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A blog written for those whose interests more or less match mine.

Why Joe Biden Punched Big Pharma in the Nose Over Covid Vaccines

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Matt Stoller has a very interesting column today:

Today I’m writing about Joe Biden’s attack on vaccine monopolists. What happened is a bit technical and involves a bunch of weird international agreements on patents and IP, but the short story is that what Biden just did could be as significant as Reagan firing the air traffic controllers in 1981, or Teddy Roosevelt taking on JP Morgan in 1904 over a giant railroad combination. It’s a signal that the American order is changing.

Plus, beef prices are at record highs, so why are cattle producers going bankrupt? And why did we face meat shortages during the pandemic? I talked to South Dakota ranching advocate Bill Bullard about why our national food systems are collapsing.

Biden: We Must Vaccinate Everyone in the World

Three days ago, United States Trade Representative Katherine Tai announced that the United States supports a global waiver on intellectual property protections for Covid vaccines. There are two excellent vaccines. The first is produced by a partnership between industry giant Pfizer and the German company BioNTech, the second by multi-billion dollar start-up success story Moderna in a partnership with the National Institute of Health. Biden took the first step in a legal process to force these firms, among others, to share their technology.

The announcement sent shock waves throughout the world. French President Emanuel Macron jumped on board, director of the World Health Organization Tedros Adhanom Ghebreyesus called it a “monumental moment in the fight against Covid,” the FT’s Edward Luce said Biden had made “a brilliant move,” and political leaders globally began putting pressure on their own governments to follow suit. “Thank you, President Biden and USTR Katherine Tai,” said Lori Wallach of Global Trade Watch, a key leader in the campaign.

The pharmaceutical industry reacted with shock and anger. “In the midst of a deadly pandemic, the Biden Administration has taken an unprecedented step that will undermine our global response to the pandemic and compromise safety,” read a statement from the trade association group PhRMA. The US Biotechnology Innovation Organization pronounced “extreme disappointment” and the European Federation of Pharmaceutical Industries and Associations warned this move will lead to counterfeit vaccines.

What just happened? And what does it actually mean?

There are multiple layers to this story. I’m going to offer an explanation of how this waiver affects the global attempt to address the pandemic, the politics behind the decision, and what it means going forward. The short story is that this is an unexpected and major defeat for the pharmaceutical industry, all the more bizarre that it comes from Joe Biden, who in his career generally deferred to big business. As one Washington lobbyist told the Financial Times, “Nobody really thought Biden was going to take on the pharmaceutical lobby, [they thought] that he would be too scared. But before the financial crisis, everybody thought the financial services industry was untouchable, then that changed. This week showed that pharma companies are the new banks.”

To understand what happened, we have to start with the development of the vaccines themselves.

The Vaccine Success Story

The development of Covid vaccines is the single most successful U.S. government program since the elimination of polio. Vaccines have traditionally taken more than a decade to develop. Yet, in this case, less than a year after the virus was first genetically sequenced by Chinese scientists and posted to the web, trucks began rolling out of factories with safe and effective vaccines ready for deployment. Today, more than a billion doses have been injected into arms, and wealthier countries are seeing the pandemic recede.

In part, the global spread of pharmaceutical technology is one reason for this success. China, Russia, Europe, and the U.S. all have put out vaccines that work. Yet the best new vaccines come from the U.S. or Europe, and use a new technology called mRNA. The old way of making vaccines consisted of growing a weakened or deactivated germ, which would create an immune response by getting your body to respond to something that looked like a deadly virus. But making these kinds of viruses was cumbersome because they have to be grown, and they don’t always work well. Flu vaccines are grown in chicken eggs, for instance, and that takes a long time.

The mRNA vaccine by contrast is not a weakened germ, it is a set of instructions to your body to produce a custom-designed protein shaped like a part of the Covid virus, which your immune system then responds to. In doing so, you acquire immunity. The mRNA vaccine is programmable, meaning that it’s easy to update the vaccine to address new diseases or new variants, and because it is chemical, production scales quickly. Think of the difference between the old way of doing vaccines and mRNA as similar to printing books by woodblocks, each of which has to be carved by hand, versus using moveable type printing presses.

The mRNA technology comes from Katalin Kariko, a Hungarian immigrant who perfected the technology with fellow scientist Drew Weissman at the University of Pennsylvania. The two licensed mRNA to two small firms, BioNTech in Germany and Moderna in the United States. BioNTech spent years perfecting the technology and eventually got German government support. Meanwhile, Moderna received U.S. government funding in the 2010s from the Defense Advanced Research Projects Agency (DARPA), the same unit that helped create packet-switching technology in the 1970s.

