By Cristina Fr贸es de Borja Reis and Jos茅 Paulo Guedes Pinto

It is well known that, during the 20^th century, the pharmaceutical industry became extremely powerful at the international level, alongside financial, energy, technology, and manufacturing companies (Wells, 1984). The internationalization of the pharmaceutical industry only rose after the internationalization of patent protection in the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs Agreement) (). This industry is highly concentrated around a small number of very large transnational groups (65% of global sales are made by the 20 largest players 鈥� the 鈥榖ig pharma鈥�) that operate worldwide through subsidiaries in 150 countries, on average. Revenue in the worldwide pharmaceutical market increased at a considerable rate, even during the global slump of 2008, and was estimated at an astounding USD1.143 trillion in 2017 ().  Recently, we published   on pharmaceutical value chains, which investigates how they are embedded in an international division of labor, from a new-structuralist theoretical perspective. We ask: how global are the pharmaceuticals value chains? Are there centers and peripheries in pharmaceuticals value chains, and if so, which countries are in each pole?  

The international division of labor: a new structuralist account

Under the hypothesis that this sector is symbolic in terms of global and regional center-periphery international division of labor (IDL), we addressed the questions empirically by examining indicators like the pharmaceuticals world trade in gross terms, its production and employment structure, its trade in value-added, price per kilo of pharmaceuticals imported and exported, pharmaceutical industry wage shares, and intellectual property rights鈥� flows. 

For the new structuralists, the dividing line between the center and the periphery is basically the ownership of technology and capital (protected by property rights) in the former, which leads to more sophisticated patterns of productive and trade specialization there and, consequently, to uneven income dynamics between the countries from center and periphery (; ). 

Arguably, transnational corporations (TNCs) have developed international value chains, led by financial decisions, with high-value activities (generally intangible and intensive in knowledge and technology, such as research and development (R&D)) located mainly in the countries from the center, while low value-added ones (related to tangible manufacturing and productive tasks, such as assembly) are performed in the Global South (; ). 

The productive and trade relationship between the US (center) and Mexico (periphery) serve as an illustration of this IDL. Thanks to US TNC using Mexico to assemble export products, US direct investments in Mexico created a manufacturing export sector set apart from the country鈥檚 other tradable and non-tradable sectors (maquiladora industry), generating poor dynamic effects in income and employment circuits of the Mexican economy (; ). In the empirical assessment, we attempted to show that the maquiladora phenomenon is not restricted to Mexico but happens to other peripheral countries in the world system, which are also regional peripheries (). 

The pharmaceutical global value chains

In the last decades, pharmaceutical GVCs were reorganized by massively outsourcing certain activities, by developing partnerships, and by favouring external growth and open innovation (). Pharmaceutical value chains鈥� governance is high, presenting global hubs and spokes, which are widely geographically disperse in regions (RVC -regional value chains). For branded products – which are still the main source of revenues (Guedes Pinto and Shadlen, 2018) -, top pharmaceutical TNCs are engaged in global and vertically-integrated producer-driven chains concentrated in their homelands; for quality generics, they are engaged in buyer-driven chains with increased outsourcing activities in countries such as India and China; for low-value generics the chains are market-driven, with increasing participation of developing countries (). 

Our analysis shows that specializing in a high-technology sector does not necessarily mean upgrading to higher value-added products and activities in the chain. Data for value-added trade and for pharmaceuticals鈥� prices support this argument by showing that, although the entire sector is considered highly technology-intensive, some countries specialize in low-prices items or in low-value-added activities of the chain whose imported contents in their exports are high. Moreover, looking to wage levels, productivity, and wages as a share of value added provide evidence that, in the new IDL, some countries and income groups benefit more from value chains than the ones on the periphery, especially low-skilled workers.

Peripheral countries, even the ones located in developed and high-income geographical regions, are in general responsible for assembly and for other simple productive tasks, generating low-quality employment and investments, which are unable to trigger a virtuous dynamic of sustainable socio-economic development. Center countries are, in general, the hub of the most powerful TNCs (鈥榖ig pharma鈥�), which invest heavily in R&D, performing most of the chains鈥� intangible high value-added activities. They invest in their periphery not only to succeed in domestic markets but also to extract trade gains from value chains. 

The concentrated IDL in pharmaceuticals 

The IDL in pharmaceuticals is even more concentrated than that in manufacturing chains on average: its center is composed basically of three countries: the US in the regional North America factory, and Switzerland and Germany in the Europe factory. They are rich and powerful States that benefit from intellectual property rights surpluses, they have high prices per exported kg and pay high wages to employees, but their wages shares are lower than profit shares in value added. 

Furthermore, on the one hand there are a couple of rich States that are also in the center of RVCs – such as Belgium, Denmark, France, Japan, Sweden, and the United Kingdom – which in general are major exporters and importers in terms of gross values and price/kg, have average levels of imported content in their value-added exports, are huge producers, pay high salaries, and present surpluses in intellectual property rights. On the other hand, there are mid-sized countries on the global/ regional periphery (and also small countries that were not included in our analysis) that are weakly integrated 鈥� such as Brazil, Russia, Saudi Arabia – or strongly (but problematically) integrated into value chains 鈥� such as Mexico, India, Hungary, and Poland. The latter group, though composed of large producers and exporters, receives a low price/kg for exports, pays low salaries, presents deficits in charges for the use of intellectual property rights, and has a high content of imported added value in their exports. 

