Big Pharma and Monopoly Capital: Four Dynamics in the Decline of Innovation

Many concerns have been raised about the ongoing processes of medical innovation in Big Pharma, culminating in the perception that the industry’s production relations are hampering its productive forces.⁷ In addressing these concerns, the term intellectual monopoly capitalism is used to understand the way in which technological progress in Big Pharma drives pharmaceutical innovation towards the logic of expropriation and rent-seeking, rather than the normal capitalist logic of exploitation and profit-making.⁸ Today’s intellectual monopolies in the pharmaceutical industry are not simply lazy rentiers who contribute little to the production process and exploit labor––they also discourage new investment in R&D, leading to a stagnation of medical innovation in terms of changes that lead to therapeutic improvements at competitive costs.⁹ When measured in terms of significant therapeutic improvement, medical innovations today are largely small variations on existing products.¹⁰ To understand this trend, Paul Baran and Paul M. Sweezy’s concept of monopoly capitalism is still a useful starting point.¹¹ Intellectual monopoly capitalism has key features that distinguish it from classical monopoly capitalism. The example of Big Pharma illustrates the innovation system and the workings of intellectual monopoly capitalism in the pharmaceutical industry. This analysis reveals not only the profound forces that give rise to intellectual monopoly capitalism, but also highlights the significant changes that the pharmaceutical industry is undergoing today.

Intellectual Monopoly Capitalism and Innovations in Health Care

Karl Marx insisted that a proper understanding of capital must begin with an analysis of value. For capital, value has no meaning unless it is surplus value. As Marx put it in the Grundrisse: “To develop the concept of capital it is necessary to begin not with labor but with value, and precisely, with exchange value in an already developed movement of circulation.”¹² For money to become capital, it must have the potential to generate surplus as it circulates in processes of commodity exchange.

Although the classical Marxist concept of surplus is closely linked to the labor theory of value, Baran and Sweezy argued that their concept was broader and particularly suited to the recent development of capitalism in Western countries. Baran and Sweezy saw monopoly capitalism as encompassing more aspects of society, such as the escalation of militarism and imperialism, as a means of increasing economic surplus, the key concept they used to develop the theory of monopoly capitalism.¹³ In Monopoly Capital, Baran and Sweezy state that capitalist society is a producer of growing economic surplus. Economic surplus, as Baran and Sweezy define it, is “the difference between the income that could be generated with existing economic and technological means and the costs of productive labor.”¹⁴ In their view, the rise of giant oligopolistic firms has tended to increase the economic surplus in society. Austrian economist Josef Steindl also explained that in a competitive market, firms tend to invest and innovate in order to survive and competition leads firms to expand, driving higher-cost producers out of the market. After this, oligopolistic firms tend to coordinate their prices, leading to price rigidity.¹⁵ Because the adjustment is made through quantities rather than prices, less efficient firms survive, and profits that are not reinvested grow, creating excess capacity.¹⁶ Therefore, according to Baran and Sweezy, “since surplus which cannot be absorbed will not be produced, it follows that the normal state of the monopoly capitalist economy is stagnation.”¹⁷ There is thus an inevitable paradox between high economic surplus and low incentives to use new techniques in monopoly capitalism. This understanding points to the key problem that we now face under intellectual monopoly capitalism. Before returning to this point, I discuss how Ugo Pagano and Susan Sell have addressed it.

Pagano, an Italian economist, explains that the main characteristic of intellectual monopoly capitalism is that “monopoly is not simply based on the market power due to the concentration of skills in machines and management; it becomes also a legal monopoly over some items of knowledge, which extends well beyond national boundaries.”¹⁸ This explanation points to the tremendous growth of intellectual property and the power relations it establishes by law. Under intellectual monopoly capitalism, technological progress generally pushes the knowledge economy toward the logic of expropriation and rent-seeking, rather than the ordinary capitalist logic of exploitation and profit-making. Specifically, three key features can be observed:

1. While knowledge should be a public good in terms of its non-rival, nonexclusive character, the legal creation of intellectual property rights enables knowledge to become a private right, with the double effect of both stimulating and blocking innovation;
2. to the extent that intellectual monopoly capitalism is made possible by the exclusive enclosure of ideas in privately owned fields, privately owned intellectual property has a blocking effect on the development opportunities of others; and
3. while the 1990s witnessed a booming knowledge economy, the overall effect of the protectionism that characterizes intellectual monopoly capitalism has been a global shrinkage of investment opportunities since the early 2000s––a trend that led to a crisis of intellectual monopoly capitalism and was a primary cause of the 2008 financial crisis and the ensuing Great Recession.¹⁹

Sell analyzed the impact of intellectual monopoly capitalism on medical innovation and observed a declining pace of innovation in terms of the development of new drugs by pointing to three key features of intellectual monopoly capitalism in the pharmaceutical industry:

