Tyfield 10

But how did one industry come to have such influence over US national trade policy? To understand this process, we must look not only at Big Pharma’s success regarding TRIPs but also regarding its steady accumulation of power within the US itself, including domestic patent reform. This latter process, however, is a history that incorporates not just Big Pharma but also two other key sectors: the emergent biotechnology firms and the life science departments of (leading) US universities. During the early 1980s, these three sectors found themselves converging into a broad-based and singleissue political coalition in favour of domestic patent reform (Tyfield 2008). As this coalition grew in political influence, it acted as a springboard and background for the further efforts of Big Pharma regarding global patents. Indeed, through its domestic connection with biotech and life science research, not least in the minds of Washington policy makers across both major parties, Big Pharma could plausibly cast itself as a uniquely important national asset – and one besieged by weak international patent rights. The importance of this connection cannot be underestimated. Big Pharma was not alone in the late 1970s in facing problems of profitability. Political demands from this industry for stronger patents could easily have been rejected by a generally pro-free-trade Congress as the protectionist demands of a mature, if not declining, industry (cf. Republican objections to the current bail-out of the automotive sector). Yet the pharmaceutical industry’s demands were met with unparalleled and bipartisan support (Slaughter and Rhoades 2002) because Big Pharma could depict them as the demands also of the ‘technology of the future’ (biotech), which would resolve the current crisis of profitability, and a crucial national asset (molecular biology research). Let us briefly consider how these three sectors converged into a pro-patent coalition. First, in the late 1970s Big Pharma was, like most industries at the time, facing a significant profitability crisis. This was due in part to ever-increasing R&D costs – not only a result of a dwindling pipeline for new products but also increasing regulatory costs following the thalidomide scandal – and in part to growing competition within the industry, including from generic drug manufacturers from developing countries. The recouping of R&D investment in the pharmaceutical industry, however, is unique in its dependence upon patents. In particular, drugs are often relatively straightforward and inexpensive to reverse engineer, meaning that trade secrets and know-how are not always effective in preserving monopoly innovation rents, while much of the huge R&D expense is spent on regulatory trials that yield no easily appropriable advantage. While it remains unclear whether Big Pharma needs strong patents to be financially viable, their attraction is plain. It follows that the pharmaceutical industry in particular was the most likely industry to lobby hard for stronger patents. Furthermore, as regards TRIPs, the growing R&D expenses also meant that costs could only be recouped through international sales, which would need commensurate international patent coverage. Note, however, that the United States market remains overwhelmingly dominant (at 68 per cent of global pharmaceutical revenues of Big Pharma in 2005) while developing countries are less than 10 per cent, focused in Latin American, Eastern Europe and the Asian newly industrializing economies (PhRMA 2005). Second, ‘biotech’ refers primarily to the biological applications that involve genetic manipulation. Such work follows from a number of scientific breakthroughs in recombinant DNA (rDNA) techniques in the 1970s. This work was not carried out with commercial applications in mind but in the context of the contemporaneous economic crisis and the historical experience of the economic impacts of previous breakthroughs in such fields as organic chemistry and electromagnetism. These scientific results were quickly latched upon as the obvious ‘next step’ by financiers. Patents, and patent reform, were seen to be crucial for this fledgling industry. Biotech is exceptional in the direct involvement of basic science in commercial applications. Such science, as abstract knowledge relatively disembodied from technical know-how, is relatively easily appropriated by competition. Biotechnology start-ups have R&D expenditures commonly as high as 50 per cent of sales, so that such threats of imitation jeopardize the whole business plan (Dutfield 2003: 153). The added security of patents over trade secrets was thus enormously attractive to biotech start-ups, matching Big Pharma’s interests. For patenting to be possible in biotech, however, two particular changes in US law seemed to be necessary. First, it was unclear that biological materials were patentable at all, given restrictions on patenting scientific discovery rather than invention. Second, given the location of this biotechnological research in university departments, the illegality of the patenting, and hence private appropriation, of the results of publicly funded basic science research was a major problem.4 This leads to the university molecular biology research groups where this basic science was being conducted. By the late 1970s, the budgets of American universities were under considerable strain, like Keynesian welfare spending more generally. Purely from the perspective of seeking to continue existing research projects, therefore, American universities