They are precisely the ones undergoing specialization on low value-added activities of the chains 鈥� becoming maquiladora firms in the IDL, due to the associated dependency prevailing in the periphery of the system. From the structuralist perspective, periphery countries could upgrade in value chains and reduce inequalities through structural and institutional changes, relying on the State to shape the productive structure and class relationships in the direction of more even wealth and power distribution. In this sense, even being among the world鈥檚 largest producers and exporters, China can still be considered a part of the periphery in terms of where they are in the pharmaceutical GVCs. But its position is rapidly changing, with the State’s power leveraging innovation in health value chains, for example, by developing vaccines and drugs to combat the covid-19 pandemic before some pharmaceutical TNC.

The Covid-19 pandemic revealed the dramatic effects of the concentration of pharmaceutical value chains led by powerful TNCs. Disruptions in flows of goods and services from chains associated with prevention, containment, care, and treatment against the virus on a global scale have delayed the end of the suffering and deaths of millions of people, which could have been partially avoided if the power and wealth distribution were more equitable. Moreover, the pandemic revealed that the division of center and periphery posed by the technological and knowledge property rights are closely related not only to corporate governance decisions but heavily influenced by state policies.

References

Bergin, P. R., R. C. Feenstra, and G. H. Hanson. 2009. . American Economic Review, 99 (4): 1664-71.

Castillo, J. C., and A. Szirmai. 2016. . UNU-MERIT Working Paper, 2016-001.

ECLAC. 2015. . Libros de la CEPAL, N掳 132 (LC/G.2633-P/Rev.1), Santiago de Chile, Comisi贸n Econ贸mica para Am茅rica Latina y el Caribe (CEPAL).

Gallagher, K.P., and L. Zarsky. 2007. .  MIT Press: Cambridge, MA.

Geymond, M. 2020. . CES Working Papers, 20011, Universit茅 Panth茅on-Sorbonne (Paris 1), Centre d’Economie de la Sorbonne.

Globerman, S. 2011. Global Value Chains: Economic and Policy Issues. In , edited by A. Sydor, 17-42. Ottawa: Department of Foreign Affairs and International Trade Canada.

Guedes Pinto, J. P., and K. Shadlen. 2018. Cross-Border Flows of Goods and Services Associated with Intellectual Property: Highlighting the Asymmetries among Countries and Regions. Workshop: Political Economy of Capitalism – Young Scholars Initiative: University of Geneva.

Haakonsson, S. J. 2009. . Competition and Change, 13 (1): 75-95.

Reis, C. F. B., and F. G. Cardoso. 2021. Center and Periphery in Global Value Chains: an Interpretation based on the Pioneers of Development. In , edited by A. Hermann and S. Mouatt, 171-190. London: Routledge.

Statista 2019. (in billion U.S. dollars). Accessed 05 May 2019. 

Wells, N. 1985. Pharmaceuticals Among the Sunrise Industries. Proceedings of an Office of Health Economics symposium, Royal College of Physicians, London, October: 22-23.

Cristina Fr贸es de Borja Reis is Professor of Economics and International Relations at the Engineering, Modeling and Applied Social Sciences Center (CECS), Federal University of ABC (UFABC).

Jos茅 Paulo Guedes Pinto is Professor of Economics and International Relations at the Engineering, Modeling and Applied Social Sciences Center (CECS), Federal University of ABC (UFABC). He tweets at .

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What is new with contemporary (global) leading corporations? If gigantic monopolies are a repeated phenomenon in capitalism鈥檚 history, why all the fuss we see every day regarding high concentration?

Leading corporations of the 21st century are intellectual monopolies. These are firms that rely on a permanent and expanding monopoly over portions of society鈥檚 knowledge. A recent joint OECD and European Union report shows that the top 2000 corporations in business expenditure in research and development (BERD) concentrated 60% of total IP5[1] patents between 2014 and 2016 (Dernis et al., 2019).

How did this happen if intellectual rents enjoyed by the innovator were supposed to disappear once the rest of the industry adopts the new technique? They disappeared if the secret was broken, the patent expired, or when another firm innovated, overcoming the innovating firm鈥檚 advantage. Knowledge is cumulative and those innovating have a greater absorptive capacity to keep innovating. Aided by a more stringent and global intellectual property regime, the continuous reinforcement of knowledge monopolies has led to a perpetuation of the core, maximizing rentiership over time.

Intellectual monopolies may not monopolize the markets they operate, which can even be competitive markets like Amazon鈥檚 marketplace, where Amazon sells its products with millions of other sellers. Their monopolistic condition relies on their capacity to significantly and systematically monopolize knowledge, which generally 鈥� but not always 鈥� contributes to market concentration.

What we are witnessing is the climax of a process that began almost half a century ago with the formation of global value chains (GVC) led by multinational corporations that retained the exclusive knowledge on how to integrate the supply chain. It was also in the 1970s that the big pharma blockbuster drug model emerged signalling a turning point in terms of intellectual property and rents. Furthermore, the initial policy transformations that paved the way for intellectual monopoly capitalism also date from the 1980s and continued during the 1990s (from the Bayh-Dole Act to the Trade Related Aspects of Intellectual Property Rights followed by free trade agreements, bilateral investment treaties, and regional pacts that installed a global intellectual property regime). Yet, it was not until this century, in particular after the advancements in deep learning and neural networks that unleashed big data based innovations that the consequences of intellectual monopoly capitalism became apparent.

