"The Covid 19 crisis is a perfect test of whether a more public health approach to innovation and production will prevail in the years ahead. Although recent vaccine news has raised hopes, it has also exposed the broken business model of the pharmaceutical industry and cast doubt on the prospects of getting a vaccine to people..."
Corona vaccines - nothing would work without public funding
The broken business model of the pharmaceutical industry
By Björn Radke
[This article published on Feb 22, 2021 is translated from the German on the Internet, Sozialismus: Das kaputte Geschäftsmodell der pharmazeutischen Industrie.]
With the approval of vaccines against infection with the Corona virus, the fight against the pandemic has entered a new stage. Vaccination against the Sars-CoV-2 coronavirus has been underway in many countries since late 2020. Never before have vaccines been brought to licensure as quickly as in this pandemic.
It costs a lot of money to find vaccine candidates, get the products through clinical trials, produce them and ship them out. The U.S. and the European Union have provided massive public investment for research and development in recent years. More recently, BioNTech received €371 million from the German government and Moderna received million from the Coalition for Epidemic Preparedness Innovations and more than billion from the U.S. Biomedical Advanced Research and Development Authority and the U.S. Defense Advanced Research Projects Agency. There was over a billion pounds in public funding for the vaccine from AstraZeneca and Oxford University.
Nevertheless, there were massive disputes about the vaccine's purchase policy and the pricing policy of the pharmaceutical subcontractors. The EU Commission had to take a lot of criticism for its purchasing policy for the vaccines, especially that it had spent far too long haggling over the price in its negotiations instead of paying what the vaccine manufacturers had demanded. Too much time had passed over this, which was then lacking for a speedy vaccination. This criticism is not very convincing, because it does not require large imagination to imagine the indignant outcries of the same critics, if the European Union commission would have followed actually the price conceptions of Pfizer/Biontech, which became last as completely excessive admits.
As early as January, the EPP's health policy spokesman, CDU politician Peter Liese, rejected the criticism: "It may well be that there was a possibility of getting more vaccine, but anyone who criticizes now should ask themselves whether they knew a few weeks ago what the situation is now." BioNTech and Moderna's vaccines are the best, he said, but that has only been known for a few weeks. "In the next two or three months, no country in the world will have enough vaccine to make a real difference in the fight against the pandemic," Liese continued. His rebuttal now, nearly three months later, unfortunately finds itself confirmed.
According to research by the Süddeutsche Zeitung with WDR and NDR, the EU Commission had apparently purchased the vaccine from the pharmaceutical companies BioNTech and Pfizer in line with the market after all. In June of last year, these two companies had still demanded a proud 54.08 euros for each vaccine dose for the purchase of 500 million doses. The Handelsblatt reports, "BioNTech company circles report that the amount of 54.08 euros was only a kind of initial rough calculation. This rough calculation had been mentioned when it was still completely uncertain under which conditions production could be set up and the precursors procured." In total, Pfizer/BioNTech wanted 27 billion euros for so much vaccine that a good half of the EU population could be vaccinated with it. The price, Pfizer/BioNTech assured, already included "the highest percentage discount" offered to any industrialized country in the world.
Subsequently, the proposed price of to was on the table at the EU Commission on July 10. Pfizer had made the deal with the U.S. on July 22 at .50 per dose. In the tough negotiations with the EU thereafter, liability issues in particular were also at stake. This delayed the negotiations considerably, as insiders report. It was not until November that the EU Commission reached a commercial agreement with the two pharmaceutical companies. At the end of the negotiations, however, the EU Commission paid only 15.50 euros per vaccine dose.
Clemens Martin Auer, co-chairman of the steering committee in which the 27 member states control and monitor the EU Commission's joint Corona vaccine procurement, also rejects the criticism, according to Süddeutsche Zeitung: "We started negotiating with BioNTech, and at some point the Pfizer company joined in, and then all of a sudden American lawyers were sitting at the table. That doesn't make it any easier. But I don't know if all the critics would really have been so happy today if we had given in to the American demands. Which, by the way, we shouldn't have done at all, because we can't override European product liability law with civil law supply contracts. ... Even if we had paid the manufacturers four times as much, or were paying them now, we would not have higher production capacities at the moment."
