Shot chasers: big pharma’s covid-19 boost

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Hello and welcome to the Intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. What seems like a long time ago, the phrase working from home suggested an easy day. Now hundreds of millions of people know better. We look at the possible long term impacts for workers, for commercial property, maybe even for the makeup of cities. And in Hong Kong, a straightforward history exam question has ignited an almighty fight as tensions imposed by Beijing rise. Even high school essays can be seen as political acts and many of the kids aren't alright with it. But first, It wasn't so long ago that America's Republicans and Democrats found a rare area of agreement. Drug prices were too high and big pharmaceutical companies were to blame.

One of my greatest priorities is to.

Reduce the the price of prescription drugs.

When it comes to prescription drugs, we're going to throw the book at the pharmaceutical companies that abuse their power.

But the pandemic has led to a shift. Yesterday, novavax, an American biotech firm, said it had started the first human trial of its coronavirus vaccine candidate. A few days after a small vaccine trial by Moderna, another biotech company, showed positive results. Last week, AstraZeneca said it had capacity to manufacture a billion doses of a vaccine that's being developed by Oxford University. And the firm has two drug candidates it's testing that may help treat some of the worst symptoms of COVID 19. As the world anxiously awaits both treatments and an eventual vaccine, the industry's reputation has turned around.

Before the crisis, Big Pharma was an industry that had lost its way.

Vijay Vegteswaran is our US Business editor.

The big pharmaceutical companies were reviled by the public for their high prices. They were seen by the health sector and activists as neglecting global health problems, favoring marketing, sales and even certain sort of corrosive or corrupt practices in how they did sales and marketing. And they had been challenged by regulators, including in America's Congress and The pandemic.

Has shifted those views somewhat.

What the pandemic has done is brought to the fore the value of what big pharma traditionally did best, and that is innovation. At this time, we all want big pharma to be at its best, coming up with new therapies, vaccines, remedies that can help us either endure or ultimately defeat the coronavirus. And I think that is exactly what has happened. For example, we've seen the big four companies, as they're called, involved in vaccine production. That's Johnson and Johnson Pfizer, as well as GlaxoSmithKline and Sanofi. These are European and American pharma giants that in effect control most of the world's vaccine manufacturing. In commit to developing new vaccines as well as manufacturing them at scale, but without a significant profit motive. They've promised they'll do this on a cost plus basis, with GSK even putting a price. They say they'll produce this at about €10 a dose, which is a very small amount in the rich world and in the developing countries, mechanisms are being developed to give them away at very low cost or free, as is done currently for other medicines for the very poor.

So you think this is kind of sparking a renaissance in how the industry as a whole is going to be viewed?

I think we're seeing the commitment to invest in early stage innovation. We have 120 plus efforts around the world to develop a vaccine, for example, many of them involving either the big pharma companies or biotech companies. And that has shown the world, first of all, that we need the work that pharmaceutical companies do. But secondly, it has rejuvenated their interest in their own best practice, which is to invent the new. We've seen in the last quarter, for example, a dramatic increase in our research and development spending at the big pharmaceutical companies.

I mean, that does change the way though that these companies are running. I mean, are all the incentives aligned as they need to be for the industry to see its way through the pandemic?

So just because innovation is now prized doesn't mean it's smooth sailing for pharma bosses. There are some tricky days ahead, and in particular there are a couple of problems and new sorts of ethical dilemmas that are coming up now. One of them is vaccine nationalism. As governments realize that there might be only a limited quantity of vaccines that comes up at first, they're likely to try to secure the vaccine for their own populations. That creates a problem for pharma companies. We saw the French champion, Sanofi get into trouble some days ago when the CEO of the company said the US Government would get first crack any new vaccine that it comes up with because the American government had put in risk capital into its early stage R and D efforts. And that created a national controversy in France and where they believe that they're entitled at a minimum to get some of the fruits of that labor. And they also want to see a global equitable distribution of those vaccines. So we're going to see this sort of question of who gets the vaccine first rear its head in an ugly way. Another challenge for pharma companies is a threat to intellectual property rights. Now, patents are really at the core of the value proposition of the drugs industry. That is, the inventions that they come up with are given short term monopolies so that the innovator can get their rewards. But this often leads to higher prices, of course. And in this crisis, there's been a push from the World Health Organization, for example, which held a big assembly a few days ago, but also from dozens of current and former world leaders and other figures who've written an open letter saying that any kind of vaccine or remedy that's come up with should be given patent free to the world. And that gets to the heart of challenge to Big Pharma's business model.

So how can the industry get past those challenges at this stage? I mean, if patents and the profits going to the risk takers have to be overlooked now, what's the sol?