To acknowledge them, I suggest thinking of innovation, as any process based on human labour, not only from its implications but also as a social relation of production. In other words, innovating always has a twofold meaning. One looks forward and starts when the innovation is achieved, thus studying the effects of innovation as an accomplished result. The subordination of complementors in digital platforms (such as third-party sellers in e-commerce) as well as of outsourced firms in GVC exemplify how innovations (or more broadly intangibles), once monopolized, are used to subordinate other organizations. The other approach looks backward and delves into the social relations of production that take place in order to innovate. This is innovation as a process. In contemporary capitalism, this process increasingly takes place as networks, organized and planned by intellectual monopolies.

Intellectual monopolies are not only 鈥� nor mainly 鈥� a result of giant corporations鈥� in-house R&D. Their knowledge monopoly is based on appropriating and monetizing knowledge results from their multiple innovation networks organized as modularized knowledge steps in charge of different organizations (from start-ups to public research organizations and universities). Intellectual monopolies also outsource innovation steps by actively engaging in open access or open science initiatives (including open-source software in the case of tech giants), monetizing knowledge commons.

In this context, what is the fate of the rest of the firms 鈥� which are the overwhelming majority of the industrial landscape 鈥� and how do they manage to remain profitable while subordinating to intellectual monopolies? How are science and technology transformed in this context? What are the implications for research universities and other public research organizations? What is the place of the peripheries as profits concentrate in a handful of corporations from core countries? What is the role played by those core countries鈥� states in the emergence and spread of intellectual monopoly?

To answer these questions, I elaborate on the concept of predation, initially defined by Veblen (1899) as a direct relation of spoliation. Predation contributes to explaining the higher concentration of intangible assets by intellectual monopolies. Intellectual monopolies predate knowledge from other organizations. Innovation in capitalism has thus grown as a power relationship. 鈥淚nventors鈥� (those actually working on intellectual monopolies鈥� innovations) will at most receive a minor payment in comparison with the rents amassed by the intellectual monopoly that surveilled the whole process. As a result of this division of intellectual labour, the industrial landscape is split between corporations that control production, distribution, and consumption by controlling innovation processes and a myriad of organizations whose best alternative is to subordinate.

Meeting the world鈥檚 predators

In our epoch, intangibles assets鈥� rise cannot be understood without considering the -highly asymmetric- digital economy. Its five leading corporations represent over 25% of the S&P 500. The combined market capitalization of Google, Apple, Facebook, Amazon, and Microsoft (GAFAM) is even above Japan鈥檚 2019 GDP. As well as their counterparts from China, GAFAM concentrate profits and (tangible and intangible) capital based on monetizing knowledge and data. Their continuous innovations rely on their exclusive access to big data sources, thus predating society by curtailing access to an input that was socially constructed. Furthermore, they analyse data with artificial intelligence (AI) algorithms that, more often than not, were developed by other organizations. They use that data to orient their business and innovate based on customized models that are capable of predicting and shaping each individual鈥檚 behaviours with the greatest existing accuracy.

Although at the forefront of this new stage, intellectual monopoly capitalism goes beyond digital industries. Big pharmaceuticals are another paradigmatic example. Furthermore, companies from the most diverse industries are becoming intellectual monopolies. From State Grid Corporation of China (SGCC), China鈥檚 state-owned utility company, to BlackRock鈥檚 financial data monopoly.

Depending on the diversity of knowledge management techniques and on the multiplicity of monopolized technologies, intellectual monopolies differ in scope. Some are focused on narrow niches 鈥� such as Siemens鈥� dominance of AI for life and medical sciences inventions or SGCC鈥檚 lead in AI-related inventions for energy management (World Intellectual Property Organization, 2019). Meanwhile, GAFAM and its Chinese counterparts expand their power, dominating general-purpose technologies. All in all, intellectual monopoly capitalism can be conceived as the stage in capitalism where capital accumulation (and distribution) is led by a core of intellectual monopolies that base their accumulation (and power) on their permanent and expanding monopoly (and assetization) of predated knowledge.

By synthesizing the common traits of these cases, I argue that intellectual monopoly capitalism capital accumulation is increasingly driven (and hampered) by rent-seeking and predation. Intellectual monopolies sabotage society by privately monetizing intangible goods; they are 鈥搒imultaneously- capitalists, rentiers, and predators. The more their rents grow, the more the rest of the world will be deprived of access to knowledge and of a greater portion of the total value produced. Intellectual monopolies are also the corporations leading the rankings of offshored retained earnings and declare profits in tax havens, further favouring their shareholders by minimizing paid taxes. This points to the entangled connection between an accumulation strategy based on rentiership and predation that results in levels of earnings and financial strength that allow to further expand rents, this time by participating in financial markets.

Intellectual Monopolies maximize their appropriation of wealth ultimately at the expense of workers of all the subordinate firms but also including their own workers. Workers’ differentiation under intellectual monopoly capitalism results in a majority with earnings below what they need to reproduce themselves and their families. To tilt the scale, unions must regain the power they lost in Western countries and gain the power they never had in Asia. A global organization of labour is required. However, this is much easier said than done.

The effects of intellectual monopoly capitalism on the peripheries

The persistently uneven distribution of innovation in the world is a structural truth worsened by intellectual monopoly capitalism. Intellectual monopolies originate in core countries, in particular in the United States, but their effects are spread all over the world. In my book 鈥溾�� I study intellectual monopoly capitalism integrating three levels of analysis: global, national, and network. At the national level, it distinguishes between core and peripheral countries. At the network level, it focuses on how intellectual monopolies plan, organize and predate from their innovation networks, thus also including a broad set of subordinate firms, universities, and public research organizations from all over the world.