BioNTech CEO Ugur Sahin gives a different account of the course of the negotiations: his pharmaceutical company, together with its U.S. partner Pfizer, had offered its own vaccine last summer at a price of between 30 and 15 euros. The price model was calculated in July for all industrialized countries with correspondingly large order volumes.
"On July 22, we signed the U.S. contract based on the new parameters, from which the .50 was apparent. This pricing model was then received by all developed countries ... We had initially only produced small quantities of doses ourselves for our clinical trials in 2019 and 2020," the vaccine developer said. For the first 2,000 doses, he said, we had costs of 1.5 million euros.
It is not only the high price that Pfizer/BioNTech initially demanded from the EU that is astonishing, but also the claim in the offer to the EU that they had "completely financed" the development of the vaccine themselves. The fact is that the German company BioNTech has been financially supported by the university in recent years since it was spun off. The company points out that it received about 50 million euros in funding from the cluster initiative and EU programs during the first few years after its founding. Then, in the fall of 2019, the Bill and Melinda Gates Foundation had invested million in the company, and by the summer of 2020, it had received another €375 million from the German Federal Ministry of Education and Research for mRNA-based vaccine development.
Public funding for private gain?
BioNTech exemplifies vaccine development with massive support from public funding. In an essay in the medical journal The Lancet, the funding for the vaccines is named as follows: According to the paper, Sanofi/Glaxo-Smith-Kline and Novavax each received .1 billion, Astra Zeneca/University of Oxford received .7 billion, Johnson&Johnson received .5 billion and Moderna received 7 million.
Billions of dollars in public funds have been committed to what was ultimately the successful and gratifying development of vaccines. However, this mix of public resources and competitive pricing policies shows the absurdity of the pharmaceutical industry's business model.
In a commentary by Barbara Gillmann in the Handelsblatt of February 20, 2021, the business model is rehashed like a mantra of neoliberalism: "Those who now want to immediately put the few projects that have landed a great success with state funding back on the state line have not understood the principle: Support for startups is supposed to help them get over their teething problems - until they make it on their own. When the company is successful, the state is no longer needed and must withdraw ... So research funding must not go hand in hand with influence on corporate policy - as tempting as that would be, especially in such crisis situations as the pandemic. Of course, this also applies to price negotiations: If BioNTech did indeed initially charge more than three times as much for the vaccine in negotiations with the EU than it is now getting, then that's perfectly fine. That's called a market economy." In many countries, however, the prevailing view is that the state must be pushed back from the economic sector because it inhibits free enterprise and the dynamics of capital accumulation. Only free enterprise creates innovation and growth.
The current case of the development of vaccines by the pharmaceutical industry illustrates the dubiousness of this business model. If technological advances are to translate into improved health for all, collaboratively developed innovations should be regulated in the public interest and not in favor of private profit. This is especially true when it comes to the development, production and distribution of a vaccine in the context of a pandemic. No country can handle this crisis on its own. Therefore, vaccines should not be protected by patents, but rather free availability should be the focus.
The pricing and business policies of the pharmaceutical companies unmask the development logic of a larger part of economic development in the current phase of capitalism. It is the massive public investment of the state in innovation that allows new products and new markets to be developed, thus decisively driving economic growth.
Mariana Mazzucato, professor of science and technology policy, has shown in several studies the outstanding importance of an active and investing state for innovation and growth. She uses the example of Apple's corporate success and the renewable energy industry to vividly document how state investment can ensure the development of entirely new markets. Venture capitalists and companies come off badly in her research. In the author's opinion, they first profit from the state's investments and then do everything they can to avoid paying taxes. Her plea: Since companies depend on a functioning and active state for new markets and growth to flourish, they should not only pocket profits but also share the costs (see also her 2013 book "The Capital of the State - Another History of Innovation and Growth").
And because the race to develop vaccines revolves mainly around Western markets, some vaccine candidates are unlikely to be useful outside the developed-country context. For low- and middle-income countries in particular, distributing these vaccines will present costly and complex logistical challenges. In contrast, vaccines that are easier to manage are denied efficacy and tolerability from other countries such as Russia and China. The Russian vaccine SputnikV has now been sold to 19 nations, including India with 100 million doses. The latest study by the renowned journal The Lancet, which attests it an absolutely competitive efficacy of over 90%, makes the Russian preparation an export hit.
lso in the transition to electromobility or digitalization to the Internet - often up to market launch and enforcement - the state has always been the financier and driver of development. Innovations and sustainable growth, which everyone is currently calling for, therefore do not come solely from the corporate sector or even from the financial superstructure. It is much more likely to come from a state that reassigns its traditional role, uses its unique capital and takes a long breath to drive forward future technologies such as the expansion of renewable energies.