I think it would be a mistake to abolish patents. Patents are a way of rewarding invention. The reason we have 120 teams around the world plus working on potential new vaccines is the prospect of a potential reward. And that reward doesn't have to come during the pandemic. That's what sometimes people forget. While there is a global health emergency, every country has a right that's consistent with its legal obligations under the World Trade Organization and intellectual property agreements to declare compulsory licensing. That means they're allowed to use any drug that's developed or vaccine, regardless of who holds the patent. And this is something countries typically do in massive health emergencies. So everyone on earth will have access to the ultimate vaccine. But abolishing patents altogether means that at no point in future can a drug company earn any rewards on its inventions. And it's very likely that some form of this coronavirus will be still with us for years and years and years, even after the pandemic is over. And so what you're telling a potential innovator today is no matter how hard you work or how brilliant you are to help save us in this crisis, you, you'll never make any reward. And that to me seems a wrong signal. What it will mean is that we'll get less innovation.

But if you keep the industry's superstructure in place and we find ourselves the other side of this pandemic, what's to stop all those same complaints that preceded the pandemic from returning?

You ask absolutely the right question. And my answer is that we cannot return to business as usual. And I think that big Pharma has to learn that lesson. Just as society has been reminded of the value of an innovative industry at a time of crisis, the industry has to remember that its value to society and its less to operate comes from renewing its investments in R and D, in its innovation capability. It's in a way the innovators hour. And those that are most effective at coming up with new ways of doing things will be rewarded in this crisis.

Vijay, thank you very much for joining us. Thanks for having me, Jason.

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As lockdowns have eased, governments have been allowing and even encouraging workers to get back to the office. Our people want to work.

They want to go back, they have to go back.

People who haven't been into the office spaces can return, but with good hygiene practices in place.

We need to get a million Australians back to work.

That is the curve that we need to address.

When the coronavirus first began to spread, tens of millions of employees found themselves working at home for the first time. That sudden shift in habits is likely to have some lasting consequences. Jack Dorsey, the founder of Twitter and Square, announced that employees at both companies were allowed to work from home indefinitely. Facebook boss Mark Zuckerberg said that in coming years, half of the firm's employees would probably be out of office.

A lot of us are going to have to be working remotely for some time to come.

And coming out of this period, I.

Expect that remote work is going to.

Be a growing trend as well.

Already, though, working from home isn't what it once was.

So over the last couple of decades, better technology has allowed more homeworking and, you know, increasingly people have done the odd day or two working from home rather than the office, but it's not been the norm for most people.

Duncan Weldon is the Economist's Britain Economics correspondent.

That, though, is starting to change with the enforced innovation we've seen over the last eight or nine weeks.

So you think both the attitudes about an appetite for working from home has really changed here?

I think there has been a really big shift. So most people didn't want to have to work from home, but they were left with no choice. We've now had around most of the world, two months of office based workers working from home. And as that's happened, we've seen a shift on both sides from employers and employees. So, you know, employers, they used to have an attitude. In many ways it was seen as, you know, an easy day, almost a day off. But actually, I think a lot of employers have been surprised by just how productive their staff have been when working from home. And that's leading them to reassess whether they need this big office infrastructure in the same sort of way as things hopefully start to return to normal. But we've seen a similar shift on the other side too. So I spoke to one investment bank and what they said is when they initially planned how they would run their offices with more social distancing, no one wanted to be on the team that was working from home. But after six or seven weeks of working from home, when they asked their employees about the return to the office, no one wanted to be the people going back to the office every day.

And what are the wider implications of an increased number of people working from home?

It's got huge implications for the commercial property sector. Now, I think we should be clear that there are very few firms who are talking about completely ditching their office and working from home all of the time. So firms like Nationwide and Twitter in the US suggested they will embrace homeworking even after the crisis is over. But lots of firms are saying, okay, given we've proved we can successfully work from home even once the offices reopen, maybe people can only come in for certain activities. Maybe the norm will be for members of staff to come in one or two days, a week, or a fortnight even, rather than every single day. There are lots of tasks involved in office work that you don't have to be in an office to do. It makes very little Sense to spend 45 minutes or an hour travelling to an office and then spend 8 or 10 hours just processing emails, which can be done from home. It's particularly, as you can imagine, chief financial officers, when we think of senior management who are eyeing up some potentially quite large savings from reducing their office footprint.

Sure, there are savings to be made, but this working from home model can't work for all businesses.

When I've been speaking to people in some of the creative industries or in advertising, where they need a lot of collaboration, a lot of bouncing ideas off each other, there are certain things that, as good as things like Microsoft Teams and zoom, it's not the same as getting people together. So it depends really on the nature of the work. But even in areas like that, it's not necessarily the case that everyone needs to be in the office.

And for those working from home, how has this impacted the working day?

There are challenges as well as advantages from the point of view of the worker. There's the advantage of not having to commute, that's saving in time and money. But there are of course disadvantages too. You miss that social side of the office. You are probably in most cases working with worse technology. And of course, while working from home is fine, if you've got a nice house to work from, that is simply not the case for particularly younger workers and many less well paid workers as well. And I think it is important to remember, you know, when these big decisions on the future of the office are being made, they're generally being made by people for whom the alternative to the office is a nice house with a garden rather than a crammed fletcher.

And what about city life more broadly? If people don't need to commute in, if the value of being in the city is reduced because you don't need to be near that big office, I mean, is there a chance that this has a longer term effect on city life itself?

