A good week for….

…the UK economy as the Bank of England sees GDP rising in 2021 at a rate of 7.25% against its previous estimate of 5%. As a result, while leaving base rates at 0.1%, the Bank’s bond purchasing programme is beginning to be reined in, reducing the weekly purchases from £4.4bn to £3.3bn and, assuming a decent rate of economic progress is maintained, with the expectation that it will cease altogether by the end of the year. The Bank sees inflation hitting 2.3% (the target rate included in its mandate is to manage the UK economy with CPI at 2%) late in 2022 but expects the rate to fall to 1.9% in 2024. Further, the Chancellor has dropped hints that, such is the improvement in the economy since the March Budget, his suggestion to ‘harmonise’ (i.e. for some, potentially to double) UK capital gains tax rates with individuals’ marginal rates of income tax can be filed away, for use on another day if needs be.

A bad week for….

…global research-based pharmaceutical companies, as President Biden floats the suggestion to suspend patent protections on Covid vaccines to allow production centres in countries such as India and South Africa, already big producers of generic pharmaceuticals, to manufacture generic Covid vaccines at a fraction of the cost for both domestic consumption and export to the remainder of the developing world.


On the face of it, Biden’s is an entirely laudable sentiment, not only on humanitarian but pragmatic grounds: the faster the global population is inoculated, the sooner the Covid viral transmission rate is curbed and with it its ability to mutate. It becomes a virtuous circle, a universal healthcare solution which helps restore economic stability and social behaviour globally. Cynically, there is a strong element of political vaccine geo-diplomacy at work too: China and Russia are already streets ahead of the West supplying their own vaccines to developing  countries, notably those of strategic interest. In the geo-political arms race of exerting influence abroad, at least as far as vaccines are concerned, the West needs to catch up.


But what of the innovators and patent-holders of such vaccines, the ones whose intellectual property every efficacious compound is? Are they not potentially being robbed? Here the waters are murky in the case of the various Covid vaccines. Companies such as Pfizer are selling their Covid vaccine at agreed commercial prices; AstraZeneca is selling its initial tranches at cost, for zero profit. While some vaccines have been developed with private capital entirely at the expense of the companies concerned, others have had the benefit of ‘public’ money channelled via the WHO from its resources which in turn originate from those countries which fund the organisation, of which by far the biggest is the US government; “he who pays the piper calls the tune”, as the saying goes. US Democrats have long had Big Pharma firmly in their sights, believing these companies habitually hold the state to ransom with unfeasibly high prices for patented, branded drugs; the current administration’s views, laid out in Biden’s manifesto, continue a long history to curb the sector’s pricing practices going all the way back to when Hilary Clinton was her husband’s unofficial healthcare secretary two decades ago. But Biden taking it to its logical extension with the vaccine patent suspension breaks new ground, emitting seismic judders.


The argument is delicate. That the developing world needs urgent access to Covid vaccines is in no doubt, not only in its own interests, but everyone’s. Current supply is growing but still limited; freeing up generic production short-circuits the timetable by years. On the other hand, there would be no generic drugs without original innovation. We need a healthy, vibrant, innovative pharma sector to keep humanity going but it does not come cheap. 99% of pharmaceutical compounds never make it to full commercial production: they fail at some stage during the lengthy development and approval process, and the further along the path they are when they fail, the greater the sunk costs, almost on a logarithmic scale. The average development time from discovery of a compound to full commercial production of the finished product is 10 years (which makes the Covid vaccines highly unusual in being developed in months, though most are derivatives of well-established technologies). When a pharma company does develop a viable, innovative prospect, the pressure is on to be a money-spinner (a ‘block-buster’ in the jargon), not only to cover its own costs but all the costs of the failures, and to provide the cash-flow for developing its successors (in among the 99% which will fail etc). The only protection the company has is the 20-year patent life; the patent clock does not begin ticking when the drug goes on sale, but much earlier when the compound is recognised as having true efficacious potential (i.e. the company is still spending money on development and trials during the patent term, only generating positive cash returns for what remains of the patent protection period after regulatory licences have been issued).


Biden describes the proposal as ‘temporary’ but were it to succeed, the risk is it sets a precedent. If the legal goalposts can be moved arbitrarily for Covid vaccines (155m cases, 3.24m deaths worldwide so far), why not for malaria (229m cases in 2019, 400,000 deaths), or cancer (2020, 19m new cases, 10m deaths)? Being the domiciles of several major primary research pharmaceutical companies including AstraZeneca, GlaxoSmithKline, Bayer, Sanofi and others, the UK and the EU’s immediate retort to Biden is strongly negative and it would take international agreement to suspend patent rights, however temporary the measure. Much the biggest purchasers of pharmaceuticals are national governments; the same governments’ health departments also grant pharmaceutical licences. As we have discussed before, the procurement of vaccines in the context of Covid is not just a healthcare issue, it is deeply political (as the CEO of the unfortunate AstraZeneca knows only too well!). The managers of any 21st Century global pharmaceutical company need the skill to dance on a pin.

Vox Pop

As we go to press, the English local council election results are still incomplete, as are the counts for the Scottish and Welsh assemblies. But the by-election result for the Westminster seat of Hartlepool, a long-time proud Labour stronghold, unbroken since 1964 and once the preserve of Peter Mandelson, produced a resounding Tory win. Clear to anyone watching Channel 4’s Gogglebox, the result was done and dusted as far back as last Friday, a home-run for Boris: with the exception of the Worthington family of Manchester, the other largely red-wall resident, professional television viewers reviewing a BBC News clip running the story on Tory ‘sleaze’, the impugning of John Lewis and the cost of No 10’s wallpaper, simply could not see what all the fuss was about. It needed no great leap of imagination to conclude that a week later, voters in Hartlepool might agree.


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