The basic principle of capitalism's development was once captured by Joseph Schumpeter as "creative destruction." In contemporary capitalism, "progress" is still attributed solely to corporations. According to Mariana Mazzucato, modern economists still cling to this attribution. It is precisely not the small start-ups that unleash creative potential in society, but it is now the state as the decisive entrepreneur, responsible in a fragile symbiosis for the essentially disruptive creations. Without state funding, without state-financed research at universities, without the expansion of the infrastructure in transportation and information technologies, without innovations at the base, in other words, where the state works almost exclusively, the respective implementations of Apple and Co. would not even exist. Mazzucato therefore wants an open structure for this combination of companies and the public sector, as well as an appropriate share of profits for the state, so that it can continue to perform this function.
She rightly highlights the exemplary value of the Corona pandemic: "The Covid 19 crisis is a perfect test of whether a more public health approach to innovation and production will prevail in the years ahead. Although recent vaccine news has raised hopes, it has also exposed the broken business model of the pharmaceutical industry and cast doubt on the prospects of getting a vaccine to people and achieving the concept of 'health for all.' If we keep doing what we're doing, we might somehow get by in this crisis. But there is a better way. Before the next pandemic hits us, we need to recognize vaccines as a global public good and start moving the innovation system toward symbiotic public-private partnerships led in the public interest."
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Social Market Economy in the Pandemic
Aspects of Everyday Consciousness
By Joachim Bischoff/Bernhard Müller
[This article published on Feb 8, 2021 is translated from the German on the Internet, Sozialismus: Soziale Marktwirtschaft in der Pandemie.]
The year 2020 was a catastrophic one: the Covid 19 pandemic, subsequently economic crises all over the world, widespread climate disasters, and social unrest in many places.
As U.S. economist Jeffrey Sachs pointed out, "Above all, the pandemic exposed how badly we are governed in Europe and in America and how weak multilateral institutions are. ... And we're still not through, if you just look at the vaccination mess. The one great success has been the rapid development of vaccines. That's a triumph of science, technology, and public funding."[1]
He concluded, "This technological innovation is an example of goal-oriented research and the success of a public-private effort. The same approach should be used to address other global challenges, such as promoting renewable energy, sustainable agriculture, and biodiversity conservation.
The Corona pandemic stalled the long economic recovery from the 2008/2009 financial crisis, which also brought a significant reduction in unemployment and a recovery for all segments of the public finances. This massive change in the social reproduction process is also expressed in everyday consciousness.
After the severe recession associated with the great financial crisis of 2008, several years of economic upturn were reflected in the clearly positive assessment by the majority of the population in 2016. Since then, the assessment of the general economic situation and the economic order has deteriorated significantly.
Unsurprisingly, the assessment of their own economic situation is significantly better. Here, too, there is a downward trend in the assessment of a partial deterioration in one's own economic circumstances. This is certainly due to the massive economic and income support provided by the government, which has meant that the economic consequences of the pandemic have not had such a severe impact on the circumstances of private households.
In the midst of the second lockdown light, three-quarters of respondents (76%) - and even more than during the first lockdown in the spring - say they have been negatively affected financially "hardly at all" or "not at all" by the consequences of the Corona crisis. This has mainly to do with the massive government support loans, financial compensation payments, deferral options and generous short-time working arrangements.
Even more striking is the gain in confidence of the "social market economy" in the course of the pandemic crisis. According to a recent representative survey[2], the socially regulated capitalist economy was able to expand its acceptance. In 2010 - after the Great Financial Crisis - the loss of confidence in the "social market economy" had sunk to lows in parallel with skepticism about politicians' assessment of their ability to act.
Now the "social market economy" is receiving top marks in the population's assessment. A slight majority (56%) considers the current state regulation of the market economy to be "just right. At the same time, 63% say that society is not socially just. This figure is significantly higher than the survey results from 2010 and 2013 (58% in both cases). A majority agrees with government measures to reduce the economic and social consequences of the pandemic, but nevertheless maintains its critical assessment of the market economy.
