Monday, April 26, 2021

Vaccines and liability

I learned something from the New York Times lead editorial on Sunday. Why are we not shipping mega quantities of vaccines to countries like India? 

... as the vaccines came to market, some vaccine makers insisted on sweeping liability protections that further imperiled access for poorer countries. The United States, for example, is prohibited from selling or donating its unused doses, as Vanity Fair has reported, because the strong liability protections that drugmakers enjoy here don’t extend to other countries...

Pfizer has reportedly not only sought liability protection against all civil claims — even those that could result from the company’s own negligence — but has asked governments to put up sovereign assets, including their bank reserves, embassy buildings and military bases, as collateral against lawsuits. 

Well, you can sort of see the problem. You're a drug company. You sell a billion units of a brand new drug -- still on emergency use authorization in the US -- to, say, India. 10 people get a rare blood clot that may or may not be due to your vaccine. Local courts sue you for a gazillion dollars. Who wouldn't want liability protection? 

As the Europeans allowed trillions of GDP and quite a few lives to vanish while they haggled over a few billion in cost of vaccines, perhaps the onus on countries should be, to say, we want your vaccine, we understand it's brand new and there may be risks, we'll take them?  

The NYT is, predictably, full of bad ideas. 

Suspend patents. Nearly 60 nations have petitioned the World Trade Organization to allow countries to temporarily override intellectual property rights for coronavirus-related drugs and vaccines, but so far the measure is languishing. The Biden administration should support this waiver, nudge vaccine makers into voluntary licensing agreements and help build the public-private partnerships needed to bring those agreements to fruition. It should also press companies to offer better deals to the countries trying to secure doses — no more absurd indemnity clauses that protect company profits over human lives.

"Suspend patents." Great. Just in time to discourage drug companies from working full steam to identify the new variants stewing around the world and get moving on updated vaccines. Once again, all you need to know about cost benefit analysis is that trillions > billions. The profits' of drug companies are drops in the bucket. Related to a twitter stream going on, it's always time for that "once and never more" property expropriation isn't it? 

But most of all,   "absurd indemnity clauses that protect company profits over human lives?" If you mean it, dear Times, here's a suggestion: You offer to pay for any legal damages that foreign courts assess to US drugmakers over vaccines gone wrong. Not that hot to put "people" over your own "profits," eh?

The administration should also lift any embargoes resulting from its use of the Defense Production Act. President Biden was wise to use this law to bolster domestic vaccine production, but that move has also prevented companies from exporting raw materials. As a result, production lines in India and elsewhere are at risk of shutting down for want of key ingredients available in the United States. 

I'll given them the first, but not the "wise." DPA was silly in the first place. We're not building aircraft carriers for WWII, and it is beyond hypocritical to complain about Chinese and others banning exports to us while we do that. Instead our newly internationalist administration should work to stop all export bans worldwide in such situations. The world needs to work together, and that means to use our global supply chains when we need speed and efficiency. 


  1. I've never quite understood why the same argument for suspending profits to save lives doesn't extend to medical doctors. For that matter, this same profession also escapes the sneers of inequality warriors.

    1. Cochrane: commentators should "stick to logic, facts, and … looking for logical consistency."

      This really goes to the root of much rancor. Human factors, which Cochrane waves away, are essential elements in these debates.

      We are not denktiers (German for "think animals"--pure intellectuals), as it seems to me Cochrane would have it.

      There is in fact a homimus--with faults and flaws and blindspots--behind every post.

  2. "The world needs to work together, and that means to use our global supply chains when we need speed and efficiency." Dear John, where were you doing 4 years of MAGA? Now you care about global supply chains? I am a keen reader of this excellent blog, but can't help it when I see such double standard. By the way, I agree with you that suspending patents is beyond "wrong".

    1. I was right here loudly propounding free trade and free immigration. If this offensive comment had been about anyone else I would have blocked it.

    2. I don't think this is offensive, I have no intention to be offensive and appreciate the openness to keep the comment. I know you promote free trade and immigration, but didn't write critically about unpredictable trade policies that raised "EPU" and disrupted GVCs in the way you write about "the need to use our global supply chains". In other words, you may think you are loudly promoting trade/immigration, but never criticized the policies in place (in that sense you may not be as loud as you think). Please don't take offense, I am just trying to have a conversation and I enjoy this blog.

    3. "Why weren't you saying this under Trump," especially when factually inaccurate is an ad-hominem attack alleging one massages message for partisan advantage. Verboten here. "Well what about x?" is nearly but not quite as bad. Here, stick to logic, facts, and at best "how does this square with your previous statement about y," looking for logical consistency. I delete ad-hominem attacks on other people in comments. For transparency and free speech I allow them about me, but respond.

    4. I will try to do better next time, but this is a very literal (exaggerated) interpretation of what constitutes an ad hominem "attack". If I want to point out "silence" about x, it begs the question of "who" being silent about x. As far as being inaccurate, I beg to differ. You may think you've been loud about free trade, but to avoid another "ad hominem" slap on my words, I will refrain from fully explaining my disagreement. In any event, I think the volume on free trade, the rule of law is louder now. And I never linked anything to partisan advantage. I appreciate the take on transparency and free speech. Thanks.