In the peripheries, intellectual monopolies systematically pass over 鈥� less powerful 鈥� states. Part 3 begins with an assessment of innovation and upgrading policies for development under intellectual monopoly capitalism. In this context, innovation studies (including the idea of an entrepreneurial state), as well as GVC and catching-up approaches, have shortcomings in providing viable policy recommendations. Peripheral countries鈥� specific traits result in a greater technological gap with (intellectual monopolies and their innovation networks from) core countries and reinforce underdevelopment. However, the relatively more developed countries within the peripheries exhibit an unbalanced knowledge and innovation structure with their leading research institutions integrated into global knowledge networks, thus risking being subordinated to intellectual monopolies, while local firms generally lag behind.

To account for specific effects of intellectual monopoly capitalism on the peripheries, I propose the concepts of knowledge and data extractivism, two specific forms of what can be dubbed intangibles extractivism.

Knowledge extractivism refers to science and technology from the peripheries that are monetized in core countries, usually by corporate intellectual monopolies and eventually by academic intellectual monopolies. This form of extractivism mainly affects leading universities and public research organizations from so-called emerging or middle-income countries.

Concerning data, a new layer in the international division of labour is emerging. It splits the world between raw data providers and a handful of data-driven intellectual monopolies. Raw data is valueless, but as continuous streams of data are centralized and processed with deep learning and neural network approaches, algorithms improve by themselves and learn faster. Peripheral countries (and even Europe) are net providers of raw data and pay for digital intelligence.

Intangibles extractivism results in a higher concentration of intangible assets in the hands of a few corporations from the core, which expands their rents at the expense of knowledge and data produced in the peripheries. Some authors conceive this unequal exchange of knowledge and data as a new form of colonialism, defined as data or digital colonialism (Couldry & Mejias, 2019a, 2019b; Kwet, 2019). A vicious cycle is established between intangibles extractivism and the lack of technological autonomy in the peripheries.

My book provides evidence knowledge extractivism from the peripheries by global (but born in core countries) intellectual monopolies. Chapter 12 focuses on the distribution of innovation rents from Singapore鈥檚 innovation hub, showing that it is multinational corporations that appropriate most of them. Chapter 13 presents evidence of pharmaceutical knowledge extractivism from the University of Buenos Aires, in Argentina.

Hence, what can we do to tilt the scale against intellectual monopoly capitalism?

We must first acknowledge that this question should be answered through community debates and collective and democratic decision-making processes. So, I only anticipate here some ideas attempting at contributing to such discussions.

Beyond counterbalancing trends, such as knowledge commons and open access initiatives, the current private knowledge regime needs to be overcome. A new commons knowledge regime should simultaneously consider knowledge access and use. In this respect, sci-hub -a website that grants access to academic publications- works as a democratizing development policy. This reform becomes all the more important if we consider the Covid-19 pandemic. Democratizing access to knowledge also requires public (free) education to guarantee that local populations can critically understand it and further elaborate on it.

In a similar vein, data privacy acts aimed at limiting tech giants鈥� power, further contribute to knowledge privatization by fostering individual property over data. On the contrary, I think that digital global public goods should be fostered. Every Google search, every Amazon purchase, every Facebook or YouTube post, and so on contribute to improve the algorithms used, thus, to improve the services we all receive. Digital platforms are globally produced by society at large and since digital services -in particular those in the hands of big tech companies- tend to be natural monopolies, why not envisioning them as global public goods?

Moreover, peripheral countries must set their own agenda to battle against intellectual monopolies, which should include limiting all forms of extractivism (data, knowledge, and also natural goods, some of them essential for digital value chains).

The accomplishments of these measures and others -such as global agreements to strengthen labour market regulation forbidding new and old forms of informality that the digital (gig) economy takes to unprecedented levels within capitalism-, will only take place if grassroots social movements and workers unions fight for them. As social scientists, we should engage in these fights and this includes retargeting our research agendas. We need to be bold and ask challenging questions, bridge the gap between general trends and specific, in-depth analyses. Our research priorities should consider social and environmental impacts, which require integrating other social actors in the definition of science and technology agendas. Uncovering new and structural trends of capital accumulation, thus identifying the roots of poverty, inequality, and underdevelopment cannot wait. My research on intellectual monopoly capitalism pursues this aim.

References

Couldry, N., & Mejias, U. A. (2019a). Data colonialism: Rethinking big data鈥檚 relation to the contemporary subject. Television & New Media, 20(4), 336鈥�349.

Couldry, N., & Mejias, U. A. (2019b). The costs of connection: How data is colonizing human life and appropriating it for capitalism. Stanford University Press.

Dernis, H., Gkotsis, P., Grassano, N., Nakazato, S., Squicciarini, M., van Beuzekom, B., & Vezzani, A. (2019). World Corporate Top R&D investors: Shaping the Future of Technologies and of AI (EUR 29831). Joint Research Centre and OECD report.

Kwet, M. (2019). Digital colonialism: US empire and the new imperialism in the Global South. Race & Class, 60(4), 3鈥�26.

Veblen, T. (1899). The theory of the leisure class: An economic theory of institutions. Macmillen.

World Intellectual Property Organization. (2019). WIPO Technology Trends 2019. Artificial Intelligence. WIPO.

Footnotes

Patents in the 5 largest patent offices:  European Patent Office (EPO), Japan Patent Office (JPO), Korean Intellectual Property Office (KIPO), National Intellectual Property Administration of the People’s Republic of China (CNIPA) and the United States Patent and Trademark Office (USPTO).

Cecilia Rikap is a tenure researcher of the CONICET (Argentina鈥檚 National research council), associate researcher of the Centre de Population et D茅veloppent (CEPED), IRD/Universit茅 de Paris and of the COSTECH lab, Universit茅 de Technologie de Compi猫gne. She tweets at .

