Profiteering Off Publicly Funded COVID Treatments

from the fun-with-patents-and-tech-transfer dept

I’m all for heavily compensating whoever comes up with an effective treatment or vaccine for COVID-19, but our existing setup seems designed to encourage scamming and grifting. For years, we’ve talked about the evil that is the Bayh-Dole Act, which encouraged universities to patent every damn thing (most of which was funded from federal government grants) and then sell off those patents to industry. While it’s made a bunch of people rich, it’s been such a disaster in so many other ways. First it’s done massive harm to university research (rather than the opposite as its backers promised). It significantly decreased information sharing and collaboration (keys to innovation breakthroughs) because universities kept demanding ideas be kept secret so they could patent them and lock up the output of any (again, mostly taxpayer funded) research.

A key result of Bayh-Dole is that many, many universities all set up “tech transfer” offices, in the belief that they’d be able to cash in on all these patents being licensed to industry. But, of course, like so many patent holders, universities vastly over-estimate the value of the patent, and under-estimate the value of actual execution. So almost all (with just a few limited exceptions) university tech transfer offices have been dismal failures, and lost universities money, rather than being profit centers. Of course, that created an opportunity… for patent trolls. One of the world’s largest patent trolls, Intellectual Ventures, was literally built off of this scam: swooping in to “rescue” desperate tech transfer offices at universities, buying their patents off them for pennies, and amassing a huge collection to shakedown actual innovators. And of course, some universities — including the University of California — got directly into the patent trolling business themselves.

If you want to see a case study on how this works in the age of COVID-19, look no further than the story of the antiviral therapy called EIDD-2801. My and your taxpayer money helped fund the development of the drug (taken in pill form, originally for the flu), by a grant from the federal government to Emory University for $30 million (only about half of which has been spent). But, just as the COVID-19 situation heated up, there was a recognition that pharma firms might be eager to find new drugs to treat the disease. George Painter heads Emory’s tech transfer operation, and also (coinkydinks) holds some patents related to EIDD-2801. In what lots of people considered to be a weird move, he quickly sold off the rights to EIDD-2801 to a “biotherapeutics” company called Ridgeback Biotherapeutics, that didn’t seem to have much in the way of, well, anything:

Ridgeback Biotherapeutics had no laboratories, no manufacturing facility of its own and a minimal track record when it struck a deal in March with Emory University to license an experimental coronavirus pill invented by university researchers…

What Ridgeback did seem to have was close connections to the Trump administration. And a wealthy couple who “founded” the firm.

Wayne Holman, who holds a medical degree from New York University, is a hedge-fund manager with a long track record of investing in pharmaceutical stocks. He founded his fund Ridgeback Capital Management in 2006. Wendy Holman, chief executive of Ridgeback Biotherapeutics, is a former investment manager who was named to President Trump?s advisory council on HIV/AIDS in 2019.

The Holmans live on Miami?s exclusive Star Island, where they bought two mansions for a combined $47 million in 2014 and tore one of them down. Ridgeback Capital?s headquarters is in a small office building not far away in Coconut Grove, near a private school where Wendy Holman serves on the board of trustees.

The story of Emory and Ridgeback came to attention only because of Rick Bright, the whistleblower who was removed from his job as the director of the US Biomedical Advanced Research and Development Authority for challenging the US’s approach to dealing with COVID-19. Among the things he blew the whistle on was Ridgeback’s sketchy and insistent push for a lot more money from BARDA, despite not even drawing down the remaining $14 million of the existing grant:

Ridgeback?s involvement burst into the broader public sphere in early May, when Bright, the ousted head of BARDA, filed his explosive whistleblower complaint. Bright alleged that he clashed with Robert Kadlec, the Health and Human Services assistant secretary for preparedness and response, over demands that he award BARDA contracts to well-connected companies. HHS has said it ?strongly disagrees? with Bright?s allegations.

In his complaint, Bright cited attempts to secure money for EIDD-2801 ? first by Painter in November 2019, and then by Wendy Holman in early April ? among episodes of alleged political pressure.

Bright said he rejected requests to fund EIDD-2801 because Emory had already received pledges of $30 million from the National Institute of Allergy and Infectious Diseases and the Department of Defense to cover development of the drug, including human safety testing. Without first seeing safety results, Bright said, it did not make sense to back the drug with new infusions of federal cash.

