The response reflected a longstanding belief that individuals shouldn’t be able to claim monopolies on medical science. Breakthrough discoveries, unlike the technologies inventors would design to apply those discoveries, should remain open and free to a global community of doctors and researchers, with the backing of the government if necessary.
These norms persisted into the postwar era. In 1947, U.S. Attorney General Samuel Biddle argued that the government should maintain a default policy of “public control” over patents. This, he said, would not only advance science, public health, and marketplace competition, it would also avoid “undue concentration of economic power in the hands of a few large corporations.” When asked on national television in 1955 why he didn’t patent the polio vaccine, Jonas Salk famously borrowed the quip leveled a century earlier against the Boston dentist who invented ether. “Could you patent the sun?” he asked.
By then, though, the economics of medicine had begun to shift, and with them the medical ethics surrounding patents. The public university at that time had become a giant laboratory where government and industry scientists worked together designing missiles, inventing medicines, and engaging in basic-science futzing under the “Science of the Endless Frontier”—a concept promoted by New Deal science-guru Vannevar Bush, who believed that the government should fund the open-ended pursuits of the most gifted scientists. Out of this new world arose new interests and new questions: What happens to the inventions spinning out of government-funded labs? Who owns them, who can license them, and for how long?
Toward the end of the 1960s, new mechanisms hatched out of the National Institutes of Health would transform the industry and drastically expand the opportunities for private profit at the expense of the public interest, ushering in a post-Biddle age of virtually unrestricted industry access to taxpayer-funded science.
In 1968, the NIH’s general counsel, Norman Latker, spearheaded the revival and expansion of a program that had, in the years before the government spent much on science, permitted nonprofit organizations—universities, mainly—to claim monopolies on the licenses of medicines developed with funding from NIH. Called the Institutional Patent Agreement program, it effectively circumvented rules that had been in place since the 1940s, not only making monopolies possible, but also greatly expanding their terms and limits, giving birth to a generation of brokers whom universities relied on to negotiate newly lucrative exclusive licensing and royalty deals with pharmaceutical companies.
In an industry where active ingredients are often bulk-purchased for pennies and sold in milligrams for dollars, the patent is more than just the product. It is a license to print money. An awful lot of money.
Before 1968, inventors had been required to assign any inventions made with NIH funding back over to the federal government. Now, those inventions were being sold to the highest bidder. “Nineteen-sixty-eight was the year the NIH threw its support behind a drug development market based on patent monopolies,” says Gerald Barnett, an expert on public-private research who has held senior licensing positions at the University of Washington and University of California. “It’s kept it there ever since.”
Watching these developments closely was the group of nominally libertarian economists, business professors, and legal scholars at the University of Chicago, known collectively as “The Chicago School.” The industry’s regulatory travails and the new opportunities to commercialize science that had emerged in the late 1960s were of particular interest to the economist George Stigler, a founding member of the Chicago School and its most celebrated theorist after Milton Friedman. Stigler is remembered today as the father of “capture theory,” which holds that because industries have a bigger stake in policy than individual citizens, they will exert greater control over shaping that policy. Industry, he argued, will seek to use their power to hamper competition and shore up their position in the market. Regulation never benefits the public, he believed; instead, it benefits the very industry being regulated. There is a lot of merit in this theory. But instead of arguing for more democratic control over regulation, Stigler argued for its elimination.
Though members of the Chicago School opposed monopolies, Stigler and his colleagues hated the government, not to mention the burgeoning “consumer-rights” pro-regulation movement of the 1970s, even more. If forced to choose between private and public power, there was no contest. Stigler developed his openly un-democratic ideas as chair of the Business School’s Governmental Control Project, whose name reflected a double meaning at the core of the project it served: Advancing the “free market” against government control of the economy can be achieved not only by rolling back the state and eliminating its agencies (the approach Milton Friedman favored—and promoted in the Newsweek column he wrote between 1966 and 1984), but by the invasion and colonization of politics on multiple fronts, especially patent law, regulation, and antitrust and competition policy.
“Pharma was the perfect test case for a neoliberal project that celebrates markets, but is fine with large concentrations of power and monopoly,” says Edward Nik-Khah, a historian of economics who studies the pharmaceutical industry at Roanoke College. “Stigler and those influenced by his work had very sophisticated ideas about how to audit and slowly take over the agencies by getting them to internalize [their] positions and critiques. You target public conceptions of medical science. You target the agencies’ understanding of what they’re supposed to do. You target the very thing inputted into the regulatory bodies—you commercialize science.”
In 1972, Stigler organized a two-day event, “The Conference on the Regulation of the Introduction of New Pharmaceuticals.” Major drug makers like Pfizer and Upjohn pledged funds and sent delegates to the conference—a first and fateful point of contact between Pharma and the organized movement to undo the New Deal and radically remake the U.S. economy to serve an ideology of unfettered corporate power.
Born of this meeting was the echo chamber of ideas, studies, and surveys that the pharmaceutical industry has used to buffer an increasingly indefensible system against regular episodes of public outrage and political challenge. Organized and initially staffed by alumni of the Chicago conference, its hubs are the American Enterprise Institute’s Center for Health Policy Research, founded 1974, and the Center for the Study of Drug Development, founded in 1976 at the University of Rochester and later moved to Tufts. Their research has succeeded in producing and policing the boundaries of the drug pricing debate, most successfully propagating the myth that high drug prices are simply the “price of progress”—carrots that drug manufacturers need to entice them to sink hundreds of millions into research and development, because drugs cannot be developed or tested any other way. In the early 2000s, these think tanks gave us the deceptive meme of the “$800 Million Pill,” a dubious claim about the “real” cost of developing a single drug, which has provided cover for, among other things, George W. Bush to sign away the government’s right to negotiate drug prices in 2004. (The same think tanks now talk about the “$2.6 Billion Pill.”)
“The point of pharma’s echo chamber was never to get the public to support monopolistic pricing,” says Nik-Khah. “As with global warming denialism, which involves many of the same institutions, the goal is to forestall regulation, in this case by sowing confusion and casting doubt about the relationship among prices, profits, innovation and patents.”
While Stigler was marshaling researchers in the think tank world, the market was evolving to include more opportunities for speculative investments and bigger IPOs. Venture capital firms in the 1970s began investing heavily in biotech; soon, young biotech firms, established drug makers and Wall Street were pushing for changes in licensing and patent law to make these investments more profitable. They were aided in this by Edward Kitch, a law professor, Chicago School protégé of Richard Posner, and veteran of the ’72 conference, who worked with AEI’s Center for Health Policy Research. In 1977, he published “The Nature and Function of the Patent System” in The Journal of Law and Economics. It enumerated the many advantages of patents and IP rights, not least their role as bulwarks against the “wasteful duplication” of competition. Patents create the conditions for increased profits that, in turn, increase private sector R&D and spur innovation. (If this sounds familiar, it’s because the paper helped press the record for what has since become the industry’s favorite tune, “Price of Progress,” sung over the years in a thousand variations, including the strained aria of Michael Novak’s Pfizer-funded essay on the moral and Godly bases of monopoly patents, The Fire of Invention, The Fuel of Interest.)
These efforts contributed to a revolution in biomedical IP law during . . .