When the pandemic hit, three things happened. First, Pfizer and BioNTech quickly agreed to work together to scale and develop their mRNA vaccine. Second, government scientists at the National Institute of Health designed a spike protein molecule and sent it to Moderna, which used it as the basis for its mRNA vaccine. Third, the U.S. government, through what was called Operation Warp Speed, created a market for vaccines, signing guaranteed-purchase agreements with a number of firms, including Pfizer/BioNTech and Moderna, to secure hundreds of millions of vaccine doses for the U.S. population.

This process worked remarkably well. The first country to have more than 50% of its population vaccinated, Israel, basically has no Covid anymore, and Covid is dropping rapidly everywhere these vaccines have been widely deployed. If we could deploy vaccines worldwide, we could effectively eradicate Covid, or at the very least, make the outbreak of new variants that can evade vaccines much less likely.

Where there’s great success, there’s great money. Pfizer is projecting it will make $26 billion in 2021 from its vaccine, and Moderna will make $18.4 billion. That’s a good thing. These firms should make large sums of money from a fantastically useful vaccine, even though the technology was publicly financed.

Still, despite this success, there’s a significant vaccine shortage. The world will need 10-12 billion to be fully vaccinated, and Moderna and Pfizer/BioNTech won’t produce that much. Pfizer/BioNTech, for instance, forecast production of 2 billion doses in 2021, and Moderna will make something on the order of a billion doses. That’s a lot, it’s just not nearly enough. Indeed, at this rate, some countries aren’t going to start significant vaccination campaigns until 2023. That’s quite dangerous, because if the pandemic keeps raging, it’s more likely that a vaccine-resistant Covid variant emerges. If that happens, such a variant will spread across the already vaccinated areas of the world.

So making sure we have a global vaccination campaign looks like a logistical challenge, but also a necessary one. That said, there’s a fly in the ointment, a ghoulish incentive at work for Pfizer, BioNTech, and Moderna.

Pfizer and the “Durability of the Franchise”

On an investor call last month, the CEO of Pfizer, Frank D’Amelio, discussed what would happen to revenue from his vaccine product as the Covid pandemic ends, what he called the “durability of the franchise.” He told analysts not to worry. People in rich countries will need annual booster shots, and that is where Pfizer will make real money.

For these annual treatments, Pfizer will be able to charge much more than it does now. The current price for a covid vaccine, D’Amelio noted, is $19.50 per dose. He told analysts of his hope Pfizer could get to a more normal price, “$150, $175 per dose,” instead of what he called “pandemic pricing.”

The ghoulish part, however, is why there will need to be annual boosters. It’s not because the vaccine strength wanes over time, though that might happen. It’s because, as D’Amelio told Wall Street, there will be new variants emerging from abroad that can evade the vaccine. And how will variants emerge abroad? Well as outbreaks occur in non-vaccinated parts of the world, new strains will naturally occur as the virus mutates. If the rest of the world gets vaccinated, however, new variants won’t arise.

What D’Amelia really wants is to be able to charge $150 for a vaccine he is now charging $19.50 for. But D’Amelio is also assuming that there won’t be a global effective vaccination campaign. And, in a narrow sense, while Pfizer’s main goal is to keep prices high, it is actually against Pfizer’s financial interest to have the rest of the world vaccinated. If the world gets vaccinated, Pfizer won’t necessarily be able to sell expensive booster shots in rich countries who can afford them. Yikes.

The corporate world, sans Pfizer, has a very strong reason not to want a vaccine-resistant variant. A new variant of Covid could force the world back into lockdown, which is expensive. The International Chamber of Commerce, hardly a bastion of lefties, put out a study asserting that not sufficiently vaccinating poor countries will cost $9.2 trillion (with wealthy countries like the U.S. bearing half the cost). Covid isn’t good business for most firms, but it’s great for Pfizer and Moderna.

So what is the holdup for global vaccination? One argument is that there isn’t . . .

Continue reading. There’s much more.

Later in the column, he discusses why beef prices are rising as cattle prices are dropping. That begins:

Beef Is Expensive. So Why Are Cattle Ranchers Going Bankrupt?During the Covid pandemic, Americans went to the supermarket and found something that hadn’t happened for decades – a meat shortage. There was plenty of cattle, but the beef wasn’t getting to the supermarket shelves.

What happened and why?

To answer this question, I asked Bill Bullard, a former cattle rancher and the current CEO of R-CALF, a cattle producer-only membership organization focused on the viability of the U.S. cattle ranching industry. “We have so skeletonized the entire live cattle and beef supply chains that it is no longer capable of withstanding a shock,” he said, “whether it be the covid pandemic or a climatic circumstance.” This shortage was a wake-up call. “The industry is incapable of meeting our national food security needs.”

Bullard is an ardent anti-monopolist, a viewpoint developed through hard-won experience dealing with a consolidated meatpacking industry. He noticed problems with our cattle markets becoming more severe in 2014. That’s when beef prices and cattle prices started to diverge. . .

Read the whole thing.

Written by Leisureguy

9 May 2021 at 5:19 pm

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