The story includes quotes from a series of emails that Holman sent pushing for more taxpayer funds to run clinical trials.

Bright said in his complaint that Ridgeback had been seeking $100 million to further the drug?s development. In an April 13 email, a BARDA official said the proposal from Ridgeback could obligate the government to pay the company more than $300 million. The contract official objected to the outlay because Ridgeback had not followed proper application procedures.

Even so, it appears that Ridgeback was able to cash in by flipping the rights to EIDD-2801 to pharma giant Merck after just about two months:

That wager paid off with extraordinary speed in May when, just two months after acquiring the antiviral therapy called EIDD-2801 from Emory, Ridgeback sold exclusive worldwide rights to drug giant Merck.

Nice work if you can get it.

And, again, I’m all for investing in the development of a successful treatment of this disease, which remains a massive threat. But, let’s go back to the basics here: the research was paid for by taxpayers. But the benefit seems to be accruing to private companies entirely, and where the incentives get sketchy super quick. It seems that a much better system is to not involve patents and sketchy licensing deals that give off the appearance of self-dealing. Why not just offer massive prizes, along with some initial incentive grants to do the necessary work, and then whoever comes up with a treatment can claim a massive prize, along with the promise that the actual treatment be made widely available for free or at a nominal price. That seems a lot more effective with much less risk of arbitrage and flipping, and privatizing that which was paid for by public funds.

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Companies: emory university, merck, ridgeback biotherapeutics

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Mike Masnick (profile) says:

Re: Massive Threat?

Yes, you awful person, a massive threat. I DO know many people under 50 who have been hospitalized with COVID, and there are tons of stories of deaths as well, including this article from early April (way before the death rate peaked):

And sure, the risk is HIGHER for older people, but it is still a massive threat to tons of people at younger ages. Even leaving aside that issue, the risk of death is not the only part of the massive threat. You have the threat of continuing to pass on the virus to those who it might kill. You also have the threat of long lasting complications that may not mean death, but are still devastating. I have a friend who got COVID in early March and STILL has not recovered.

So, honestly, fuck you if you’re trying to play this down.

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Stephen T. Stone (profile) says:

Re: Re: Re:

The United States has recorded over 2.26 million cases of, and over 120,000 deaths due to, COVID-19. No vaccine, cure, or all-around effective treatment yet exists for the disease. Go ask the living survivors (who aren’t on ventilators) and the families of the dead if the threat is overblown.

Anonymous Coward says:

Re: Re: Re:2 Re:

Where are you getting your numbers? The John Hopkins tracking site currently gives 2,191,371 confirmed cases and 118,436 deaths. Of course both numbers are likely lower than the real (but in reality unknowable) numbers. Still, I’m curious about the – admittedly small – difference.

Meanwhile I’ve seen at least one right wingish commentator on another site claim that numbers are inflated by financial incentives to report positives. Does anyone know of any such incentive? It sounded like dingbat conspiracy theory fodder to me. I’ve also seen more grounded claims that current testing methods have at least a 20% false negative output (i.e. at least 20% of people infected by or carrying the virus will test negative, and that’s at the best point in the infection, it gets much worse earlier and later than that point).

With almost twice as many dead already as a bad seasonal flu outbreak despite everything being done to combat the outbreak, no end in sight*, deaths in all age ranges**, many of the "recovered" from severe cases still barely able to function and may never recover fully, implying this is a phony emergency is digustingly calous stupidity.

  • After falling from the peak, new daily cases hit a botton about one and a half to two weeks ago and are now on a possibly accelerating uptick, at least per the John Hopkins site. If this gets out of hand, things could go from nasty to much, much worse.

** Yes, young children have almost certainly died as a result of this disease, There are outbreaks of "multisystem inflammatory syndrome" likely caused by the novel corona virus, initally mistaken for Kawasaki disease, and they can be fatal if not effectively treated.

PaulT (profile) says:

Re: Re: Re:3 Re:

"Still, I’m curious about the – admittedly small – difference."

Johns Hopkins and the CDC tend to lag in terms of reporting time, I find the Worldometer site updates more quickly with no long term problems with accuracy. Basically, all the sites will vary by a few thousand depending on when you check them.

