[Ip-health] Stiglitz on prizes

[James Love]

* Patents are not the only way of stimulating innovation. A prize
fund for medical research would be one alternative. Paid for by
industrialised nations, it would provide large prizes for cures and
vaccines for diseases such as AIDS and malaria that affect millions
of people. Me-too drugs that do no better than existing ones would
get a small prize at best. The medicines could then be provided at cost.

* In any system, someone has to pay for research. In the current
system, those unfortunate enough to have the disease are forced to
pay the price, whether they are rich or poor. And that means the very
poor in the developing world are condemned to death.

* The alternative of awarding prizes would be more efficient and more
equitable. It would provide strong incentives for research but
without the inefficiencies associated with monopolisation. This is
not a new idea - in the UK, for instance, the Royal Society of Arts
has long advocated the use of prizes. It is, perhaps, an idea whose
time has come.


http://www.newscientist.com/channel/opinion/mg19125695.700-innovation-
a-better-way-than-patents.html;jsessionid=3DIMIGCOOIHINI

Innovation:  A better way than patents
16 September 2006
 From New Scientist Print Edition.
Joseph Stiglitz


Innovation is at the heart of the success of a modern economy. The
question is how best to promote it. The developed world has carefully
crafted laws which give innovators an exclusive right to their
innovations and the profits that flow from them.

But at what price? There is a growing sentiment that something is
wrong with the system governing intellectual property (IP). The fear
is that a focus on profits for rich corporations amounts to a death
sentence for the very poor in the developing world. So are there
better ways of promoting innovation?

Intellectual property is different from other property rights, which
are designed to promote the efficient use of economic resources.
Patents give the grantee exclusive rights to an innovation - a
monopoly - and the profits this generates provide an incentive to
innovate. Recent years have seen a strengthening of IP rights: for
instance, the scope of what can be patented has been expanded, and
developing countries have been forced to enact and enforce IP laws.
The changes have been promoted especially by the pharmaceutical and
entertainment industries, and by some in the software industry who
argue that the changes will enhance innovation.

Monopolies can lead to higher prices and lower output, and the costs
can be especially high when monopoly power is abused, as courts
around the world have found in the case of Microsoft. What's more,
the hoped-for benefit of enhanced innovation does not always
materialise.

Why is this? First, the most important input into research is
knowledge, and IP sometimes makes this less accessible. This is
especially true when patents take what was previously in the public
domain and "privatise" it - what IP lawyers have called the new
"enclosure movement". The patents granted on Basmati rice (which
Indians had thought they had known about for hundreds of years) and
on the healing properties of turmeric are good examples.

Second, conflicting patent claims make profitable innovation more
difficult. Indeed, a century ago, a conflict over patents between the
Wright brothers and rival aviation pioneer Glenn Curtis so stifled
the development of the airplane that the US government had to step in
to resolve the issue.

The developing world has other complaints against the IP system
imposed as part of an international deal that has become known as the
1994 Uruguay Round trade agreement. Developing countries are poorer
not only because they have fewer resources, but because there is a
gap in knowledge. That is why access to knowledge is so important.
But by strengthening the developed world's stranglehold over
intellectual property, the IP provisions (called TRIPS) of the
Uruguay agreement reduced access to knowledge for developing
countries. TRIPS imposed a system that was not optimally designed for
an advanced industrial country, but was even more poorly suited to a
poor country. I was on President Clinton's Council of Economic
Advisers at the time the Uruguay Round was completed. We and the
Office of Science and Technology Policy opposed TRIPS. We thought it
was bad for American science, bad for world science, bad for the
developing countries.

In the case of pharmaceuticals, the costs of our IP system go beyond
money. The global intellectual property regime denies access to
affordable lifesaving drugs, even as the AIDS epidemic lays waste to
so much of the developing world. Despite the billions drug companies
earn in profits, they spend next to nothing looking for cures and
vaccines for the diseases of the poor. They spend far more on
advertising than on research and far more on researching lifestyle
drugs than on lifesaving ones. The reason is obvious: the poor cannot
afford to pay much for drugs. For those concerned about health in
developing countries, the intellectual property regime has not worked.
=93The global intellectual property regime denies poor people access to
lifesaving drugs=94

Patents are not the only way of stimulating innovation. A prize fund
for medical research would be one alternative. Paid for by
industrialised nations, it would provide large prizes for cures and
vaccines for diseases such as AIDS and malaria that affect millions
of people. Me-too drugs that do no better than existing ones would
get a small prize at best. The medicines could then be provided at cost.

In any system, someone has to pay for research. In the current
system, those unfortunate enough to have the disease are forced to
pay the price, whether they are rich or poor. And that means the very
poor in the developing world are condemned to death.

The alternative of awarding prizes would be more efficient and more
equitable. It would provide strong incentives for research but
without the inefficiencies associated with monopolisation. This is
not a new idea - in the UK, for instance, the Royal Society of Arts
has long advocated the use of prizes. It is, perhaps, an idea whose
time has come.

Joseph Stiglitz is at Columbia University in New York. His latest
book, Making Globalization Work, is published this month by Allen Lane
 From issue 2569 of New Scientist magazine, 16 September 2006, page 20