found themselves compelled ‘to compete increasingly for external dollars that were tied to market-related research’ (Slaughter and Leslie 1997: 8). Biotechnology was unsurprisingly the focus of this move, given the striking scientific breakthroughs of the period. Furthermore, the percentage of federal research funds devoted to the life sciences was large and growing, so biological research was plausibly presented as a national competitive asset ripe for commercial exploitation. Amongst biology faculties, while there were mixed reactions regarding the embrace of commerce, there was widespread acknowledgement of the possibilities of funding their research in this way. Furthermore, we have seen how patents were (seen to be) a crucial factor for this to be possible in biotech. Indeed, as Kenney notes (1986: 257), it was the universities who had most interest in patent reforms as trade secrets were unavailable to them, not themselves being businesses. There was thus a clear prima facie compatibility of interests regarding domestic patent reform from these three parties: Big Pharma, biotech, and universities. Yet this alone does not explain how overwhelming bipartisan political support was forthcoming for the reforms demanded, if only because this discounts the high degree of controversy that accompanied (and in some cases, still besets) these changes in each case. For instance, regarding biotechnology, in the late 1970s rDNA experiments generated a great deal of public concern, and legislation regarding their strict regulation was being negotiated by parliamentary committees (in both the US and the UK) with the full expectation of uncomplicated passage into law. Similarly, the increasing penetration of commercial interests into academia continues to elicit grave anxiety regarding the effects on the open circulation and criticism of results, the direction of research agendas and the more generalized public trust in science. Yet in each case, these objections were suddenly swept aside in 1979/80. For instance, all legislative discussion of regulation for rDNA experiments simply evaporated between 1978 and 1982 (Wright 1994). Similarly, while moves to allow university patents in the 1970s were completely unsuccessful and rapidly defeated, in 1980 the Bayh-Dole Act, allowing just such patenting, was passed by an overwhelming bipartisan majority – with biotechnological pharmaceuticals the primary argument behind the legislation. Indeed, 1979/80 is a clear watershed for the fortunes of all three players. First, as regards Big Pharma, the profitability of the industry took off from 1980, rising to make it the single most profitable industry in the US economy by the turn of the century. In the midst of a downturn in 2003, the ten Big Pharma firms in the Fortune 500 list of largest US companies accumulated a profit that exceeded the aggregated profits of all the other 490 companies combined. Second, regarding biotech, the public listing of a biotech company, Genentech, on the New York Stock Exchange in 1980 was not only the first such listing, but also one of the most successful ever, with the fastest rise in the history of the New York market. Yet biotech was still a fundamentally risky technology and Genentech itself was far from profitability. Similarly, the legal framework for biotech was transformed from 1980, not only through the BayhDole Act, but also case law confirming the patentability of biotechnological commodities (Diamond vs. Chakrabarty), the creation of a specialist patent court in 1982 that has made US law much more pro-patent, and a series of laws supporting the university-industry complex of biotechnology (Slaughter and Rhoades 2002). Finally, following these legal changes, university patenting has ballooned since 1980, with particularly striking growth in the life sciences. Patents granted to universities more than doubled in 1979–84, and again in 1984–9 and 1989–97 (Mowery et al. 2001), and these have been disproportionately concentrated in biological classes represented in 49.5 per cent of all university patents in the early 2000s (Owen-Smith and Powell 2003). At Columbia and Stanford universities, both major protagonists and beneficiaries of the changes, by 1995 biomedical patents accounted for more than 80 per cent of their substantial licensing revenues (Mowery et al. 2001: 107). In short, therefore, the privatization through strong patents of such biological research suddenly became an acceptable change, if not an urgent priority, at exactly the time of the neoliberal counterrevolution. For it was the structural demands of the global capitalist political economy – with the US at its centre, so that these demands were most effective there – for a new round of capital expansion that enabled the formation of this coalition. Financialization after 1980 gave political power to finance capital and its favoured investments, the most important being biotech, to amend economic regulation to its advantage. Without this changed context, given that the initial demands of each party were prima facie weak and greatly contested, the patent coalition’s demands were unlikely even to stumble to success, let alone stride through virtually unopposed. Simply by pursuing its own disparate interests, however, the US life sciences patent coalition has been a crucial agent in the history of neoliberalism and a key player in neoliberal processes of primitive accumulation, creating a global IP regime that especially covered the life sciences, the industries for which such IPRs are most controversial.