In the course of the prolonged pandemic, many companies and businesses depend on the rescue financial and fiscal subsidies provided by the state, which - albeit so far only in individual cases - has even stepped in as a shareholder to stabilize companies, as was the case with Lufthansa, for example. In this economic crisis caused by the natural disaster, there is no alternative to enormous state aid.
But the longer the exceptional situation lasts, the stronger the warnings from concerned ideologues that the state should not be allowed to slip into the role of entrepreneur via crisis-related involvement - either directly, by taking over even more shares in private companies, or indirectly, by allowing itself to be pressured by public opinion into nationalizing questionable business models.
Indeed, the massively damaged business model of the pharmaceutical industry[3] is triggering critical reactions even within the bourgeois camp. According to the World Health Organization (WHO), typically only about seven out of every hundred vaccination projects make it to the broad clinical trials phase. Of these, only one in five is successful. But when a capitalist company has a vaccine confirmed as effective by the review process, it not only receives ample social recognition, but also a billion-dollar business. This is what we see in the case of the vaccines against the pandemic of the century
According to the WHO, of an initial 174 potential Covid-19 vaccines, 63 eventually reached the clinical trials stage. The EU has so far approved those from Pfizer/BioNTech, Moderna and the vaccine from British-Swedish manufacturer AstraZeneca. Russia and China have their own products on the market, Sputnik V and Sinovac, respectively.
The development of vaccines in the capitalist countries relied not only on investments from the respective companies, but also on grants from non-governmental organizations such as the "Bill and Melinda Gates Foundation" and government research grants, which helped various companies to immediately expand their investments with contributions in the triple-digit millions. For example, the U.S. government had already launched the "Warp Speed" program at the end of April 2020, which unceremoniously provided around billion to support various vaccine and drug manufacturers.
Germany has supported the research work of BioNTech and Curevac, two biotech companies based here. And under preliminary contracts to supply certain quantities of vaccine doses, numerous government contractors bought vaccines from various manufacturers at risk when it was not yet known whether they would ever be approved.
The government vaccination campaigns hit turbulence after the vaccines were approved because, in addition to organizational weaknesses, delivery delays occurred due to difficulties in production. In view of this mixture of factors - massive research funding, advance payments and massive competition among states for supplies - even politicians who were otherwise convinced of the social market economy asserted a "right of necessity".
This was also the case with Bavarian Prime Minister Markus Söder: "I am committed to the social market economy," the CSU leader told the newspaper "Welt." However, he said, there is an emergency situation because of the corona pandemic that could fundamentally damage the market economy in the long term. "That's why there should be an emergency vaccine economy in which the state makes clear specifications. So we need more production capacity and faster approval procedures." In addition, he said, there needs to be a review of whether other vaccines are permissible: "The European regulatory authorities should also review the Russian and Chinese vaccine as soon as possible."
Calls for compulsory state acquisitions and an emergency vaccine economy remained a brief interlude to appease "popular anger." There are also no foreseeable social majorities for the ideas of compulsory state licensing and an abolition of patent protection. What remains to be said is this: Despite the pandemic crisis that has been going on for months, with ever new and challenging restrictions on social interaction and economic activity for the population, around six in ten respondents (59%) continue to find the measures taken by the federal and state governments to contain the epidemic appropriate. At the same time, a majority has retained an awareness of the social injustices of the social market economy.
The state regulation of social reproduction realized in Germany and the EU is not the end state. It is precisely in the crisis constellation of the pandemic that starting points become clear as to how this mode of production could be controlled more efficiently and made more socially responsible. 92% of those surveyed think it is right for the state to provide financial support with tax money to companies that have run into difficulties as a result of the pandemic.
Long-term observations of the success of political interventions and regulations also show that people's trust in politics is a dimension of reform and change that should not be underestimated. Above the momentary satisfaction with government responses to the pandemic and its consequences, which are not only economic, it should not be overlooked that a large segment of the population has higher aspirations or expectations for shaping the future.
Notes
[1] Jeffrey Sachs, Coal and oil are finished, in: FAZ, Feb. 6, 2021.
[2] See: Praise for the Market. Despite Corona crisis, majority of Germans say: The local economic order has proven itself, in: FAZ 6.2.2021.
3] See also Joachim Bischoff/Börn Radke, Querdenker - eine Bewegung neuer Typs? in: Sozialismus.de, Heft 1/2021.
Original: Corona vaccines-nothing would work without public funding