1. The pharmaceutical industry has seen a shift from large, vertically integrated companies carrying out virtually all stages of drug discovery to large companies with less innovation, and an increase in vertical disintegration and horizontal integration through mergers and acquisitions;
2. financialization in the pharmaceutical industry suggests the strategic priority has shifted from delivering value to customers to delivering value to shareholders; and
3. per economist William Lazonick and colleagues, financialization slows the pace of medical innovation since the majority of profits are used for share buybacks and dividends and therefore there is less money available for R&D.²⁰ Big Pharma tends to accumulate intellectual property to meet the demands of venture capitalists.²¹

When referring to the factors that contribute to the operation of intellectual monopoly capitalism, Pagano and Sell relate it to the financialization of the economy and the complementary process of commodification of knowledge.²² However, these factors do not fully explain why the post-2000 period has witnessed a crisis of intellectual monopoly capitalism characterized by shrinking investment opportunities and closed science. Cédric Durand and William Milberg have identified two dynamics of monopoly stagnation: shrinking investment opportunities and intangible circulation in global value chains. They explain that large pharmaceutical firms with high market power face limited competitive pressure to invest, while the dominant position of these large pharmaceutical firms also contributes to low investment by rivals.²³ In fact, the factors that have influenced this decline in innovation are more complex than Pagano’s and Sell’s analyses acknowledge. In response, I suggest that four dynamics have influenced Big Pharma’s decline in innovation and the crisis of intellectual monopoly capitalism in the pharmaceutical industry.

Untangling Big Pharma’s Four Dynamics of Innovation Decline in the Shadow of Intellectual Monopoly Capitalism

(I) Big Pharma’s Knowledge Monopolization within the Academic-Clinical-Corporate Nexus

“Big Pharma” refers to the world’s largest and most powerful pharmaceutical companies, such as Pfizer, Johnson & Johnson, Merck, Roche, and others. These companies have dominated the industry for over a century.²⁴ While Big Pharma has recruited top scientists, encouraged their autonomy, and rewarded them with high salaries, it has essentially collaborated with government, universities, hospitals, clinical research laboratories, and small R&D labs to produce innovative products and translate patents into mass-produced commercial products.

Government support is the pharmaceutical industry’s most important source of innovation and drug commercialization. The National Institutes of Health in the United States and publicly funded agencies in other countries are key supporters of the pharmaceutical industry’s most important and groundbreaking discoveries.²⁵ Starting in the mid-1990s, funding for the National Institutes of Health, which receives the majority of the U.S. federal government’s funding for basic biomedical research, increased significantly and only declined from the early 2000s until 2015.²⁶ In 1994 and 1998, the U.S. federal government spent twice as much in these areas as all the countries of the European Union combined.²⁷ Government agencies provide a great deal of support for the research efforts of not-for-profit entities such as hospitals and universities. In the United States, the Patent and Trademark Law Amendments Act (known as the Bayh-Dole Act of 1980) also allowed hospitals and universities to apply for patents on products discovered with federal tax dollars and to license patents to for-profit companies.²⁸ In this way, the private pharmaceutical industry in the United States has reaped the rewards of groundbreaking research conducted in public-sector research institutes and universities, turning these discoveries into commercial products.

Big pharmaceutical companies have formed cooperative and competitive networks with other big pharmaceutical companies, universities, research institutes, and start-ups.²⁹ Today’s trend of collusion within intellectual monopolies, the first dynamic in the decline of innovation, emphasizes the coproduction of knowledge modules, especially generic knowledge modules, through which companies can strengthen their dominant position in the pharmaceutical industry, rather than simply agreeing on prices, sales conditions, and payment terms, as was the case in the past.³⁰ Big pharmaceutical companies have increasingly relied on their collaboration with universities, research institutes, and start-ups, which have taken the lead in intellectual work. One significant result has been a decline in the proportion of first and corresponding authors from Big Pharma in publications.³¹ Despite the increasing reliance on external innovation, it is the big pharmaceutical companies that own the patents, rather than sharing them with universities, research institutes, or start-ups.³² In some cases, start-up companies are acquired by Big Pharma.³³ Collusive coproduction of technologies is thus a monopolistic behavior permitted by the current regulatory environment that locks in technological advantages within Big Pharma. To further reduce the cost and improve the efficiency of large-scale clinical trials, pharmaceutical companies have increasingly used Contract Research Organizations as third-party intermediaries to outsource clinical trials from North America, Western Europe, and Australia to other countries, such as China, India, Brazil, and Poland.³⁴ This has created a predatory academic-clinical-corporate nexus in which the start-ups, research institutes, and clinical investigators have become, in a sense, subordinate organizations performing the decentralized or ancillary functions of Big Pharma, but Big Pharma has tended to occupy a dominant position and derive great benefit from the nexus.

