Big Pharma deserves its reward for coming up with Covid-19 vaccines

Calls to restrain drug companies' profits from making Covid-19 vaccines are misplaced and would do more harm than good, says Matthew Lynn

It turns out that Covid-19 vaccines are like the old joke about buses. You wait for ages and then three turn up at the same time. Over the last month, we have seen stunning results from Pfizer, Moderna and Oxford-AstraZeneca. Each vaccine is slightly different, in terms of effectiveness, and how quickly it can be rolled out, but there is now no question that we are close to a mass vaccination programme that should bring the virus under control. Six months ago plenty of experts were arguing it would take five years or more to get a working shot. In fact, it has been done in less than a year. 

Don’t throw sand in the wheels

But there’s a problem. Now that we are close to a vaccine, the arguments are starting about who gets it, when, and on what terms. There are complaints about the potential for the drugs companies to make excess profits. And countries such as South Africa and India are calling on the World Health Organisation to suspend patent protection on the vaccines so that they can be manufactured by anyone at cost. 

It is easy to understand the arguments for that. A Covid-19 vaccine is needed around the world, and some countries might struggle to afford it. It doesn’t make any sense just to vaccinate the richer countries. If the virus is still rampant around the world it will just come back in more virulent forms. The trouble is, suspending patents, and stopping drug companies from making money from the vaccine, would be a disaster, not just for the shareholders in those businesses, but for the whole world.  

Why? Getting a vaccine in less than a year is a huge achievement, and one that has cost vast sums of money, much of it privately funded. If the only reward for that is to have the patent rights taken away, then will the companies make the same kind of effort the next time there is a global epidemic? 

Second, some exciting new technologies are emerging. The genetics-based vaccines that seem to be working against Covid-19 can not only be developed far more quickly than traditional shots but may also work against many other conditions as well. We already have vaccines that can work against some form of cancers. Over the next decade the technology that has advanced at rapid speed in this crisis may well turn out to be just as good at dealing with other forms of cancer, dementia, Alzheimer’s, and a whole range of hard-to-treat diseases. But if we don’t allow companies patent protection on the technologies they are developing, then that is far less likely to happen – and we will all be worse off for that. 

Whatever the profits, it’s a bargain

Finally, it is immoral. Private companies have done the work on a vaccine, they have risked their own money, and they have devoted time and resources to solving a global crisis. They deserve to be rewarded for that. So do their shareholders. If we start taking one form of property away from companies, then where do we stop? In truth, we should probably reward vaccine makers more than we are right now – for example by extending the patent protection from 20 to 30 years. Given the vast cost of the epidemic in terms of locked-down economies, closed businesses and schools, lost jobs, and broken families, if anything we are paying too little for the science that will get us out of the mess, not too much. 

There are far better ways of dealing with the issue of global access. The sums of money are not huge, especially when set against the scale of the challenge. Take a relatively poor country such as South Africa, with one of the worst outbreaks on the continent. Even with Moderna’s vaccine, at £30 a shot, the most expensive so far, it would only cost £1.5bn to vaccinate the entire country. If the government can’t raise that, then aid budgets, and charities, could probably step in and fill the gap. If the poorest 20% of the global population needs help paying for the vaccine, then the G20, representing the richest countries in the world, could easily step in with an emergency funding programme. That way we still get the vaccine out around the world, and we also properly reward the companies that made it. 

Most Popular

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism
Economy

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism

Russell Napier talks to Merryn about financial repression – or "stealing money from old people slowly" – plus how Asian capitalism is taking over in t…
16 Jul 2021
Three companies that are reaping the rewards of investment
Share tips

Three companies that are reaping the rewards of investment

Professional investor Edward Wielechowski of the Odyssean Investment Trust highlights three stocks that have have invested well – and are able to deal…
19 Jul 2021
The future belongs to emerging markets – three EM stocks to buy now
Share tips

The future belongs to emerging markets – three EM stocks to buy now

Professional investor Carlos von Hardenberg of Mobius Capital Partners picks three of his favourite emerging-market stocks.
5 Jul 2021