Would Anyone Be Allowed To Keep The Profit From A Coronavirus Cure?

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Imagine that someone walked in with a cure for Covid-19 right now. And then said they were charging for it.

Do we actually think that they’d be allowed to keep such profits? Sure, this is from that home of economic inanity in Ely but still:

When big business expects the government to carry its risk it also has to pay its way. And that means excess profits taxes are now very firmly on the agenda.

I think you can guess one aspect of the recommendations in the Tax After Coronavirus (TACs) section on corporation tax as a result.

Think of all those people who froth at the mouth over Big Pharma being allowed to make money out of illness:

My reading of the current febrile state of play is that no Covid-19 treatment will be viable at anything very much above manufacturing cost. The political head of steam about drug pricing is already at a pretty high pressure. With economies closing down left and right, GDP likely to fall 30% and all that I just can’t see that the above arguments about development costs are going to work at all.

So, assume that this new drug works. In fact, assume that any new drug or treatment does. I have a very strong feeling that the people who develop it aren’t going to be allowed to make much money out of it.

One of two things is going to happen. The developers themselves will, noting the politics of the issue, agree to sell it at around cost, or to licence it freely and for a low royalty. On the grounds that if they don’t then compulsory licences, likely on worse terms, will be imposed upon them.

Or, if they don’t do that then compulsory licences will be imposed upon them upon those bad terms. Yes, I know, this leaves us back with the public goods problem of how to entice people into doing drug development but that’s often enough the way politics works.

It’s ridiculous, of course it is, but I do think something like that would happen.

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Phoenix44
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Phoenix44

Everything in the quote is wrong. Big business doesn’t expect government to bear the risk – it’s only when the government takes actions that result in big losses that shareholders expect government to do something. And what’s an “excess profit”? It doesn’t exist, unless the state hasn’t done its job and has allowed a monopoly.

What is about corporation tax that turns so many Lefties into imbeciles?

TD
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TD

I think that in their view excess profit is synonymous with profit. I’m surprised they’re not advocating punishment for anyone who develops a cure in hopes of being paid.

Spike
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Spike

The “Squad” in the US Congress already has bloviation on the record that any Covid cure must be placed at the service of “people, not profit.” And no legislator is willing to stand in the way of distribution of this common-wealth on the flimsy excuse of defending the inventor’s rights.

Leo Savantt
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Leo Savantt

Any individual or company that develops an effective vaccine, by giving it away without profit, will earn enormous kudos and publicity which in itself is a reward.

jgh
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jgh

I can’t pay my mortgage with kudos!

Leo Savantt
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Leo Savantt

You can’t develop a vaccine either.

Bloke in North Dorset
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Bloke in North Dorset

With all the sharing of data and research, a large amount being paid for and facilitated by tax payers around the world, it’s going to be hard for one individual or organisation to claim to be the inventor.

Obvious an existing drug is slightly different, but much as I think they should keep their property rights it’s hard to see them being allowed to.

Boganboy
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Boganboy

This is of course, the standard Neglected Tropical Disease problem. Since the poor old blacks and browns would have to pay for the NTD cure instead of those wicked whites being righteously robbed, no one is prepared to pay for the development costs.

Indeed since the NTD cure would have to be tested on blacks, no one is prepared to have Boko Haram going for their throat over the matter.

dodgy geezer
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dodgy geezer

Interestingly, it’s not only personal greed that halts such philanthropic endeavours. Vitamin A deficiency (VAD) is common in the Third World, a deficiency which each year is estimated to kill 670,000 children under the age of 5 and cause an additional 500,000 cases of irreversible childhood blindness.

So, a good example of a Neglected Tropical Disease? Not so – the West worked on the issue, and have engineered a variant of rice specifically to address this problem. It has been offered for free to tropical farmers.

However, activists protesting against genetically-modified foodstuffs have so far managed to suppress its use…..

dodgy geezer
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dodgy geezer

Purely as an exercise, if someone on this blog had just developed, and had unequivocal rights to, a certain cure for Covid-19, what actions should they take to obtain the largest profit?

As an aside, I offer the example of Bill Gates, who managed to obtain a practical monopoly on all the world’s computers with very little government kick-back….

BlokeInNormandyFromTejas
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BlokeInNormandyFromTejas

But Bill got rich on a new thing that the big computer companies dismissed as essentially irrelevant and a side issue.

And he stole the guts of what he was selling.

Not clear how the analogy works with medicine…

dodgy geezer
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dodgy geezer

How Gates obtained control of the basic DOS operating system is irrelevant to this example. The point is that gaining control of it enabled him to effectively monopolise the development of Personal Computing (OK, there were and still are, a few other alternative O/Ss). Computing can now be seen as essential to Western life. In that way it is analogous to a basic foodstuff, or a critical medicine. My point was that, while monopolies are normally seen as dangerous, and are broken up by law, Gates managed to retain his powerful position by a mixture of questionable business practices, the… Read more »

Spike
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Spike

Gates made the non-command-line computer interface affordable and rose to dominance, like Walmart did, on the basis that people wanted the product. Yes, he promoted it. Despite alleged manipulation of Washington, Washington DID try to break up Microsoft, crucially defining its market to exclude UNIX machines. This was heady government activism in the complete absence of a real problem.

So yes, the guy who cures Covid should have a Man in Washington. Even Rearden Metal had one.

BlokeInNormandyFromTejas
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BlokeInNormandyFromTejas

dg

I suppose I was unclear. Gates got rich in essence by being in a good place when a giant new consumer market sprang into existence (on the back of real technology – scalable CMOS).

I just don’t see how anything similar is available for medicine… The herbs’n’supplements biz already exists.

I’d hate to think of folk selling ‘grow your own virus (or bacteria)’ kits…

Spike
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Spike

Revolutionary, disruptive innovation is not “available for medicine”? How about therapies that withdraw blood from the patient, re-engineer the cells, and reinject it? How about a viral therapy that pisses everyone off by proving to be an actual cure?

Grow your own pathogens, perhaps not. But do-at-home tests/procedures that used to require professionals is as certain as was ruining the downtown business that used to develop your film.

BlokeInNormandyFromTejas
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BlokeInNormandyFromTejas

Spike

Yep. Consumer biz would be vital.

But 6502 based microcomputers didn’t offer major threats to individual or public health…

To your specific point:

That’s not a method of getting rich off the cure to Covid19.

It’s the way things will be: even for boring quotidian things, your phone/tablet/computer runs software which uses whatever sensors you have to do diagnosis and write prescriptions/hook up with specialists/etc. It’s clear how it would spread. It’s clear that that’s the future.

The route may be a teensy bit encumbered by a bunch o folk, tho…

Esteban
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Esteban

My guess is that a company with a cure could charge enough to make wonderful profits by normal standards, but well below the maximum profit it would seek if this were a product exempt from “moral” or “social justice” concerns. It would benefit from positive press, saving lives and forgoing excess profits, etc. Some would scream that any profit is immoral, etc. but I think most of the public would see it as they’re saving a lot of lives and only taking a small part of the profits they could.

Spike
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Spike

Remdesivir is a promising treatment for COVID, mentioned by Trump and fast-tracked by the FDA. Gilead Sciences feels the need to donate the first 1.5 million doses. Its stock perked up when the rumors first spread, but has given a lot of that back. Still to be seen is what the regular price for the product will be (list price and effective price after plan discounts) and whether Gilead will face political heat for it. It will be an expensive medicine (as it should be, to recoup the costs of development and approvals).