(II) Value Extraction Through Pharmaceutical Pricing Dynamics

While commercial products are manufactured with government support, the prices of drugs are not directly regulated by public authorities in the United States, which allows Big Pharma to set their prices significantly higher than those for identical drugs sold elsewhere. For example, the wholesale price of Januvia, Merck’s top-selling diabetes drug, was $1.99 in Europe and $8.20 in the United States in 2013.³⁵

In the loosely regulated market, large pharmaceutical companies have become “price makers,” structuring a second dynamic of innovation decline, rather than “price takers.” According to Baran and Sweezy, unlike in competitive capitalism, where individual firms are “price takers,” in monopoly capitalism, large corporations are “price makers.”³⁶ In their view, prices are largely determined in modern oligopolistic (quasi-monopolistic) markets through a process of tacit collusion in which firms in the industry typically follow the price leader, with the result that prices go only one way—up.³⁷ In the pharmaceutical industry, although big pharmaceutical companies always claim that the cost of discovering a drug is huge and that high prices are necessary to recoup the investment, they do not disclose the real cost of R&D. Instead, they always report costs based on an estimate of how much profit would be made if the R&D investment had been made in an index fund and other inflators. Little is spent on basic research.³⁸ Moreover, to the extent that today’s collusion within intellectual monopolies emphasizes the coproduction of knowledge modules, the monopoly protection of medical products through patent rights has led to a rigid elasticity of demand for drugs. As Mariana Mazzucato and Victor Roy point out, large pharmaceutical companies can set prices without competition, suggesting that the higher prices of drugs are not a reflection of demand for the product, but a manifestation of “what society can bear” in the form of rents that pharmaceutical companies can extract from the exclusivity period of patent rights protection.³⁹

In recent years, large pharmaceutical companies have become intertwined with financial actors and have begun to use lobbying and other pricing strategies to tie themselves to the financial markets. For example, the pricing of hepatitis C medication by Gilead Sciences has been strongly controlled by financial actors, following the logic that “each new generation of treatment sets a new price floor” and leads to a “price escalator.”⁴⁰ The financialization of Big Pharma has further changed the way value is extracted. In The Endless Crisis, John Bellamy Foster and Robert W. McChesney observe that, in the absence of disruptive technologies and other strong incentives to invest, modern capitalist economies have increasingly relied on the financial sector to maximize profits. They observe the “dialectic of production and finance” in terms of the two pricing structures in the economy—the pricing of real output and the pricing of financial assets.⁴¹ Following Hyman Minsky, Foster and McChesney point out that, if the second dynamic were to take precedence over the first, money capital would be transformed into a purely speculative economy based on M – M’.⁴² This mirrors what is happening in the pharmaceutical industry. The urging of shareholders to achieve short-term growth is undermining the tolerance of companies for the long-term risks required to develop new drugs, which has reduced Big Pharma’s investment in R&D and forced them simply to buy compounds that are nearing the final stages of development.⁴³

On a general level, Big Pharma’s spending on R&D is estimated to be between 10 percent and 25 percent in 2022, compared with an average of 31 percent for the pharmaceutical industry as a whole.⁴⁴ Thus, while the drug pricing dynamic allows Big Pharma and financial investors to extract “value” from the knowledge monopoly and through monopolistic processes of shareholder profit maximization like corporate stock buybacks, it has also reduced their investment in R&D and increased their reliance on external innovation as suggested by the first dynamic, which involves Big Pharma in a speculative economy based on M – M’.

(III) Internationalization of Big Pharma’s Intellectual Monopoly Power

The pharmaceutical industry has been truly global since it emerged in its modern form in the 1880s. There is little doubt that the global distribution of key companies is changing, but the worldwide nature of the industry is here to stay.⁴⁵ Switzerland, Germany, the United Kingdom, and the United States have maintained industry leadership, with the United States becoming dominant after the Second World War. The United States and a few large corporations waged a concerted campaign to extend U.S. intellectual property rights worldwide in order to secure profits for U.S. companies.⁴⁶ This trend, representing a third dynamic, has been identified by Foster and McChesney as the internationalization of monopoly power. In their view, the last few decades have witnessed a proliferation of multinational corporations and an internationalization of monopoly power since the late twentieth century.⁴⁷ In order to achieve the internationalization of intellectual monopoly capital, an “extra-economic” means of value extraction has been used, supported by the hegemonic power of the United States in favor of the strong protection of intellectual property rights on a global scale.