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A flawed understanding of the concept of 鈥減ublic good鈥� hampers the fight for equitable access to the upcoming COVID-19 vaccine

The term 鈥済lobal public good鈥� has been used in very different ways by policy makers, economists and others. The term 鈥済lobal鈥� is not particularly controversial, and in this context is generally understood to involve cases where the benefits of the service or good impact residents of more than one country, even if not necessarily the whole world. The term 鈥減ublic good鈥� is subject to more diverse uses, often depending upon one鈥檚 educational or professional training.

For many people, perhaps most, the term 鈥減ublic good鈥� is loosely defined to include cases where governments are willing to undertake measures to expand access, with universal access at least an aspirational goal. However, among the other influential definitions of 鈥減ublic good鈥� is one that is exceptionally restrictive. A proposal by Paul Samuelson first published in 1954, meant at the time as an extreme and polar case, has found its way into countless articles, textbooks and academic courses, and has parameters that are rarely met in practice. At times, Samuelson鈥檚 66-year-old paper is actually an obstacle to collective efforts to supply and distribute goods that have considerable impact on society.

The COVID-19 pandemic presents an astonishing global challenge regarding the control of the pandemic and the reduction of harm. The health impacts are large, particularly for older patients, and growing unpredictably, and the pandemic has had an enormous social and economic impact on everyone, with no obvious end in sight.

Biomedical technologies to combat the pandemic are important, particularly diagnostic tests, drugs and vaccines, and the world needs innovation, testing, evaluation, access and affordability. A number of political leaders, health groups and other entities have called for COVID-19 vaccines and drugs to be treated as public goods. For example, the South Centre issued a听听on the launch of the World Health Organization鈥檚 COVID-19 Technology Access Pool (C-TAP), noting that 鈥渁ims at ensuring that the technologies needed to address the pandemic are considered, as a matter of principle, global public goods.鈥� The MSF Access Campaign听听that 鈥淐OVID-19 medical tools should be considered 鈥済lobal public goods鈥� and should be 鈥榓ffordable, safe, effective, easily administered and universally available for everyone, everywhere.鈥欌�� The Secretary-General of the United Nations, Ant贸nio Guterres, issued a听听on May 20, 2020, which said that 鈥淎frican countries should also have quick, equal and affordable access to any eventual vaccine and treatment, which must be considered as global public goods.鈥�

鈥淭he benefits of a COVID-19 vaccination accrue not only to the person being vaccinated, but also to the community, as widespread vaccination eliminates hosts for the virus, and contributes to the control of the pandemic.鈥�

In the negotiations over a World Health Assembly (WHA) resolution on the COVID-19 pandemic, the European Union submitted an听听The draft 鈥淩ecognizes population-wide immunization against COVID-19 as a global public good for health and the crucial role of quality, safe, and efficacious vaccines therein.鈥� The United States objected to the inclusion of 鈥減ublic good鈥� in the text, on grounds that it was not well-defined, and proposed that global public good be changed to 鈥済lobal benefit.鈥� There was also a discussion in the drafting process about the distinction between vaccination being a global public good, and the vaccines themselves. The Third World Network听听that the Chair of the WHA drafting committee on the resolution 鈥渃larified that it recognized that 鈥榩opulation-wide vaccination鈥� was a global public good for health but the vaccine itself was not.鈥�

The distinction between vaccination and the vaccine was based upon the definition that Samuelson proposed more than six decades ago. The benefits of a COVID-19 vaccination accrue not only to the person being vaccinated, but also to the community, as widespread vaccination eliminates hosts for the virus, and contributes to the control of the pandemic. In this sense, the benefits of vaccination have an external benefit for the community, and that benefit is non-excludable. But the vaccine itself, as a product, is neither non-rival in consumption, nor non-excludable, the two key features highlighted by Paul Samuelson in his original definition of public goods, as set out in听听听in 1954 and 1955. If individuals cannot be effectively excluded from the use of a good, it is non-excludable in nature; if its use by one individual does not reduce availability for others, the good is non-rival. While first proposed as an 鈥渆xtreme鈥� or 鈥減ure鈥� case for public expenditures, the definition has become widely quoted without an appreciation for its limits.

In the mid-1950s, the world was deeply engaged in a cold war between governments that were extolling the virtues of either market or non-market models for the production and distribution of goods. Samuelson was interested in presenting a mathematical model where private markets would not exist, as 鈥渁n extreme polar case鈥� that would be used to contrast 鈥渢he admittedly extreme polar case of traditional individualistic general equilibrium.鈥� The 鈥済rand Walrasian model of competitive equilibrium鈥� was the extreme polar case at which Samuelson was aiming, in which markets and market prices were efficient, and in some simplified versions, perfectly efficient.

Samuelson鈥檚 1955 paper provides ample caveats regarding the relevance of this model, which was illustrated by the examples of 鈥渁n outdoor circus or national defense鈥� as two goods that were non-excludable and non-rival in consumption. He acknowledges that 鈥減ublic expenditure and regulation proceed from considerations other than those emphasized in my models,鈥� redistribution of incomes, paternalistic policies, where 鈥渁tomistic competition鈥� is not realistic, and 鈥淢yriad 鈥榞eneralized economic and diseconomy鈥� situations, where private pecuniary interest can be expected to deviate from social interests.鈥� Notably, in his 1955 paper, Samuelson states 鈥淚 regret using 鈥榯he鈥� in the title of my earlier paper.鈥� In a 1958 paper on 鈥減ublic expenditure theories,鈥� Samuelson notes that a good that 鈥渞efuses to fall in my polar case for a pure public good will not thereby obligingly go into the other polar case of a pure private good,鈥� using the example of an information good with a zero marginal cost to make his point.

