In Defense of COVID Billionaires

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People love to hate billionaires. And they really love to hate large pharmaceutical companies.

But at the very least, the last year has complicated the popular narrative that drug manufacturers and businessmen are selfish profit-taking parasites, hoarding wealth at the expense of the sick. Faced with the challenge of the novel coronavirus, big pharmaceutical companies didn’t just beat their record for developing a new vaccine. They utterly demolished it. Multiple vaccines have been created and tested in under a year. The previous record was set in the 1960s by the mumps vaccine, which took five times longer.

The fact that there were numerous firms racing toward many different vaccines wasn’t wasteful; it was crucial redundancy on a difficult high-stakes problem where time was of the essence. And one reason so many were able to spin up COVID response efforts quickly is that they were already sitting on giant piles of cash, enormous, expensive labs, and offices full of well-paid scientists, engineers, and strategists.

This is how pharmaceutical firms work: They laboriously develop and test new drugs, then sell them at a profit. The money they make is reinvested into more research—the leading firms plow about a quarter of their total sales into R&D—and, crucially, profits attract more capital.

In 2019, the top 10 pharmaceutical companies invested over $82 billion in research and development, according to the drug data firm Evaluate. If you include the whole industry, that number is closer to $150 billion. Compare that to the total budget of the National Institutes of Health, which was $39 billion the same year. When the threat posed by COVID-19 became clear, Pfizer, Gilead, Moderna, and others dropped ongoing research projects and diverted billions to solving the puzzle of the pandemic.

The simple fact is that major medical discoveries take a mind-blowing amount of time and money. Sometimes the latter can compensate for the former, but not entirely. The greatest achievement of 2020 would not have been possible in an environment where many more regulations constrained the industry, its growth, or its capacity to generate profit. No amount of government cash or prodding could have produced the innovation we witnessed in 2020 if the capacity and institutional knowledge about rapid development wasn’t already there.

And that’s exactly what the pharmaceutical companies have been trying to tell us for ages. “The argument of the industry for a long time has been ‘we’re innovative, you’ve got to pay up for innovation,'” Dan Mahony, co-head of health care for Polar Capital, told the Financial Times. “That premise has been put to the test this year and the industry has over-delivered.”

Of course there are bad actors in the pharma sector—and bad incentives, in the form of our broken intellectual property regime and the too-limited attention span of some institutional investors. But the vaccine success of 2020 has been a demonstration project in the industry’s core argument about the relationship between profits and innovation.

What about the role of government? After all, weren’t these firms being coordinated by the federal Operation Warp Speed? It’s true that this particular state intervention was quite well designed, as far as these things go: It functioned essentially as prize money for proven success. Government de-risked much of the endeavor, promising to purchase specific numbers of doses from several different companies if they produced a working vaccine, as well as offering more targeted support for development and research to some firms. But we shouldn’t overstate the role of that taxpayer money in motivating swift action. Nearly all of the large pharma companies joined the fray months before those guarantees were formally put in place this summer.

There was also a little kerfuffle when Donald Trump announced the first vaccine success in November. Pfizer wanted to make it clear that—unlike Moderna and some other competitors—the firm has not received funds for development from the administration. In fact, it refused that offer of assistance because it was wary of the strings that might be attached. Pfizer later conceded, however, that it was relying on the federal government as a buyer.

American companies have dominated the vaccine development race, but they are certainly not working alone. And it would be a mistake to view the project through the lens of nation-states. Nationalism is poised to rear its ugly head in the dissemination phase as rich countries jockey for access to vaccine stocks. While the desire to be first in line is understandable, the element of Operation Warp Speed that essentially places the United States ahead of other nations and allows the government to control allocation of the vaccine may backfire.

Pharma companies, known for being ruthlessly competitive with each other, figured out how to work in an efficient and complementary way on the vaccine moonshot. They worked across borders and around barriers. Governments should follow their example, if they can.

Not coincidentally, the Pfizer and Moderna vaccines wouldn’t have been possible without the notable contributions of immigrants or children of immigrants—many from much-reviled Muslim-majority countries, no less. As Ilya Somin notes at The Volokh Conspiracy, Moderna co-founder Noubar Afeyan emigrated with his parents from Lebanon to Canada as a teenager. Ugur Sahin and Özlem Türeci, husband and wife co-founders of German firm BioNTech (which collaborated with Pfizer), are children of Turkish immigrants who came to Germany as guest workers.

Even Moncef Slaoui, the scientist who heads up Operation Warp Speed for the federal government, emigrated from Morocco to Belgium at the age of 17, before ending up in the United States.

The record-setting pace of vaccine development was made possible by the free movement of people, goods, and ideas across borders. Let’s not lose sight of that once vaccines start rolling off the assembly lines in earnest.

Then there’s the question of who will get rich. Will some people become billionaires off the COVID vaccine? Will some billionaires see their wealth multiply? Of course. In fact, several CEOs and founders of pharmaceutical firms have already joined the ranks of billionaires during the pandemic, and Moderna’s stock has jumped 400 percent, according to Forbes.

Billionaires are not evidence of policy failure, despite what the tired lefty slogan would have you believe. Quite the opposite. Some of them, and the large, innovative firms their wealth derives from, may well have enabled our greatest (only?) policy successes in 2020.

Big pharma is the most significant. But one could point to a few other billionaires who deserve credit for other bright spots in a dark year. Many of us came to rely on Amazon—a $1.6 trillion company led by world’s richest man Jeff Bezos—to meet basic needs. Amazon’s sheer size, flexible labor force, access to capital, and proven ability to ramp up operations quickly were central to the success of the online superstore in adapting to the challenges of a global pandemic.

Meanwhile, two inspiring and completely successful manned space missions would have been impossible without billionaire Elon Musk’s quirky obsession with getting off the surface of the planet. (His company Space X is currently valued at $100 billion.) And Zoom founder and CEO Eric Yuan, already a member of the three-comma club, saw his net worth grow by about 400 percent in 2020.

Obviously, there are billionaires whose gains are ill-gotten, including those who are primarily the beneficiaries of rent-seeking and other zero-sum behaviors. Government makes billionaires sometimes by letting some people take other people’s stuff. Other times, barriers to entry and other regulatory protections end up locking in the fortunes of those who should have lost them to upstarts and competitors.

But private innovations made it possible, and even sometimes pleasurable, to exist in a nightmare scenario. There have been plenty of policy failures in 2020, but the money made by these remarkable entrepreneurs is not one of them.

William Nordhaus, a Nobel Prize winner in economics, estimates that innovators capture about 2 percent of the economic value that they create. The COVID vaccination effort will illustrate this phenomenon in stark terms: The benefits to life, health, and livelihood that will accrue across the globe will be almost incomprehensibly massive. While pharmaceutical companies will end up taking relatively modest returns, some will begrudge them even those. The same is true of the Yuan, Bezos, and Musk fortunes as well. They got more money, it’s true, but we got to see the faces of the people we love at a time when leaving home was dangerous; got the stuff we needed delivered to our doorsteps when stores felt scary; and maybe even got the beginnings of a way off the surface of this pestilential planet.

Bill Gates has been bringing his philanthropic billions to bear on the problem of COVID, of course, running and bankrolling an $11 billion effort through the World Health Organization. In 2019, though, he was asked about “the idea that there shouldn’t be billionaires.” He replied: “I’m afraid if you really implemented something like that, that the amount you would gain would be much less than the amount you would lose.”


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