Throughout the 1980s, the private intellectual property sector, including the private pharmaceutical industry, lobbied the U.S. government to extend intellectual property protections abroad. Since 1981, the Advisory Committee for Trade Policy and Negotiations has played an important role in channeling industry views to the president and developing trade-related intellectual property strategies to shape U.S. trade policy. The U.S. Congress adopted amendments to the Trade and Tariff Act of 1984, responding to the demands from the private sector. The amended act recognized the failure to protect intellectual property rights as actionable under Section 301. Consequently, strong intellectual property protection became a dominant component of U.S. trade policy.⁴⁸

In the 1990s, an alliance of the pharmaceutical, software, entertainment, and agribusiness industries persuaded the Bill Clinton administration and the governments of other industrialized countries to impose uniform intellectual property rights on the rest of the world. Advocates of U.S.-based industries, particularly the pharmaceutical industry, worked painstakingly to institutionalize trade-based intellectual property protection through the World Trade Organization’s (WTO) adoption of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1995. By establishing specific minimum standards for intellectual property rights outlined in the agreement and requiring domestic compliance and enforcement, TRIPS ultimately became a legal instrument for the establishment of intellectual monopoly capitalism in the pharmaceutical sector.⁴⁹ Although the 2001 Doha Declaration on the TRIPS Agreement and Public Health reaffirmed the right of WTO member states to implement flexibility by adopting compulsory licenses to facilitate access to essential medicines, TRIPS also allowed member states to include provisions in bilateral and regional trade agreements that exceed TRIPS standards for intellectual property protection. The Office of the U.S. Trade Representative also pushed a “vigorous campaign” for regional and bilateral free trade and investment agreements to protect intellectual property rights and eliminate flexibility within TRIPS.⁵⁰ Bilateral Intellectual Property agreements, bilateral investment treaties, and regional free trade agreements thus constituted the TRIPS-plus requirements that turned intellectual property rights into investment assets.⁵¹

In this way, the active promotion of bilateral and regional free trade and investment agreements has shaped the institutional conditions of intellectual property regimes favoring monopolistic practices and rent-based revenues, through which giant corporations have expanded abroad and reaped intellectual rents from the ownership of intellectual property rights on a global scale. In the pharmaceutical sector, Big Pharma has established commodity chains through which it captures a disproportionate share of U.S. and global profits through its ownership and control of robust intellectual property. Moreover, the United States has shaped the structure of the global and regional political economy so that intellectual property rights are recognized as intangible assets. When intellectual property rights have become intangible assets, they also demand “greater security through the alleviation of uncertainty.”⁵² While the demand for security can be achieved through the enclosure and monopolization of knowledge production through bilateral and regional agreements and supported by the hegemonic power of the United States, it can also lead to asset bubbles with significant social costs on a global scale.⁵³

(IV) Exclusion of Competitors Through the Asymmetries Between Technological Exclusion and Information Diffusion

Above, I have identified three dynamics that demonstrate how intellectual monopoly capitalists in the pharmaceutical industry have occupied a dominant position and extracted intellectual rents from the ownership of intellectual property rights on a global scale. However, they are not only doing this, they are also causing a decline in medical innovation by exploiting the blocking power of patents, trade secrets, and regulatory exclusivity in the pharmaceutical industry. These blocking mechanisms, constituting a fourth dynamic, have limited the ability of competitors, such as generic companies, to enter the pharmaceutical industry, and have made independent research by start-up companies more expensive.

Typically, Big Pharma has focused on promoting patents as an incentive for innovation—a solution to the public goods problem and the associated market failure. Compulsory licensing exists when a government allows another entity to produce a product or process without the consent of the patent owner. Although patents are always presented by the pharmaceutical industry as an incentive for medical innovation, they are largely used by pharmaceutical companies to develop trivial improvements to approved drugs. Rather than finding new chemical compositions that result in significant therapeutic improvement, patents are used by them to “evergreen” the market exclusivity of certain drugs.⁵⁴ Reform proposals have been put forward to limit patentability of minor variations or other health products that do not significantly improve results. Other proposals, such as the Health Impact Fund, would establish a link between health improvement and reward.⁵⁵ However, Big Pharma continues to fiercely protect its patent rights and refuses to transfer knowledge to users or other innovators, even when they are strongly urged to do so, as in the case of attempts to transfer COVID-19 vaccines from Europe and the United States to the Global South. To fully explain how Big Pharma has exploited blocking mechanisms to restrict competition and strengthen monopoly power, the workings of three key mechanisms must be understood—the malfunctioning of compulsory licensing; the increasing use of trade secrets; and the establishment of statutory data exclusivity.