"Does anyone know of any such incentive?"

My understanding is that Medicare introduced flat payment schemes for COVID-19 cases to discourage unnecessary testing/overcharging and to make it easier to allocate resources in a similar way they do for flu and other regularly occurring diseases. Of course, the right-wing moronosphere has twisted this into something else.

The funny thing is – even if that were true, how do they explain the other 70%ish cases in 200+ other countries that have different medical systems, most of which are not for profit and therefore wouldn’t attract such behaviour? They never think that far ahead…

Ngita (profile) says:

Re: Re: Re:4 Re:

Australia has similar mechanisms.

A reasonably big fuss was made because after trumpeting in the press that a 30 year old had died of COVID-19 and that he was the youngest to die in Australia, the autopsy revealed that he had not in fact died of COVID, that he did not have COVID and the 5000 people tested for possible contact revealed nobody that was infected with COVID.

Anonymous Coward says:

Re: Re: Massive Threat?

Let’s not forget what I like to call "COVID induced deaths".

Rather than explaining, better if I show an example:

Why did they only check her for COVID? Because they were fucking swamped and spread very thinly, plus getting infected themselves.

In normal circumstances, she would have gotten a proper check and they would have found her appendicitis in time.

So well, COVID doesn’t only kill by virus, but also by saturating healthcare services.

PaulT (profile) says:

Re: Re: Re: Massive Threat?

"So well, COVID doesn’t only kill by virus, but also by saturating healthcare services."

Which is the entire sodding point behind the lockdowns… COVID doesn’t magically replace the other illnesses and deaths that normally occur, and without lockdowns the death count would be much higher because those who would normally get treatment couldn’t be serviced by an overwhelmed healthcare system. Which is already in the shitter because people would rather work as Typhoid Marys than call in sick or risk a bankrupting bill that nobody else in the civilised world will ever get.

That’s why my country is about to open up some borders on Monday due to safety not being a concerning issue on that level, while the US is still pissing around working out how to get idiots not to deliberately spread around a disease that’s already killed more people there.

Anonymous Coward says:

Re: Re: Re:2 Massive Threat?

Well, it was the only piece of news in english so that you didn’t need Google Translate.

In Spanish:

Both are well known papers. One has undefined political leanings, but people think they are left leaning, and elmundo is right wing (conservative) leaning.

PaulT (profile) says:

Re: Re: Re:3 Massive Threat?

"Well, it was the only piece of news in english so that you didn’t need Google Translate"

Generally speaking, translation of an original source is better than believing an unreliable source’s claim of what it supposedly said.

Although, since I do speak Spanish I had a quick look at those links. First off, 20minutos is a free paper given away at train stations in a similar way to the UK’s Metro, not typically a primary source. If you read the whole thing, they clearly state it’s taking it’s story from the El Mundo article. So, all you really have is the one source being reworded by multiple people. Not good.

Then, the El Mundo is behind a pay wall so I can’t read the whole thing, but the gist seems to be that mistakes were made in a single case not long after the state of emergency was implemented, at which point resources were severely stretched.

So, what you said is true, but be careful about resources. Of the things you’ve been quoted, you only had one primary source and were originally relying on an unreliable translator.

Anonymous Coward says:

Can someone please name an ‘ Act’ that hasn’t done massive harm to university research (rather than the opposite as its backers promised). Almost all are introduced or backed by politicians who are either ignorant, greedy or both and in almost every case, these ‘Acts’ prove to be totally disastrous! How they are ever thought up in the first place is beyond me but there has to be personal gratification because surely no one, even for substantial ‘campaign contributions’ wants to make themselves look total twats for nothing, do they? Yet it is such a regular occurance to be almost unbelievable.

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Mike Masnick (profile) says:

Re: Re:

Not profitable? In your dreams.

The data says you’re wrong

Most universities lose money on it. In 2012, a year very much in line with the ten-year trends in this sector, the top 5% of earners (8 universities) took 50% of the total licensing income of the university system; and the top 10% (16 universities) took 70%, nearly three-quarters of the system’s income.

over the last 20 years, on average, 87% did not break even.

So, no: the vast majority of tech transfer offices are not profitable. That there are a tiny few who are does not change that fact.

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