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    Kick-starting Harley-Davidson

    THE LARGE dealership with the distinctive orange logo in Berlin’s Huttenstrasse displays a range of Harley-Davidsons from a spectacular custom machine, “Der Texaner”, to the brand-new LiveWire, an electric bike. Yet the Midwestern motorcycle-maker’s only shop in the German capital is deserted owing to covid-19 rules mandating a time slot and a negative test result, which deters most bikers.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

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    How executive mothers cope

    BETSY HOLDEN was vice-president of strategy and new products at Kraft, a giant food company, when she became pregnant for the second time. “No one has ever done the job with two children,” her male boss worried. “How many children do you have?” Ms Holden asked. “Two,” he replied.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

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    Will shareholders halt the inexorable rise of CEO pay?

    LAST YEAR was a terrible one for travel of any sort. You would not know it from the way some American chief executives trousered pay. Annual filings show that Larry Culp, boss of GE, whose jet-engine business stalled as aviation nosedived, earned $73m, almost triple his total pay in 2019. Christopher Nassetta, CEO of Hilton, a hotel chain, enjoyed a 161% pay boost, receiving $55.9m. Norwegian Cruise Line, which described 2020 as the hardest year in its history, more than doubled the compensation of its CEO, Frank Del Rio, to $36.4m. All three were among the corporate titans who grandly took cuts in their basic pay and/or bonuses during the pandemic. They pocketed far more than they gave up.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

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    Are drug patents worth it?

    ONE OF THE first rules of American politics is not to pick a fight with Big Pharma. Its army of lobbyists in Washington, DC, has ensured that presidents from both parties, from Ronald Reagan to Barack Obama, have upheld the industry’s stout defence of intellectual-property (IP) rights, including in international treaties. Donald Trump threatened to impose drug price controls, which won bipartisan support in Congress, but intense lobbying ensured that his initiative flopped. That effort to rein in Big Pharma chimed with the industry’s global image as arrogant and greedy.President Joe Biden is throwing his weight behind a proposal at the World Trade Organisation to waive patent protections for covid-19 vaccines. If Mr Biden is willing to rethink IP rights for covid vaccines abroad, he might also have the audacity to take on patent protection for new drugs at home. To judge whether America’s industry deserves such treatment, it is worth asking three questions. First, how much innovation is happening? Second, is rent-seeking behaviour—ranging from price gouging to patent manipulation—declining? Third, what might happen if patent rules were watered down?Start with innovation. In the 2000s pharma investment fell out of fashion. But since 2010 America’s industry has raised spending on research and development (R&D) sharply as a share of revenues, to over 25% (see chart). Venture funding into life sciences in America is booming, hitting a record high of $36bn in 2020, double the level in 2017. The number of new drugs approved by America’s Food and Drug Administration has more than doubled in the past decade. None of these measures is an ideal proxy for future innovation, but they suggest the mood has changed.On rent-seeking, too, the picture is less dire that it was. Drug prices in America are still the world’s highest on average, but the rate of increase has slowed. According to IQVIA, a data firm, once secret rebates offered to big customers are discounted, net drug prices rose more slowly than inflation in 2018 and 2019. Political pressure is only one reason. Consolidation among health insurers and pharmacy-benefit managers (big middlemen) who pay for drugs gave them more power to negotiate price cuts. It has got harder to mint cash from blockbuster drugs. Deloitte, a consultancy, reckons that the internal rate of return on in-house R&D at a dozen big drugs firms fell from 10% a decade ago to 2% in 2019—below their weighted-average cost of capital of 7%. The average cost to bring a drug to market has increased by two-thirds since 2010, to some $2bn. And the forecast for peak sales for each new drug has also fallen by half over that period. Often big firms prefer to buy smaller innovative rivals. According to EY, a consultancy, American drugs firms spent $185bn in the past five years on biotech acquisitions. Roughly a third of revenues at big drugs firms are the result of IP arising from acquisitions.What would happen if patent rules were weakened? Rent-seeking would fall, but innovation might, too. One way of getting a sense of this is to look at how much innovation happens outside America, where IP rights are often weaker or less well enforced. In most industries innovation is now happening globally, not just in America, but in pharma it still has a powerful American skew. Two-thirds of worldwide biotech venture-capital investment takes place there. Despite China’s advances on other fronts, in life sciences it still accounts for only about 15% of the global total of venture-capital funding. Similarly, even as American multinational pharma firms have become more global (earning roughly half their revenues abroad), their preference for domestic R&D has risen, with 88% of it done in America.This suggests that America’s government will eschew wholesale changes that damage innovation. But it still might loosen the patent regime to reduce rent-seeking from old drugs. In 2019 the Federal Trade Commission, a regulator, found that the industry is relying less than it used to on egregious “pay for delay” agreements, through which it paid generics firms to hold off on launching low-cost rivals to pricey drugs coming off patent. However, Big Pharma is still using other wheezes, such as “evergreening” IP protection beyond the initial 20-year period by filing a thicket of patents on minor modifications. More can be done to rein in such abuses.The S&P index of big drugs firms has risen by roughly 20% over the past five years while the broader equity market has doubled. Despite miraculous covid-19 treatments, this year the pharma index has declined by nearly a tenth. It is clear that even as spending on innovation rises, presumably reflecting confidence that important IP rights in America will remain intact, investors think the opportunity to print easy money is not as good as it was. That seems about right.■This article appeared in the Business section of the print edition under the headline “Less buck for the bang” More