  3. As you've said before Dr. Cochrane: it's all about incentives.

    Patent law really got innovation going back in England and helped get the ball rolling for the Industrial Revolution about 200 years later. Temporary monopolies in exchange for government protection of IP that also provided inspiration for further innovation.

    Yes, bad idea to suspend patents. If anything, expand protection of IP through proper enforcement. Without enforcement, there is zero incentive to share knowledge.

  4. Patents are country-specific. A patent granted by the United States of America does not give the patentee rights to exclude a competitor from producing or distributing a product in Canada that infringes on the U.S. patent. In order for an inventor or the inventor's assignee to gain patent protection in a foreign country, the inventor or the assignee must apply for patents on the invention in that foreign country. Pfizer and Moderna and AstraZenica-Oxford would have applied for patents in multiple countries, and each country would decide for itself whether or not to grant the applicant a patent on the invention.

    It is a feature of international patent law convention, that the patent holder must practice the invention covered by the patent in the country granting the patent or licence the patent to others to do so. If a patent holder fails to practice the patented invention in the country then there is provision in the law that allows a third party to force the patent holder to licence the patent rights to that third party for a nominal licencing fee. The third party must be 'one who is skilled in the art' of the invention for this to be economically viable, for otherwise the product produced by the third party will not likely be successful technically or otherwise.

    Patents are not documents that disclose the full requirements or features of the invention, but the disclosure is sufficient (or should be) for one skilled in the art to reproduce the invention or the invention's benefits with a high level of confidence from the information disclosed in the patent document. Often, this presumption is violated--the inventor or applicant (assignee) withholds crucial information (intellectual property) that renders the patent null. In the case of pharmaceuticals, patents cover only one aspect of the invention. Forced licencing in that circumstance would not achieve the ends that the proponents of forced licencing desire.

    A patent grants a monopoly over the use, production and distribution of the invention within the jurisdication of the patent grantor. A patent is considered to be property of the inventor or the inventor's assignee. The owner can do what any owner can do with his or her own property. The courts in the U.S. look on property the same way that the 17th Century English courts looked on property--as a fundamental right not to be extinguished or abridged without due process in accordance with the common law jurisprudence.

    We ought not to be surprised over the NYT's point of view in this day and age. It shares may attributes with Puritanism, absent the religious overtones, but with that sect's moral imperative impulse. It points to a singular characteristic of the current decade--that inputs to every action a moralistic judgement absent every other consideration. It puts every question to a binary test: is the individual at the center of the controversy a 'believer' or 'denier'. Without passing legislation to the effect, this is a manifestation of the Test Act, an act of the English parliament of the 16th and 17th centuries that was considered anethema to the naisacent republic that the U.S.A. once was.

    What goes around, comes around--apparently.

  5. I am curious how to account for the investment of government money weighs into this issue. Operation Warp Speed funds, I believe went to all but one of the pharmaceutical companies. Previous to C19 most pharmaceutical research was associated with university medical research, especially mRNA research that is the basis of many of the vaccines. There needs to be balance, I do not mind a reasonable profit and reasonable liability protection but do take issue with usury actions. Conversely, I have issue with the taking of intellectual property. But feel that we, US tax payer, invested significantly in the mRNA vaccine intellectual property and deserve to have a say in the profits, distribution, etc.

  6. I'm not a big fan of patents. I think they stifle more innovation than they incentivize. The real issue is with excessive regulations. I haven't looked into these particular patents, but have seen many biotech patents granted that would be obvious to the typical grad student, let alone someone "skilled in the art". They also tend to block more startups than they help. Large companies have patent war chests to protect them against patent claims of other companies. "Pausing" the J&J vaccine over a possible one in a million issue doesn't make things easier with getting vaccines to other countries or with potential for lawsuits.

    I totally agree with you on the DPA. Ordering companies to produce vaccines in nonsensical. Trying to control inputs by reserving them for vaccines just creates friction in the system and interferes with cancer thereapies/research as well as animal vaccine production, etc.

  7. Here is a fun one for JC:

    This is Japan:

    The percentage of a group who expect (inflation to) "Go up" in April was 76.0%, an increase of 4.7% points from the previous month.

    The percentage of a group who expect "stay the same about 0%" in April was 14.5%, a decrease of 1.7% points from the previous month.

    The percentage of a group who expect "Go down" in April was 6.3%, a decrease of 2.7% points from the previous month.


    But Japan has had 33 years of no inflation. But consumers expect inflation.

    There is something deep in the soul of modern humans, and they expect inflation, and see inflation, even when a CPI is flat.

    Perhaps even some macroeconomists are vulnerable to this sentiment.

  8. There's one small error in this post. It's about courts in India. If someone sues a drug manufacturer in India, the verdict will be rendered in 30 years. Then come the appeals which might take another 20 or so. I don't think courts in India are what firms care about. The problem in India is much deeper. It's precisely that the courts and state don't really enforce laws, but instead act at the whim of the government. Given how capricious the current government is, I'm not surprised at all if firms aren't looking for US protection before dealing with the Indian government.

  9. As a free market and small government guy you may want to back off from so wholeheartedly supporting patents, a.k.a. state granted monopolies.


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