鈥淚n the context of COVID-19, Samuelson鈥檚 1950s definition of a 鈥減ure鈥� public good is a poor fit, whereas everything about the development, manufacturing and access to diagnostic tests, drugs or vaccines fits his broader framework for public expenditures quite well.鈥�

The two characteristics Samuelson used in his 鈥減ure theory of public expenditure鈥� benefit from some reflection, since they capture such a small subset of goods that governments actually spend money on. Goods that are both (1) non-rival in consumption and (2) non-excludable exist, but are rare.

The phrase 鈥渘on-rival in consumption鈥� eliminates drugs or vaccines as products, as well as hospital beds, services of health care workers, and much of what governments subsidize or directly provide. Knowledge is one good that is often held out as an important good that is non-rival in consumption, and in the context of COVID-19, this would include the inventions, data and know-how to make diagnostic tests, drugs or vaccines, as well knowledge gained by the evaluation of the efficacy and safety of products.

For knowledge goods, non-excludability can be a hard condition to meet. Some of the knowledge from the evaluation of the safety and efficacy of products will also have a non-excludable quality, although recent developments in regulatory policies on test data have made even that an ownable and excludable asset in many jurisdictions.

Intellectual property is a term given to a growing set of rights, often exclusive, that are granted to inventions, expressions, designs, data, know-how and clinical evidence used for regulatory approvals. The primary mission of laws governing intellectual property is to make knowledge goods excludable鈥攅ven when expressions are published, patented inventions disclosed or data is cited by governments or published research, or through various technical protection measures or secrecy, including restrictions on worker mobility, and non-disclosure and non-compete agreements.

Samuelson anticipated and also reacted to criticism of his definition by arguing that 鈥渋n almost every one of the legitimate functions of government that critics put forward there is to be found a blending of the extreme antipodal models.鈥� However, Samuelson also ventured that 鈥渁ny function of the government not possessing any trace of the defined public good (and no one of the related earlier described characteristics) ought to be carefully scrutinized to see whether it is truly a legitimate function of government.鈥�

In the context of COVID-19, Samuelson鈥檚 1950s definition of a 鈥減ure鈥� public good is a poor fit, whereas everything about the development, manufacturing and access to diagnostic tests, drugs or vaccines fits his broader framework for public expenditures quite well.

There are certainly non-excludability aspects of both herd immunity and the elimination of the colossal cost of the pandemic responses, as well as robust non-rivalry in consumption characteristics of inventions, data, know-how and knowledge from testing and evaluation of products. When you include, as Samuelson did, 鈥渞edistribution of incomes, paternalistic policies, where 鈥榓tomistic competition鈥� is not realistic, and 鈥淢yriad 鈥榞eneralized economic and diseconomy鈥� situations where private pecuniary interest can be expected to deviate from social interests鈥� then the case for public expenditures is very strong for COVID-19 biomedical inventions.

In the case of COVID-19 policy makers and policy experts should refrain from using Samuelson鈥檚 鈥渆xtreme鈥� case for a 鈥減ure鈥� public good as one that is both non-rival in consumption and non-excludable as the working definition for global public good. This can be difficult, given the attractive elegance of Samuelson鈥檚 鈥減ure鈥� case, and the need for authors to acknowledge Samuelson鈥檚 influential earlier work. For example, consider the struggles by contributors to听Providing Global Public Goods, a听听edited by Inge Kaul, et al, in 2003, to find ways to label all sorts of obviously useful global interventions as 鈥済lobal public goods.鈥�

For COVID-19, what does it mean to treat a biomedical innovation such as a diagnostic test, drug or vaccine as a global public good? As a practical matter, and in the context of this pandemic, it would mean, as听, that policies should facilitate a diversity of manufacturers, and the open licensing of intellectual property rights for drugs and vaccines effective against the virus, since the 鈥渨orld has an overwhelming interest in ensuring these will be universally and cheaply available.鈥�

We fully expect that in the coming months governments with the most resources will seek preferential access to new drugs or vaccines for the virus, as they already have with regard to personal protective equipment and therapeutics, and through advance purchase commitments with vaccine manufacturers. The hoarding of scarce products is deplorable, but predictable, and policymakers will at best moderate the hoarding. What is completely indefensible is to hoard the intellectual property rights and the know-how necessary to manufacture and ensure quality for an effective therapeutic or vaccine. The non-rival nature of the knowledge necessary to make a product is a compelling reason to treat this as a public good, even though intellectual property rights and secrecy make it possible to be exclusionary.

James Love is Director of Knowledge Ecology International. His work focuses on the production, management and access to knowledge resources, as well as aspects of competition policy. He tweets at .听This article first appeared in , a blog co-published by the India China Institute and the Julien J. Studley Graduate Programs in International Affairs at The New School.

In on the Minimum Core Doctrine (MCD) John Tasioulas states:

鈥渢he essence of the concept will be taken to be the sub-set of obligations associated with socio-economic rights that must be immediately complied with in full (obligations of immediate effect)鈥� (p. 3).

He contrasts these against those obligations that require significant resources and are therefore subject to 鈥榩rogressive realization鈥�. Thus, the defining characteristic of MCD is that it differentiates obligations between those of immediate effect and those of progressive realization. And the focus is on the nature of the obligations (what the state must do when) rather than the nature of substantive rights (the condition of people鈥檚 lives).