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    Older consumers have learned new tricks in the pandemic

    BABY BOOMERS, aged 57-75, are as the name implies, plentiful. Healthier and more adventurous than similarly aged cohorts in the past, since 2018 over-65s have outnumbered the under-fives. They are also wealthier. America’s boomer-led households spend $64,000 a year, almost twice as much as those headed by youngsters born from 1997 onwards. Together with the earlier “silent” generation, they account for two-fifths of American consumer spending. Yet brands and retailers have long given older shoppers short shrift, focusing most of their attention on the wrinkle-free. As with many things, the pandemic is demanding a rethink.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

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    Can human creativity prevent mass unemployment?

    IN “THE REPAIR SHOP”, a British television series, carpenters, textile workers and mechanics mend family heirlooms that viewers have brought to their workshop. The fascination comes from watching them apply their craft to restore these keepsakes and the emotional appeal from the tears that follow when the owner is presented with the beautifully rendered result.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

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    America wants to waive patent protection for vaccines

    AMERICA HAS long been the global protector-in-chief of intellectual property. But on May 5th it sought to tear up the rule book. “The extraordinary circumstances of the covid-19 pandemic call for extraordinary measures,” said Katherine Tai, the United States Trade Representative. To help battle the pandemic, the administration of President Joe Biden said it supported waiving some intellectual-property protections for vaccines. Jaws dropped—along with the share prices of vaccinemakers.Investors shuddered at the idea that other manufacturers might pounce on unprotected intellectual property. Only a day earlier, Pfizer forecast vaccine revenues of $26bn in 2021, with profits around $7bn. Splitting such spoils could blunt the incentive to invest and undermine innovation. And if firms fear that their know-how can be pilfered with impunity, it could undermine collaborative efforts. Just as bad, botched imitations by generic manufacturers could fuel vaccine hesitancy.The waiver’s advocates argue that a pandemic is not the time to be thinking about profits. Moreover, existing commercial agreements should be unaffected. Beyond that, it is unclear how much extra supply of vaccines a waiver could unlock. The complexity of some production processes means that copycats will need co-operation from originators. James Love of Knowledge Ecology International, an advocacy group, hopes that the threat of weaker protections could encourage more voluntary-licensing agreements, in which companies transfer their know-how. There are untapped suppliers such as Teva, an Israeli generics firm, which recently said that it would give up looking for a production partner. But even these sort of voluntary agreements are likely to take around six months to set up.American support for a waiver is the first step in what could be a lengthy process. Several countries, including members of the European Union, Britain and Switzerland, which opposed such a move at the WTO last year, must be persuaded to change their minds. They will struggle to hold the line against America, so may agree to a narrow exception to trade rules. A broader waiving of the rules, as proposed by India and South Africa, to include the removal of patent and trade-secret protections for all covid-related products, including therapeutics and diagnostics, is not on the table. In her comments Ms Tai mentioned waiving intellectual-property protections, but only for vaccines.Consensus at the WTO could take months to secure, and after that countries will still have to change domestic laws. Meanwhile, the pandemic will be raging, while other constraints on vaccine supply continue to bite, including the availability of special inputs from plastic tubing, filters and even specialist bags. Investors may worry about a fall in profits. If negotiations at the WTO suck energy away from other initiatives to transfer technology and increase vaccine supplies, that would really be something to fear. ■This article appeared in the Business section of the print edition under the headline “A shot in the arm” More