Since the 1980s, the United States, aware that it had lost its competitive edge in economic power and technological innovation, has begun to invent a large number of machines, products, and processes, of which pharmaceuticals are an important part.⁵⁶ When patent rights are overprotected in a way that significantly restricts access to inventions, a dilemma arises between the public interest and the private interests of patent holders. James Boyle presents the dilemma well: “Intellectual property rights…produce monopolies as well as incentives; they produce incentives because they are monopolies. If we undervalue the public domain, we will tend to give too many intellectual property rights, thus delivering a powerful anticompetitive, oligopolistic chunk of state-backed market power into the hands of the established players.”⁵⁷ In other words, the benefit of protecting exclusive patent rights is to create incentives by providing government-backed market power, but, because competitors may not have access to the invention, there will be an “inherent tension between creation and diffusion.”⁵⁸

To strike the optimal balance between the creation and diffusion of knowledge, compulsory licensing is a useful tool to improve the accessibility and affordability of vaccines. If Moderna had refused to produce sufficient quantities of vaccines, or if their prices were unaffordable, the U.S. government could have taken steps to grant a non-exclusive license to other manufacturers. The U.S. Patent Act, 28 USC § 1498, allows the government to use patented inventions and patent owners to sue the government for patent infringement for “reasonable and entire compensation for such use and manufacture” of the invention.⁵⁹ The Bayh-Dole Act also gives the U.S. government “march-in” rights, which theoretically allow third parties to receive compulsory licenses on patented inventions funded by government agencies.⁶⁰

Nevertheless, in the more than forty years since their introduction in the Bayh-Dole Act, march-in rights have never been used to obtain compulsory licenses. When fears of a possible anthrax outbreak arose in the early 2000s, the U.S. government stated that it was considering issuing licenses that would enable the production of Bayer’s antibiotic at a lower price than Bayer itself was offering, but the United States did not begin its negotiations until Canada granted a license to a Canadian company to manufacture a generic version. Bayer eventually reached an agreement with the U.S. government to reduce the price.⁶¹ Weak implementation of responsibilities was also evident during the COVID-19 pandemic. Although India and South Africa petitioned the WTO for patent waivers to accelerate COVID-19-related innovation in developing countries, the U.S. government did not lend its support until global pressure intensified, and what ultimately emerged from the negotiations was simply a waiver of the obligation set out under Article 31(f) of the TRIPS Agreement.⁶² The WTO decision did not address the fundamental problems with intellectual property rights as barriers for improving the manufacturing capacity of key medical products, including treatments and diagnostics. Gilead also sued the Russian government for issuing a compulsory license for the COVID-19 treatment Remdesivir in April 2021.⁶³

Sharing information allows others to apply important technologies, thus accelerating the pace of innovation and economic growth.⁶⁴ However, the complex nature of life science products such as biologic drugs (or biologics) makes information dissemination about them particularly challenging. The first biologic was recombinant human insulin, which was approved in 1982, and since then, the number of biologics has increased dramatically, now accounting for more than one-third of new drug approvals and 46 percent of total spending on medication.⁶⁵ Because biologics are complex macromolecular therapeutics derived from living sources, they require unique manufacturing processes, including cell line identification, host organism selection, and purification procedures. They also face cultural and media conditions, all of which influence the characteristics and activity of the final products.⁶⁶ Originator pharmaceutical companies tend to protect the critical technical knowledge through trade secrets (“which constitute codified and uncodified technical knowledge that firms deliberately keep secret”).⁶⁷ Because they are not compelled by law to disclose trade secrets, the originator pharmaceutical companies tend not to disclose their invention-related trade secrets, as long as that nondisclosure does not violate the requirements of patentability.

In addition to patents and trade secrets, big pharmaceutical companies have also taken advantage of the statutory data exclusivity period to strengthen their market monopoly power. The Drug Price Competition and Patent Restoration Act of 1984 (commonly known as the “Hatch-Waxman Act”) provides five years data exclusivity for New Chemical Entities and three years for a drug “if such application contains reports of new clinical investigations.”⁶⁸ In 2009, Congress passed the Biologics Price Competition and Innovation Act, signed into law by President Barack Obama in 2010, which amended the generic drug approval process under the Hatch-Waxman Act. Under the amended law, large molecule biologics are subject to twelve years of clinical trial data exclusivity.⁶⁹

Under the rules of data exclusivity, the FDA requires biosimilar manufacturers to perform reverse engineering and, in some cases, conduct their own clinical trials, which is burdensome for biosimilar manufacturers. The approval process, which costs hundreds of millions of dollars, may create another significant barrier for competitors to enter the biologics space.⁷⁰ In this sense, at least for Big Pharma, the simultaneous protection of patents, trade secrets, and legal exclusivity represents an attractive combination of mechanisms that is used to hamper competition and strengthen their monopoly position in the pharmaceutical industry.

Thus, while the pharmaceutical industry generates large revenues, intellectual monopoly capitalists are discouraging new investment in R&D by exploiting the blocking effects of the three mechanisms. Under these conditions, together with the four dynamics mentioned earlier, today’s intellectual monopoly capitalism in the pharmaceutical industry is developing not only in the direction of a logic of expropriation and rent-seeking, but also in the direction of closed science and declining medical innovation.

