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I don't think investing money necessarily transfers the ownership of things bought with that money to the investor. The government could put in their contract "we get all your drugs that you invent" if they wanted that. But this would be like startup VCs getting 100% of your company, or your bank getting the appreciation on your house when you sell it, etc. They could ask for those things, and you could say no... and most people do say no.

The government wants to focus research into particular areas, not compete with the pharmaceutical companies. (At least the money isn't for making a new advertising platform, which is probably something a VC would fund in a heartbeat. Drug discovery is too risky for them.)

You may disagree with that, but that's their intent. If you want the government to be discovering drugs and testing them, definitely tell your elected representatives that that's what you want, and the system can change. (Or get rich from an advertising platform and do it yourself! ;)

Even the VCs get a better deal here, they end up with equity. If followed that model, then the taxpayer would own at least 50% of the patents generated (via shares the corporate entity that owned the patents).

Under the current model the taxpayer gets nothing, which hardly seems reasonable given the amount of capital they provide.

Don't we already own a portion of what gets created though? If Merck makes a boatload of money off of this, the taxpayers will indeed be taking a cut.

No we decided that corporate taxes should be low so the company can reinvest. The shareholders benefit.

>If Merck makes a boatload of money off of this, the taxpayers will indeed be taking a cut.

Merck's effective tax rate was 15% in 2019 and 20% in 2020[0]

They make boatloads of money by underpaying their taxes [1]:

  In 2004 Merck disclosed that it might owe the U.S. Internal Revenue Service (IRS) some $2 billion after the agency notified the company that it was disallowing deductions Merck had taken since 1993 relating to a partnership set up in 2003 as a vehicle for obtaining financing for the acquisition of Medco.
  
  In 2006 the Wall Street Journal reported that Merck had set up a subsidiary in Bermuda that, in partnership with a British bank, was given title to the patents for the company’s blockbuster cholesterol drugs Zocor and Mevacor, thus saving Merck an estimated $1.5 billion in federal taxes over ten years.
  
  Shortly thereafter, Merck disclosed that it was embroiled in four separate tax disputes in the United States and Canada with total potential liabilities of more than $5 billion. In 2007 the IRS announced that Merck had agreed to pay $2.3 billion to settle its federal tax disputes.

They also make additional boatloads of money overcharging Medicare/Medicaid:

  In 2008 Merck agreed to pay the federal government more than $650 million to settle charges that the company routinely overbilled Medicaid and other government programs and made illegal payments to healthcare professionals to induce them to prescribe its products.
  
  In December 2011 the Massachusetts attorney general announced that Merck would pay $24 million as its part of a $47 million settlement reached with 13 drugmakers to resolve allegations that they overcharged the state’s Medicaid program.
  
  In 2012 the Louisiana attorney general announced that Merck and four other companies would pay a total of $25.2 million to resolve allegations that they overcharged the state’s Medicaid program.

[0] https://www.stock-analysis-on.net/NYSE/Company/Merck-Co-Inc/... [1] https://www.corp-research.org/merck

That's 15%-20% we the taxpayers own then :)

By that logic, they would own a similar share of Papa John's, your corner grocery, and companies funded by VCs or banks instead of public funds.

Then is the investment return fair? Do people kind-of get health and Merck gets their fleece?

> Then is the investment return fair.

That's a totally different conversation, and it has to start with what we mean when we say 'fair'. My definition is very likely different than yours in the context of taxes.

> Merck's effective tax rate was 15% in 2019 and 20% in 2020

20% is not unreasonable. That's similar to the European OECD nation average of 21.7%.

> The government could put in their contract "we get all your drugs that you invent" if they wanted that.

"The government" isn't an entity that can unilaterally decide anything. I think it's incredibly revealing that very little of this process is understood or publicized.

There is a clear path for taking ip that is beneficial for national security

I think a better option is for the pharmaceutical corporations themselves to reduce both their advertising budget and their shareholder dividends and pour those funds into their own independently financed research institutes (see Bell Labs for the model followed in the past).

