Enabling TRIPs: The pharma–biotech–university patent coalition

ABSTRACT

The dominant player behind the Trade-Related Intellectual Property (TRIPs) agreement, as regards patents, was a handful of American pharmaceutical transnational corporations (‘big pharma’). Given that TRIPs was exceptionally controversial, how was US big pharma uniquely enabled to command the entire trade diplomatic machinery of the US and, through that, enact global law in its favour? This paper explores one crucial factor in the enacting of TRIPs, namely the prior pursuit of domestic US patent reform, from which a highly integrated and powerful single-issue political coalition between US big pharma, the new biotechnology sector and academic life science departments was formed. This created the political context in the US in which patent issues, particularly those affecting the pharmaceuticals industry, came to be considered matters of state. But explaining both the success of this patent coalition and the subsequent success of the US-led international demands for TRIPs in turn demands appeal to analysis of the structure of the global economy and its transformation to one of neoliberal financialisation, from a watershed of 1980. The paper explores how the critical histories of each of the three sectors of the patent coalition are illuminated by analysis in the context of this structural change and the underlying connections between apparently disparate issues it reveals.

KEYWORDS:

• TRIPs
• patents
• bioscience
• knowledge economy
• primitive accumulation
• financialization

Notes

1 For example, Maskus (2000).

2 Sell (2003) provides an excellent summary. See also Drahos and Braithwaite (2002), Dutfield (2003), Matthews (2002), May (2000) and Richards (2004).

3 Reddy (2000) following Hymer (1975, 1979). The resonance between globalization and knowledge-intensive activities, including science itself, has been widely observed: e.g. Castells (1993, 1996, 1997, 1998), Drori et al. (2003), and Carnoy (1993a, 1993b).

4 For instance, as early as 1957 Pfizer already had overseas sales exceeding US$60 million (Drahos and Braithwaite, 2002: 66).

5 Though TNCs are now beginning to exploit the possibilities of moving R&D to less developed countries with a relevant knowledge base (Reddy, 2000).

6 It is extremely difficult to be more precise than this because R&D figures are not readily analyzable from the filed accounts of the firms (see Angell, 2005: Chapter 3). Furthermore, a high-profile estimate of current drug development costs by DiMasi et al. (2003, 2005a, 2005b) at $403 million (or $802 million if capitalized) is controversial for reasons of methodology: see Light and Warburton (2003a, 2003b), Angell (2005: 41) and Public Citizen (2001b).

7 See e.g. Taylor and Silberstom (1973) (quoted in MacDonald, 2002: 23); and Cohen et al. (2002), Cohen and Merrill (2003), Levin et al. (1987) and Mansfield (1986).

8 See e.g. Angell (2005: xxiv), who notes the importance of another form of monopoly rights provided in the US to address this problem, namely, the exclusive marketing rights from the Food and Drug Administration (FDA).

9 Sell (2003) makes a similar point.

10 See Gallini (2002: 146), Orsenigo (1989: 46) and Kenney (1986: 257).

11 In fact, such patenting was not completely prohibited, but was allowed only after a laborious administrative process in which special approval was granted to patent (Slaughter and Rhoades, 2002: 85).

12 On fears of Reagan's cuts, see Kenney (1986: 28).

13 The percentage of basic research R&D funding going to the life sciences rose in the 1970s from 36% to 44% – in parallel to the increase in the percentage funded by the NIH, from 36.7% in 1971 to 47% in 1981 (Mowery et al., 2004, using National Science Board data) – while that going to physics fell from 18% to 14% (Mirowski and Sent, 2002: 24). ‘NIH’ is the National Institutes of Health, the primary federal funding agency for the life sciences in the US.

14 See Calvert (2004) on the basic/applied science distinction.

15 For example, Mowery et al. (2001), esteemed economists of innovation and no political radicals, argue that these reforms were based on ‘a belief by policymakers (based on little or no evidence) that stronger protection for the results of publicly funded R&D would accelerate their commercialization’. See also Eisenberg (1996).