Notes

1. ↩ Kaushik Sunder Rajan, Pharmocracy: Value, Politics, and Knowledge in Global Biomedicine (Durham: Duke University Press, 2017), 54; Kaushik Sunder Rajan, “Pharmaceutical Crises and Questions of Value: Terrains and Logics of Global Therapeutic Politics,” South Atlantic Quarterly 111, no. 2 (2012): 323.
2. ↩ Rajan, “Pharmaceutical Crises and Questions of Value,” 323.
3. ↩ “The Looming Patent Cliff: Big Pharma Giants Brace for Fall,” Healthcare Technology Report, February 14, 2024.
4. ↩ Gabrielle Masson, “The Top 10 Pharma R&D Budgets for 2023,” Fierce Biotech, March 18, 2024, fiercebiotech.com.
5. ↩ Alexander Schuhmacher, Markus Hinder, Alexander Dodel, Oliver Gassmann, and Dominik Hartl, “Investigating the Origins of Recent Pharmaceutical Innovation,” Nature Reviews Drug Discovery (2023): 181–82.
6. ↩ Congressional Budget Office, Research and Development in the Pharmaceutical Industry (Washington DC: Congressional Budget Office, April 2021), cbo.gov.
7. ↩ Ugo Pagano, “The Crisis of Intellectual Monopoly Capitalism,” Cambridge Journal of Economics 38, no. 6 (2014): 1409–29.
8. ↩ Cecilia Rikap, Capitalism, Power and Innovation: Intellectual Monopoly Capitalism Uncovered (Abingdon: Routledge, 2021).
9. ↩ Cecilia Rikap, “Amazon: A Story of Accumulation through Intellectual Rentiership and Predation,” Competition & Change 26, no. 3–4 (2022): 436–66. Innovation is defined here as “generation of higher quality products at lower unit costs at prevailing factor prices.” Following this definition, both new-molecule drugs producing minor and significant therapeutic improvements are understood as “medical innovation.” William Lazonick and Mariana Mazzucato, “The Risk-Reward Nexus in the Innovation-Inequality Relationship: Who Takes the Risks? Who Gets the Rewards?,” Industrial and Corporate Change 22, no. 4 (2013): 1093–1128; Mariana Mazzucato and Victor Roy, “Rethinking Value in Health Innovation: From Mystifications Towards Prescriptions,” Journal of Economic Policy Reform 22, no. 2 (2019): 101–19.
10. ↩ Donald W. Light and Joel R. Lexchin, “Pharmaceutical Research and Development: What Do We Get for All That Money?” British Medical Journal 345 (2012).
11. ↩ Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York: Monthly Review Press, 1966).
12. ↩ Karl Marx, Grundrisse: Foundations of a Critique of Political Economy (London: Penguin, 1973), 259.
13. ↩ Baran and Sweezy, Monopoly Capital, 9–11; John Bellamy Foster, The Theory of Monopoly Capitalism (New York: Monthly Review Press, 2014), 24–50.
14. ↩ Baran and Sweezy, Monopoly Capital, 9.
15. ↩ Josef Steindl, Maturity and Stagnation in American Capitalism (New York: Monthly Review Press, 1976).
16. ↩ Baran and Sweezy, Monopoly Capital, 67–72, 91–104.
17. ↩ Baran and Sweezy, Monopoly Capital, 108.
18. ↩ Pagano, “The Crisis of Intellectual Monopoly Capitalism,” 1413.
19. ↩ Pagano, “The Crisis of Intellectual Monopoly Capitalism, 1419.
20. ↩ William Lazonick et. al., “Financialization of the U.S. Pharmaceutical Industry,” Institute for New Economic Thinking, Working Paper, December 2, 2019; Öner Tulum, Antonio Andreoni, and William Lazonick, From Financialisation to Innovation in UK Big Pharma: AstraZeneca and GlaxoSmithKline (Cambridge: Cambridge University Press, 2022).
21. ↩ Susan K. Sell, “21st Century Capitalism and Innovation for Health,” Global Policy 12 (2021): 12–20.
22. ↩ Pagano, “The Crisis of Intellectual Monopoly Capitalism,” 1420–1424; Sell, “21st Century Capitalism and Innovation for Health,” 13–14.
23. ↩ Cédric Durand and William Milberg, “Intellectual Monopoly in Global Value Chains,” Review of International Political Economy 27, no. 2 (2020): 404–29.
24. ↩ Tulum, Andreoni, and Lazonick, From Financialisation to Innovation in UK Big Pharma.
25. ↩ Sondra N. Barringer and Sheila Slaughter, “University Trustees and the Entrepreneurial University: Inner Circles, Interlocks, and Exchanges,” in Higher Education, Stratification, and Workforce Development: Competitive Advantage in Europe, the US, and Canada, eds. Sheila Slaughter and Barrett Jay Taylor (Cham: Springer, 2016): 151–71.