The best way to encourage them to do this is to eliminate exclusive licensing of inventions financed even in part by the taxpayer, i.e. NIH, NSF funding etc. Under this model, Merck would still be able to produce the drug but any other competitor could also produce the drug, and then you'd have a competitive production process (see steel production etc.) which would, I believe, create the highest quality products at the lowest cost to the consumer.

Where is the motivation for Merck to pour funds into a drug they don't get any return on?

And if the government is doing this R&D instead of pharma cos, what is their motivation to perform? If you're a government apparatchik making decisions about what drugs to invest into R&D for, what penalty and upside do you get for being wrong/right? Getting fired or getting a promotion? That's hardly motivating at all.

Your proposal has terrible incentives for everyone all around and would certainly reduce innovation in the long run.

I think you completely misunderstand my point. Merck would be inventing new drugs on its own dime with no government input so it would own that IP outright, yes?

This allows universities to concentrate more on the kind of fundamental basic research that underlies all applied research discoveries; this basic research may not produce IP but is utterly foundational for new applied discoveries.

But the entire reason Merck and co don't pour money into foundational and/or exploratory research is because it's unprofitable. Giving the money to universities to do the research instead of doing it themselves doesn't change that. This is why things like DARPA exist in the defense industry: to fund exploratory research that would otherwise be unprofitable.

Government is already "profiting" by getting novel lifesaving drugs for their money. That's why if your research doesn't deliver results you don't get more grants. They also get a return in the form of jobs for their citizens. I don't see why it's govt's job to make profits off every venture, since their goal should be to maximize wellbeing of their citizens instead. And even if you think they should profit, the tax dollars from even a single successful drug would easily pay for a full year's NSF grants to the entire scientific community.

Bell Labs was hardly unprofitable, was it? So Merck can fund its own Bell Labs, can it not? Just invert the current typical R&D : S&M budget at any pharma outfit, which is like 1 : 3 at present (research vs. marketing).

Yes, they may have to cut shareholder dividends, yes a more competitive market will mean lower profits. However we are talking about people's lives here, and I don't care about Merck's shareholder dividends at all in relation to that.

AT&T was a national monopoly. Merck has a monopoly on a few drugs. The difference is huge.

> lower profits... I don't care about Merck's shareholder dividends

Aaand we're back to terrible incentives. You can't force people to do things that don't have incentives. Even the Soviet Union had incentives. The more you mandate regulation, the more people will find ways around it, either by finding creative ways around your regulations or just moving to other nations with more friendly policies (e.g. China, Europe). The only regulations that work are the ones where peoples' incentives are aligned with what government wants to achieve.

The phase III trial was cut short at the recommendation of the independent monitoring board. Apparently the effect was so strong they recommended seeking Emergency Use Authorization earlier, rather than waiting for the trial to finish, presumably so that they could save more people’s lives who might get sick and die waiting for trials to finish.

This is a consequence of the Bayh-Dole Act (https://en.wikipedia.org/wiki/Bayh%E2%80%93Dole_Act).

Regarding your edit: there isn't any shortage of covid-exposed people right now.

Often, trials lag because not enough participants fulfilling the criteria can be recruited. This is especially pronounced in rarer diseases.

Plus, you will know outcomes of covid pretty quickly. Compared to diseases such as Alzheimer or multiple sclerosis, covid develops fast.

You can thank Bob Dole for that wrt patents from Federal research funds.

TIL.

I'm slowly learning that, when the government has a choice between and obvious, smart way of operating, and a clearly dumb way. They choose the dumb way because some chucklefucks in Congress made it illegal to operate the smart way.

Not sure it's dumb... it's just the way... Academic institutions should be able to patent basic research. One would argue that the govt gets a 30% tax cut.. now maybe that's excluded since mosts schools are nonprofit but idk.

> Clearly, this patent should be assigned to the federal government, not to Merck

Would Merck have done the research if they didn't get to own the patent?

Merck didn't do the research, Emory did the research. Now, maybe you're thinking, would Merck finance the clinical trial of like 1000 people if they didn't get exclusive licensing right to the Emory-owned patent?