This could have a really big impact on the economic geography of countries in general. If you only need to be in the office one day a week, you can live much further away from that office. You can live somewhere cheaper, you can live somewhere with a bit more open space around you. One advantage of living in cities is you've got all of these bars, all of these museums, all of these theatres and cultural activities. Well, you know, they're going to be operating in a very different way as well. So there is this potential that this could really lead to people moving a bit further out of cities. Big impact on lots of things.

And I'm tempted to ask, from one home to another, how has the working from home been for you?

Duncan well, I found working from home to be quite interesting. It turns out I've wasted, I think about six months of my life in total commuting over the last couple of decades. Turns out I can do most of my job just as effectively from home. And actually, I would argue my productivity has been higher because I'm now combining my job as an economics correspondent with working as a primary school teacher at the same time.

Duncan, thanks for your time and good luck with your two jobs.

Thank you very much.

To follow all of the Economist's coverage of the COVID 19 pandemic and how it's swiftly reshaping the world, visit economist.com coronavirus. On Friday we looked at new national security legislation that China's mainland government wants to introduce in Hong Kong. It's an alarmingly explicit challenge to the territory's Western style freedoms. Over the weekend, police fired tear gas as thousands of demonstrators marched through the city center in protest. Opposition politicians have reason to worry, but controls are tightening for ordinary Hong Kongers too. Beijing blames last year's student led street protests on a lack of so called patriotic education. Earlier this month, teenagers got a taste of the ideology that's seeping into the classroom from a seemingly innocuous exam question.

To teachers and to students. This was a very typical history question. In this case it was asking did Japan do more good than harm to China in the period 1900-1945?

David Renney writes Chaguan, the Economist's column on Chinese affairs and is our Beijing bureau chief now.

That's a period where at the beginning of the 20th century, Japan did help Chinese reformers. But there was no doubt everyone understood that because Japan occupied China very brutally During World War II, students were all going to say that on balance, Japan did more harm than good. That's an incredibly familiar exercise. In fact, I was talking to a Hong Kong history teacher who was in a group chat with colleagues and they were talking as the students came out at lunchtime in mid May and they said how similar these questions were to every other year. They were really happy about it. And then about two hours later the sky fell in because the equivalent of Hong Kong's Education Ministry said that this was an outrageous question and that it was biased to ask students to consider anything good that Japan had done and that this seriously hurt the feelings and dignity of the Chinese people. And then we saw after that a torrent of rage from pro Beijing politicians, trade unions denouncing this as an exercise in encouraging kids to be traitors and now the question has actually been cancelled and Marx won't count.

So if it's a very standard kind of exercise, if the teachers themselves see echoes of prior exams, why all this fuss?

It's really revealing that the pro China politicians attacking this question, they don't say that it's a lie that Japan helped Chinese reformers at the beginning of the 20th century. The complaint from pro establishment types is simpler and in some ways much more alarming than they just say this is not a subject on which anyone should think there is any debate at all. There should be no discussion was what the Education Minister said. There should be no nuance. Instead students should simply bow to what the Education Minister of Hong Kong called the nation's common understanding of history. And when he says the nation, what he really means is mainland China's common understanding of history. Because remember, in mainland Chinese schools you would never in a million years be invited to consider whether Japan had ever done anything good for China in the 20th century. Because one of the pillars of Communist Party's nationalist education is inculcating kids from a very early age to dislike Japan.

And what about the students in Hong Kong? What did they make of all this?

It was very interesting. I spoke to four of the 18 year olds who had taken this high school leavers exam. What did you think about the exam question? These four said that they walked in and that the exam question looked totally normal. And in fact when they described why they had understood that they should put both sides of this argument, there was nothing political about that to them. They've just been trained for years by their teachers that when you see one of these more harm than good questions, if you want to get full marks then you're able to say Japan did more harm. But you should make sure to remember one or two counterpoints if you want to get all the marks. What's interesting though is that as they realized how this question is now being politicised, those kids have now become politicized. And so when I talked to them they now say actually there is a real social benefit to training students in critical thinking, to training students to see both sides of a question. One of the students I spoke to is now having second thoughts about her plans to read history at a Hong Kong university because that might lead to a teaching career. But she spent the last few days watching her own teachers self censoring in fear because of this rabbi history. So she's now not sure that that's a path she wants to take.

And so what does this tell you? More broadly in terms of a sense of freedom of education in Hong Kong.

Look, this pile on onto a single history question was no accident at all. This came just a few days after Hong Kong's chief executive had given an interview to a pro Beijing newspaper attacking the entire Hong Kong education system, which is blamed by the ruling elite in Hong Kong for filling children's heads with poisonous Western liberal ideas. And that is blamed for the fact that so many of the protesters were young, even school kids in uniform in some cases. So the fact that they went after this question was to tee up what everyone understands is going to be a major strangulation of educational freedoms in Hong Kong.

Thanks very much for joining us, David.

Thank you.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple podcasts and you can subscribe to the economist@exterator.com radio. Offer 12 issues for $12 or 12 pounds. See you back here tomorrow.