However, the discussion about what constitutes minimum core obligations in substance focuses on the nature of rights enjoyment and a package of minimum goods and services that would be required rather than the nature of obligations. This starts with General Comment 3 that refers to 鈥榓 minimum core obligation to ensure the satisfaction of, at the very least, minimum essential levels of each of the rights鈥�, and to the provision of 鈥榚ssential primary health care鈥� (ICESCR quoted in Tasioulas p. 5). Further, human rights-based practice begins to specify specific types of diseases to be treated and goods and services that would be included in the minimum, as under the 鈥榮elective primary health care model鈥� adopted by UNICEF (Tasioulas p. 5).

Thus, the concept of minimum core obligations has become translated as a right to a minimum set of goods and services, specifically identified with the provision of primary health care, including specific services such as oral rehydration therapy, immunization against six childhood diseases, and access to essential medicines on the WHO list. A key criterion in developing this list is affordability which makes immediate provisioning possible. Ironically 鈥� as I will discuss below 鈥� prevailing prices of such goods are therefore important to defining minimum core obligations rather than their importance for people in leading healthy lives.

This conception of MCD around low cost goods and services is unnecessarily restrictive. It is also out of line with concerns to meet pressing and priority health needs of the population. It departs from the original concept of obligations of immediate effect. It limits the consideration of the wide range of measures that national governments should take to expand the enjoyment of the right to health such as by reversing damaging policies or setting new ones. A salient example is policy choices governments might make in the area of intellectual protection provisions in free trade and investment agreements.

Intellectual property, trade agreements, and access to medicines

One of the pressing threats to the human right to health is the trend to include stronger intellectual protection in bilateral and plurilateral trade agreements. Since the introduction of the WTO TRIPS agreement that made strong intellectual property (IP) protection a requirement for all signatory countries, health and human rights activists have protested their effects on public health priorities, particularly in restricting access to life saving medicines. More than two decades on, even stronger IP provisions 鈥� 鈥楾RIPS Plus鈥� 鈥� have proliferated in new bilateral and plurilateral agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP), that was agreed in January 2018 by 11 countries. These provisions strengthen patents held by pharmaceutical corporations by making patentability easier, and delaying the introduction of generic competition that would lead to lower prices and wider diffusion. Moreover, the new 鈥榯rade agreements鈥� increasingly incorporate wide ranging provisions for investment 鈥� such as provisions for investor/state dispute settlement, public procurement, state owned enterprises and more 鈥� that strengthen investor rights and impose limitations on policy options for national governments in pursuing public health. These agreements are being negotiated with little consideration of their effects on the government obligation to fulfill the right to health; rarely are public health impact assessments made.

IP and trade policies for human right to health as a Minimum Core Obligation

There is much that countries can do to make IP-related trade agreements less damaging to public health priorities if not promote them. To start with, governments can make more proactive use of the flexibilities incorporated in the TRIPS agreement to make life saving medicines available at affordable prices. Countries can reject TRIPS plus provisions. Or they can also reject free trade agreements. These are all approaches that some countries 鈥� such as Thailand, Colombia, and Brazil have adopted. Even more important, countries that are defending IP holders interests, should refrain from joining corporations in taking retaliatory action against those countries that do use the flexibilities. For example, US government places countries that use TRIPS flexibilities on the Special 301 watch list that monitors IP enforcement and lists countries where enforcement is inadequate or weakening. One of the concerns is with 鈥渢roubling indigenous innovation policies that may unfairly disadvantage U.S. rights holders in foreign markets.鈥� (USTR 2018).

Though much has happened to expand access to life saving, high cost, patented drugs, and to invest in innovations for public health priorities, many gaps remain. Millions of people around the world lack access to medicines, and these include new branded medicines that carry very high prices 鈥� for example latest cancer drugs approved generally cost over US$100,000 for a year鈥檚 course of treatment, the new hepatitis C drug costs $1000 per pill or $84,000 for a course of treatment. Access to such drugs is critical to life and is surely a priority for the fulfillment of the human right to health and the human right to life. Yet latest lifesaving drugs are not on the WHO essential medicines list as they are too expensive and cannot be provided universally. But this is because of the IP driven medical research and development system, enforced through trade agreements, that governments are obliged to comply with. At the same time, research and development (R&D) lag for high priority challenges because they do not offer attractive investment potential. This includes not only tropical diseases that afflict poor people and poor countries, but priorities for people of all levels of income, such as new antibiotics to combat growing antimicrobial resistance (AMR). Proactive government action, to coordinate internationally and promote priority investment in medical R&D by mobilizing public, private, and philanthropic resources would go a long way to fill these innovation gaps. Numerous initiatives have been taken in this direction but much more can be done.

Taking a proactive approach to designing trade and investment policies that align with public health priorities and that do not undermine the right to health is therefore an important human rights obligation of governments. I would argue that this is an important minimum core obligation because it is one that can be implemented with immediate effect, without large investment of resources. But many countries 鈥� particularly small developing countries 鈥� that have little economic or political clout in trade negotiations are faced with difficult trade-offs between joining trade and investment agreements to benefit from the global economy, and the need to protect policy space for pursuing their public health priorities. It is incumbent on all countries therefore to work collectively to promote systemic change and develop global principles and mechanisms for a more equitable policy framework for financing medical innovation. Many proposals have been made, not least by the series of global commissions that have addressed the contradictions between trade and health over the years. Pursuing these measures that would work towards greater equity in access to medicines 鈥� particularly all lifesaving medicines, and not just the inexpensive ones that are on the WHO essential medicines list 鈥� is surely a minimum core obligation of states necessary for the fulfillment of the human right to health.

