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With biomedical research, taxpayers are getting a great deal

By Kristen Osenga - Guest Columnist | Sep 21, 2020

Gilead Sciences’ novel drug remdesivir has shown immense promise for treating coronavirus. 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, and 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 more dangerously, regarding government support of scientific research.

It is true that government researchers helped identify remdesivir from 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 FDA-approved drugs from 1988-2005, fewer than 10 percent 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 percent 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 may not have incentive to innovate.

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 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.

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.

We don’t yet know how important remdesivir will be in the fight against 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 & Professor of Law at the University of Richmond School of Law.

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