26. ↩ Congressional Budget Office, Research and Development in the Pharmaceutical Industry.
27. ↩ Graham Dutfield, That High Design of Purest Gold (Hackensack: World Scientific Publishing, 2020), 305.
28. ↩ Patent and Trademark Law Amendments Act, Public Law no. 96-517, 35 U.S.C. § 200–212 (1980).
29. ↩ Rikap, Capitalism, Power and Innovation, 110–12.
30. ↩ Baran and Sweezy, Monopoly Capital.
31. ↩ Ismael Rafols, Michael M. Hopkins, Jarno Hoekman, Josh Siepel et al., “Big Pharma, Little Science? A Bibliometric Perspective on Big Pharma’s R&D Decline,” Technological Forecasting & Social Change 81 (2014): 22–38.
32. ↩ Rikap, Capitalism, Power and Innovation, 119–20.
33. ↩ Matthieu Montalban and Mustafa Erdem Sakinç, “Financialization and Productive Models in the Pharmaceutical Industry,” Industrial and Corporate Change 22, no. 4 (2013): 1004–15; Rikap, Capitalism, Power and Innovation, 107–30
34. ↩ Maysoun Dimachkie Masri, Bernardo Ramirez, Cristina Popescu, and Ed Michael Reggie, “Contract Research Organizations: An Industry Analysis,” International Journal of Pharmaceutical and Healthcare Marketing 6, no. 4 (2012): 336–50.
35. ↩ John Ehrenreich, Third Wave Capitalism: How Money, Power, and the Pursuit of Self-Interest Have Imperiled the American Dream (Ithaca, New York: Cornell University Press, 2016), 61.
36. ↩ Baran and Sweezy, Monopoly Capital, 53–54.
37. ↩ Baran and Sweezy, Monopoly Capital, 61.
38. ↩ Light and Lexchin, “Pharmaceutical Research and Development”; Steven G. Morgan, Hannah S. Bathula, and Suerie Moon, “Pricing of Pharmaceuticals is Becoming a Major Challenge for Health Systems,” British Medical Journal 368 (2020): l4627.
39. ↩ Mazzucato and Roy, “Rethinking Value in Health Innovation,” 105–7.
40. ↩ Victor Roy, Capitalizing a Cure: How Finance Controls the Price and Value of Medicines (Berkeley: University of California Press, 2023), 84.
41. ↩ John Bellamy Foster and Robert W. McChesney, The Endless Crisis (New York: Monthly Review Press, 2012), 56.
42. ↩ Foster and McChesney, The Endless Crisis, 56.
43. ↩ Roy, Capitalizing a Cure, 84.
44. ↩ Masson, “The Top 10 Pharma R&D Budgets for 2023“; Max Bayer, “The Top 10 Pharma R&D Budgets in 2022,” Fierce Biotech, March 27, 2023; Annalee Armstrong, “The Top 10 Pharma R&D Budgets in 2021,” Fierce Biotech, March 14, 2022; Ben Adams, “The Top 10 Pharma R&D Budgets in 2020,” Fierce Biotech, April 6, 2021; Phil Taylor, “The Top 10 Pharma R&D Budgets in 2019,” Fierce Biotech, June 8, 2020; Ben Adams, “The Top 10 Pharma R&D Budgets in 2018,” Fierce Biotech, June 3, 2019; Eric Sagonowsky, “The Top 15 Pharma Companies by 2017 Revenue,” Fierce Biotech, May 15, 2018; Eric Palmer, “The Top 15 Pharma Companies by 2016 Revenue,” Fierce Biotech, March 14, 2017; Tracy Staton, “The Top 15 Pharma Companies by 2014 Revenue,” Fierce Biotech, March 18, 2015.
45. ↩ Dutfield, That High Design of Purest Gold, 3–4.
46. ↩ Susan K. Sell, Private Power, Public Law: The Globalization of Intellectual Property Rights (Cambridge: Cambridge University Press, 2003); Peter Drahos, The Global Governance of Knowledge: Patent Offices and Their Clients (Cambridge: Cambridge University Press, 2010).
47. ↩ Foster and McChesney, The Endless Crisis, 103–24.
48. ↩ Sell, Private Power, Public Law, 85–86.
49. ↩ World Trade Organization, “Agreement on Trade-Related Aspects of Intellectual Property Rights,” Marrakesh Agreement Establishing the World Trade Organization, UN Treaty Series, vol. 1869, Annex 1C, Article 1, April 15, 1994, wipo.int.
50. ↩ Susan Sell, “Intellectual Property and the Doha Development Agenda,” in The WTO after Hong Kong: Progress in, and Prospects for, the Doha Development Agenda, eds. Donna Lee and Rorden Wilkinson (London: Routledge, 2007), 57.