Well, perhaps in a non-exclusive licensing situation, other pharma outfits, or a consortion, or how about the federal government? would pay for the clinical trials. I'd guess this situation - competitive manufacturing - would result in a massive drop in the price of the drug for people who needed it.

> or how about the federal government

This is the answer I was fishing for. If you want the government to own the patents, they should do the work.

If they outsource some of the work in exchange for the patents, perhaps the work that they are outsourcing is specialized and difficult for them to achieve.

Say you owned the patent, the research was solid, high likelihood it would work, but needed a 1000 patient phase 3 trial and whatever, that you can't and don't know how to do.

Would you "outsource"¹ the work for price of an exclusive right to make the drug? Would you ask for something in return?

Remember, it is we - the people - that have the right and resources, and in our name our representatives distribute them to researchers and make the deals with salesmen.

¹ more like sell the businness

* Personally not from US, wanted to show the framing. In any case, most research is an international effort, so maybe I shouldn't completely exclude myself.

> Clearly, this patent should be assigned to the federal government, not to Merck

How about a proportional slice? That would seem fair. IP and products can have fractional ownership.

What does "fair" have to do with anything? Are you suggesting that your proposal maximizes the amount of health-improving interventions that society will receive in the future? Do you have any reason to conclude that what you're suggesting will be even a slight improvement?

As a taxpayer / healthcare consumer who is not employed in pharma -- yeah, it would be nice if we (the US) did a little less subsidizing of drug development for the rest of the world. Proportional ownership of sponsored drugs seems like a nicely aligned incentive. What am I missing?

I don't know how the pharma industry decides what to pursue, but it is at least plausible that part of the incentive for what they do depends on being able to price discriminate in sales to other countries. Before suggesting we tear down Chesterton's fence, it seems reasonable that you should have more justification than just that it seems fair to you.

I don't understand your concern -- how does proportional ownership eliminate pharma's ability to price discriminate? I just think the US government should receive some prorated portion of profits from drugs they subsidized development of, which can be reinvested into further development.

These are separate issues. You said that the US is subsidizing drug development for other countries and suggested that you would prefer that we didn't. That affects drug development incentives.

You're also saying that the US government should have some of the profits that the drug companies currently have. Presumably this would affect something that drug companies do. Shouldn't you be concerned that the thing it will affect is them developing new drugs?

Maybe the current situation isn't optimal but there's no reason to think that your suggestions would improve things.

You’re sounding rather aggressive.

It seems reasonable that if I finance X% of something, I get to enjoy X% of it. Or Y%, adjusted for non-monetary investment by someone else.

It seems strange that the state finances (drug development) research, the companies say “cheers” and proceed to keep all the profits.

Such profits could for example go towards universal health care improvements.

Maybe we want different things from the US government and its health care system. I'd like to optimize health outcomes. You have some proposals. Can you explain how they lead to something better than the status quo? What are the unintended consequences? Do drug companies invest in less drug development if they get X% less from developing drugs? Have you taken this into account in your advocacy for enjoying the X%?

Or maybe you have a different objective?

Ultimately the issue is the licensing of the patent (which is likely retained by Emory or its non-profit affiliate), and under Bayh-Dole universities can exclusively license it.

By introducing non-exclusive licensing, then you have a competitive situation in which the lower-cost manufacturer can provide the drug more cheaply but at the same quality and monopolistic pricing schedules cannot be introduced by the likes of Merck.

The taxpayer benefit is lower cost of drugs invented with taxpayer funds.

The trial was stopped early because the results were overwhelmingly positive, and thus it was considered unethical to leave the placebo group untreated.

Why do people here always want to reduce the equity and income of pharma and biotech scientists?

It must be because they have extensively modeled the optimal societal benefit of reducing the financial incentive to these entities.

We would need to examine the research proposals, and the data rights included in them, and if any other institutions providing matching funds, that resulted in this drug.

Having said that, I broadly concur that we need to examine to what extent the federal government, and all of us taxpayers, should own outright some, or all as a % of the IP.