Notes

While intellectual property protection rewards investors, it creates barriers for diffusion. It also hinders innovation for social priorities such as diseases of the poor that do not create a market demand. The tension is recognized in the TRIPS agreement itself that includes measures 鈥� commonly referred to as 鈥淭RIPS flexibilities鈥� 鈥� that can be taken when the IP provisions get in the way of public health priorities.
Without the US that withdrew from the original 2016 agreement.
For summary discussion of these issues, see McNeil et al 2017.
For overview see report of the UN High Level Panel on Access to Medicines and Innovation 2017
Several cases have been documented since the early 2000s, such as the case of Thailand that has used a compulsory license for HIV/AIDS drug in 2006, to more recent case of Colombia鈥檚 effort to issue a compulsory license for a cancer drug. Such efforts have met with retaliatory actions such as corporations threatening to withdraw their products from the market, or with being put on US government鈥檚 Special 301 watch list of countries where IP enforcement is weakening.
Office of the US Trade Representative, 2018 Special 301 Report.

Sakiko Fukuda-Parr is Professor of International Affairs at The New School. .

Photo: 漏torange.biz

This piece was first published on .

September鈥檚 UN special session on antimicrobial resistance (AMR) was a vivid reminder of the shared responsibility of governments to promote research and development (R&D) combat global health threats. The complexity of the AMR threat made clear that a combination of market forces, policy incentives, and regulation, as well as norms and standards was needed to ensure innovation that would deliver accessible and affordable treatments.

The report of the offers an important opportunity for national governments, UN organizations, philanthropies, civil society, and pharmaceutical manufacturers to move forwards and address this challenge. AMR is just the latest global health priority that cannot be resolved with the current incentive system for investing in medical R&D. AMR threatens to render a whole range of treatments ineffective and reverse 20th听century advances in medicine. Numerous other health priorities are neglected because they do not present a business potential for investment, and millions of people lack access to medicines and treatments that are priced out of reach.

In a world of unprecedented medical advances, these unmet needs present a moral dilemma, and one of the most critical challenges for humanity. The Panel, on which I had the privilege to serve, makes a number of concrete proposals to promote needs-driven R&D financing and to expand access to medicines for people in need. As a whole, the report makes short-term and long-term recommendations towards introducing more systematic and sustainable approaches to meeting unmet needs in innovation and access.

Over the past two decades, enormous progress has been made to fill these gaps through initiatives that involve public, philanthropic, non-profit, and private sector actors. They include investment in R&D on neglected tropical diseases spearheaded by such programmes as the (DNDi) and the Fund (GHIT).

A major breakthrough in efforts to expand access was the generic manufacture of antiretroviral drugs to treat HIV/AIDS, price discounts and voluntary licences offered by pharmaceutical companies, and mobilization of large amounts of donor funding through the US President’s Emergency Plan for AIDS Relief (PEPFAR) and the Global Fund to Fight AIDS, Tuberculosis and Malaria. Access to effective HIV treatment has expanded dramatically since it was invented 20 years ago, and the price of the drugs has dropped from over US$10,000 a year in developing countries to around $100 today.

These are huge achievements but do not constitute a sustainable solution to the fundamental problem of misalignment between public health priorities and current market dynamics that drive innovation and shape access. The old problem of lack of access to existing life-saving drugs remains, and new challenges are emerging such as access to new lines of HIV antiretrovirals, new threats like Ebola and Zika viruses, and the rising price of life-saving treatments for disease such as cancer and hepatitis C.

These new threats affect people worldwide, not just in low-income countries. Prices of these treatments have risen to levels that are increasingly unaffordable for household budgets and insurance schemes even in the world鈥檚 wealthiest countries, such as the USA, Japan, and Switzerland. In the USA, 11 out of 12 cancer medicines approved in 2012 were priced above $100,000 per year and the cost of EpiPen dominates the front pages of daily newspapers.

This is why the Panel report recommends sustainable solutions through shifts in policy and their implementation. For example, we urge governments to consider the public health consequences of the intellectual property and other provisions included in trade agreements, such as the recently negotiated Trans Pacific Partnership agreement, that could lead to further raising prices of medicines, and further reduce the scope of policy choice for national governments in pursuing public health priorities.

We recommend stronger action against retaliatory action when national governments use the flexibilities in the World Trade Organization鈥檚 that make life-saving medicines accessible. To facilitate decision making in both investors and governments, we propose greater transparency on pricing of medicines and the costs of R&D and manufacturing, as well as registry of patents. And we propose that countries create alternative incentives for R&D鈥斺�渄elinked鈥� from having to charge high prices鈥攖hat would build affordability of the medicines into the process from the start.

Taking action on these issues poses hard political choices. Critics have charged our report with undermining innovation by questioning the role of patents. This critique is wrong: in fact, our recommendations would deliver more innovation of public health value by addressing what the existing patent system does not. Critics have also attributed lack of access to poverty and inadequate health systems, denying the relevance of monopoly pricing under patents. What is at stake goes beyond the challenge of poverty to the health of all humanity.

According to international human rights law, access to health care is a human right that governments have an obligation to fulfil by taking necessary legislative and other policy measures. The misalignment between public health priorities and incentives cannot be addressed by charitable action of foundations and corporations alone. Nor can it be left to each government to cope with its own health emergencies. Unmet priorities in innovation and access are a global challenge and need an international response involving collaboration amongst governments, businesses, civil society, and patients.

is Professor of International Affairs at The New School. This post was first published on .