51. ↩ For flexibility under the TRIPS Agreement to facilitate people’s access to medicines, see World Trade Organization, “Declaration on the TRIPS Agreement and Public Health,” Ministerial Conference, Fourth Session, Doha, November 14, 2001; World Trade Organization General Council, “WTO Decision on Implementation of Paragraph 5 of the Doha Declaration on the TRIPS Agreement and Public Health,” August 30, 2003. There have been many articles on this topic. See Duncan Matthews, ”WTO Decision on Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: A Solution to the Access to Medicines Problem?,” Journal of International Economic Law 7, no. 1 (2004): 73–107. For a discussion of TRIPS-plus requirements for pharmaceutical patents, see Susan Sell, “TRIPS-Plus Free Trade Agreements and Access to Medicines,” Liverpool Law Review 28 (2007): 41–75.
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53. ↩ Birch and Tyfield, “Theorizing the Bioeconomy,” 319–20.
54. ↩ Scott Hemphill and Bhaven Sampat, “Drug Patents at the Supreme Court,” Science 339 (2013): 1386–87.
55. ↩ Adam Gattney, Joel Lexchin, and US, Canadian Pharmaceutical Policy Reform Working Group, “Healing an Ailing Pharmaceutical System: Prescription for Reform for United States and Canada,” British Medical Journal 361 (2018): 3; Amir Attaran, “A Modest but Meaningful Decision for Indian Drug Patents,” Lancet 384, no. 9942 (2014): 477–79; World Health Organization, “Consultative Expert Working Group on Research and Development: Financing and Coordination,” Sixty-Fifth World Health Assembly, Geneva, April 20, 2012.
56. ↩ Lawrence G. Kastriner, “The Revival of Confidence in the Patent System,” Journal of the Patent and Trademark Office Society 73, no. 1 (1991): 7.
57. ↩ James Boyle, Shamans, Software and Spleens: Law and the Construction of the Information Society (Cambridge, Massachusetts: Harvard University Press, 1996), 179.
58. ↩ Sell, Private Power, Public Law, 15.
59. ↩ Sapna Kumar, “Compulsory Licensing of Patents During Pandemics,” Connecticut Law Review 54, no. 1 (2022): 66.
60. ↩ Ryan Whalen, “The Bayh-Dole Act and Public Rights in Federally Funded Inventions: Will the Agencies Ever Go Marching In?,” Northwestern University Law Review 109, no. 4 (2015): 1083–116.
61. ↩ Whalen, “The Bayh-Dole Act and Public Rights in Federally Funded Inventions”; Heather Stewart, Charlotte Denny, and Andrew Clark, “Bayer Bows to Pressure on Anthrax Antidote,” Guardian, October 23, 2001; Fred Charatan, “Bayer Cuts Price of Ciprofloxacin after Bush Threatens to Buy Generics,” British Medical Journal 323, no. 7320 (November 2001).
62. ↩ “India and South Africa Ask WTO to Waive Rules to Aid COVID-19 Drug Production,” Reuters, October 4, 2020; “TRIPS Waiver,” Wemos, covid19response.org.
63. ↩ “Gilead Sues Russia: Private Company Challenges a Country’s Right to Protect Public Health,” Make Medicines Affordable, April 22, 2021, makemedicinesaffordable.org.
64. ↩ Jeanne C. Fromer, “Patent Disclosure,” Iowa Law Review 94 (2009): 548–50.
65. ↩ John Hodgson, “Refreshing the Biologic Pipeline 2020,” Nature Biotechnology 39, no. 2 (2021): 136; IQVIA Institute, Biosimilars in the United States 2023–2027: Competition, Savings, and Sustainability (New York: IQVIA, January 2023).
66. ↩ Paul J. Declerck, “Biologics and Biosimilars: A Review of the Science and Its Implications,” GaBI Journal 1, no. 1 (2012): 13–16.
67. ↩ Peter Lee, “New and Heightened Public-Private Quid Pro Quos: Leveraging Public Support to Enhance Private Technical Disclosure,” in Intellectual Property, COVID-19, and the Next Pandemic: Diagnosing Problems, Developing Cures (Cambridge: Cambridge University Press, 2024), 40.
68. ↩ Research into Pediatric Uses for Drugs and Biological Products, 21 U.S. Code § 355(c)(3)(E)(ii–iii), (j)(5)(F), (ii–iv); accord 21 Code of Federal Regulations § 314.108.
69. ↩ Biologics Price Competition and Innovation Act, Public Law no. 111-148, 42 United States Code § 18003 (2009).
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