4 ms·

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

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! ;)

avianlyric 5y ago
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.
- BobbyJo 5y ago
  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.
  - ipaddr 5y ago
    No we decided that corporate taxes should be low so the company can reinvest. The shareholders benefit.
  - callmeal 5y ago
    >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/Analysis/Income-Taxes https://www.stock-analysis-on.net/NYSE/Company/Merck-Co-Inc/... [1] https://www.corp-research.org/merck https://www.corp-research.org/merck
    - BobbyJo 5y ago
      That's 15%-20% we the taxpayers own then :)
      - labawi 5y ago
        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?
akira2501 5y ago
> 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.
- thatcat 5y ago
  There is a clear path for taking ip that is beneficial for national security
photochemsyn 5y ago
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.
- b9a2cab5 5y ago
  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.
  - photochemsyn 5y ago
    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.
    - b9a2cab5 5y ago
      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.

avianlyric 5y ago

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.

BobbyJo 5y ago
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.
- ipaddr 5y ago
  No we decided that corporate taxes should be low so the company can reinvest. The shareholders benefit.
- callmeal 5y ago
  >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/Analysis/Income-Taxes https://www.stock-analysis-on.net/NYSE/Company/Merck-Co-Inc/... [1] https://www.corp-research.org/merck https://www.corp-research.org/merck
  - BobbyJo 5y ago
    That's 15%-20% we the taxpayers own then :)
    - labawi 5y ago
      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?

akira2501 5y ago

> 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.

thatcat 5y ago
There is a clear path for taking ip that is beneficial for national security

photochemsyn 5y ago

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.

b9a2cab5 5y ago
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.
- photochemsyn 5y ago
  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.
  - b9a2cab5 5y ago
    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.