16 See e.g. Orsenigo (1989: 84), Mazzoleni and Nelson (1998), Nelson (2001), Heller and Eisenberg (1998).

17 See e.g. Cohen et al. (2002), Klevorick et al. (1995), Levin et al. (1987), Rosenberg and Nelson (1994).

18 Data from PhRMA (2005).

19 Compare DiMasi et al. (2003, 2005a, 2005b) with Light and Warburton (2005a, 2005b) and Angell (2005).

20 Data from Fortune 500, author's calculation.

21 For comparison, in 2001, 35% of PhRMA revenues were spent on ‘marketing & administration’, of which roughly three quarters was marketing (Angell, 2005: 120, using PhRMA data), hence 27%. Conversely, R&D represented 16.7% of total revenues that year (PhRMA, 2005).

22 Examples of minor modifications remarketed under new brand names include Clarinex to Claritin, Prozac to Sarafem, Prilosec to Nexium (Angell, 2005: 76 et seq).

23 For ‘a damning case, not just against the industry but against our [US] entire system for developing, testing and using prescription drugs’ (Angell, 2006) see, for example, Abramson (2004), Avorn (2004), Goozner (2004), Kassirer (2004), Moynihan and Cassels (2005) and Olfman (2006).

24 Bud (1998: 14) pins down the start of this financial frenzy exactly to June 1979 when Nelson Schneider of investment house E F Hutton heard about Genentech's production of human insulin, became interested and reported biotech to investors as a major technological breakthrough.

25 For a full discussion of the case and the effect of the judgment, see Krimsky (2003: 62 et seq).

26 This is not to assert that legislative changes caused such a surge. For arguments against this interpretation see Mowery et al. (2001, 2004) and Kortum and Lerner (1999).

27 Jaffe (2000: 543) and Author's calculations using USPTO data. Note also that this is just for one class of biotechnology patents.

28 Rai and Eisenberg (2003: 300) report that in 2000 the top five universities grossed nearly one-half of total licensing revenues, while Thursby and Thursby (2003) note that in the same year only 43% of licenses earned royalties at all, and only 0.56% earned over $1 million.

29 See also Mowery et al. (2001: 104) and Owen-Smith and Powell (2003: 1697), who note that biotech patents were 49.5% of all university patents.

30 Federal funding of total US R&D fell below the 50% mark in 1979 and continued to decline to a low of 25% in 2000, while funding from private industry has taken the opposite path: see NSF (2006b).

31 For instance, Angell (2005: 71) notes that the universities are just as resistant as big pharma to rigorous enforcement of a clause in the Bayh–Dole Act that demands ‘reasonable terms’ for the contracts resulting from such patents, as this may offend their big pharma sponsors.

32 At approximately 50% of investment in Europe in 1999 as opposed to ‘basic’ at 12%, cell factory and plant biotech each 9% and animal biotech 8%: Senker (2000: 57). Dutfield (2003: 146) reports 60% of US and EU biotech firms produce health-related products.

33 See also Blackburn (2006) and Harvey (1982, 2003).

34 For discussion of ‘historic bloc’ and ‘primitive accumulation’ see e.g. Bieler and Morton (2004), Cox (1987; Cox with Sinclair, 1996), Gill (1993), Gramsci (1971), Harvey (2003), Jessop (1997) and Jessop and Sum (2006).

35 Sell (2003) discusses a similar phenomenon as regards US trade legislation at the time, which during the TRIPs negotiations continually upgraded the privileged position US trade policy provided big pharma. Kenney (1986: 242) also notes the irreducible role of the state in the development of biotech. See also the discussion of Mirowski and Sent (2008) regarding a tripartite analysis of relations between academia, industry and government.

36 This is not to deny the importance of EU or Japanese pharmaceutical companies regarding the actual TRIPs negotiations, and their own respective domestic political agency. Nevertheless, the TRIPs agreement was overwhelmingly an American initiative (Sell, 2003) and I focus on the US aspect for lack of space. For an excellent comparison of the US, UK and Germany regarding biotech and the commercialization of the university, see Jasanoff (2005).