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Kristen Osenga column: With biomedical research, taxpayers are getting a great deal
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Biomedical research

Kristen Osenga column: With biomedical research, taxpayers are getting a great deal

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Gilead Sciences’ novel drug remdesivir has shown immense promise for treating the coronavirus. The drug still requires more study, but the prospect of an effective treatment for COVID-19 should be great news for everyone. Yet every time a company develops a promising drug, some policymakers call for the government to take control of the compound in question.

With remdesivir, critics argue that the government helped pay for some of its development so “taxpayers shouldn’t pay twice” — once to help develop the drug and again to buy it when it comes to market.

These critics mislead the public, specifically regarding remdesivir and, more generally and dangerously, regarding government support of scientific research.

It is true that government researchers helped identify remdesivir among a batch of potential antiviral compounds that Gilead had invented and patented. But as a senior U.S. Army lawyer recently explained, “testing a compound” doesn’t make the government “a joint inventor of the compound.”

This distinction is lost on those who argue for the government to assert ownership rights over pharmaceuticals. Institutions like the National Institutes of Health (NIH) provide valuable support to private pharmaceutical researchers. That work is important, but it is not the same as inventing and commercializing novel compounds.

The organization that does the most legwork to invent a new drug gets the patent. While the public sector contributed directly or indirectly to nearly half of new drugs approved by the Food and Drug Administration from 1988 to 2005, fewer than 10% were patented by a government entity, per a 2011 Health Affairs study.

Tellingly, of all the drugs in that study, the ones with public-sector patents accounted for just 2.7% of sales. That indicates the government was most involved in the drugs with the lowest commercial potential.

As it should, the government steps in to fill gaps and to play the biggest role when the market for a drug is small and companies might not have an incentive to innovate. Otherwise, the government supports basic research and leaves the heavy commercial lifting to the private sector.

Still, some have argued that any amount of public funding for a drug justifies the government stepping in — either to set an “equitable” price or take ownership outright. But that’s like arguing a novel should belong to the government and be free to the public because a public school teacher taught the author how to write.

The government, and therefore taxpayers, fund all sorts of activities for the public good. For example, every day Americans drive to work and ship their products on roads built with public funds.

Our government built those roads for our collective benefit — but not so that it can lay claim to the specific fruits of our labor. Instead, it takes its “share” by taxing our income and our profits.

Similarly, the federal government supports basic research at universities and nonprofit labs across the country. When this work yields a critical insight — one that’s novel, promising and with a potential commercial application — the scientists involved typically seek a patent to protect their discovery and private capital to fund serious, applied research and development (R&D).

The intellectual property protection provides the incentive that drives investment in treatments, while the time limitation ensures that these inventions ultimately fall into the public domain.

When new treatments are successful, drug companies make money because we, through insurance, buy those drugs to keep us, or make us, healthy. The government then taxes those profits and invests some of that tax money into new research.

Far from “paying twice,” we are getting a great bargain from government spending on basic research. The Milken Institute estimates that the long-term boost to total economic output could be as high as $3.20 for every dollar the NIH invests in biopharmaceutical research.

Even conservative estimates peg the value of the NIH at $1.70 of economic activity per dollar spent. If only all government spending were so productive.

The United States accounts for nearly 60% of worldwide pharmaceutical R&D spending, the vast majority of which comes from the private sector. Government spending on basic research is vital and valuable.

But it works because we recognize that the private sector is best equipped to develop treatments and cures, and bring them to market.

We don’t yet know how important remdesivir will be in the fight against the coronavirus. Hopefully, for all our sakes, one or more of the hundreds of novel drugs currently in development or trials will prove hugely effective. If and when they do, we’d do well to remember the role that private enterprise played in getting us there.

Kristen Osenga is the Austin E. Owen Research Scholar and Professor of Law at the University of Richmond School of Law. Contact her at: kosenga@richmond.edu

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