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.