i.e., patents). These individuals push the idea that rolling back property rights will allow others to produce these vaccines for global distribution.

There are, of course, numerous problems with this.

First, manufacturing these vaccines is not the equivalent of just following a simple process – a recipe – to produce a vaccine. Experts note that this is about complex biological products, with complex and precise processes and quality controls. Government deciding to rollback property rights will not magically translate into others quickly ramping up production.

Second, given that Johnson & Johnson, Moderna, Pfizer and BioNTech, for example, are working and partnering with other firms to accelerate production and distribution indicates that these calls for rolling back intellectual property protections is more about advancing a political cause rather than constructively dealing with the issues at hand.

Third, politicians and activists attacking property rights illustrates a gross and dangerous ignorance of how innovation actually occurs. Intellectual property protections incentivize the enormous investments needed to innovate, which lead to new medicines and vaccines, including providing an invaluable foundation upon which the COVID-19 vaccines have been built.

Undermining property rights means reducing potential profits, reining in innovation, and reducing new and improved treatments for existing ailments, as well as future ills and pandemics.

Finally, rolling back intellectual property protections also means diminishing entrepreneurship in pharmaceutical and medicine manufacturing – again, given the enormous uncertainties, risks and costs.

U.S. Sen. Bernie Sanders (I-Vt.) is a self-proclaimed socialist, so it’s not all that surprising that he recently declared, “Huge, multibillion-dollar pharmaceutical companies continue to prioritize profits by protecting their monopolies.”

Sanders not only fails to understand that today’s large pharmaceutical companies were once entrepreneurial startups, but he ignores the realities of the current industry.

As we proceed with producing and distributing COVID-19 vaccines, this is a time to appreciate the incredible investments, work and innovations achieved by pharmaceutical firms. It’s also a time to recognize how vital this industry is to all human beings now and into the future, and to be thinking about how to create tax, regulatory, trade and private property rights policy regimes that encourage, rather than undermine, entrepreneurship and investment.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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