[Ip-health] John Edwards: Prizes not patent monopolies

[james.love@keionline.org]

http://www.huffingtonpost.com/james-love/john-edwards-prizes-not-_b_52323.html

The Huffington Post, June 15, 2007
John Edwards: Prizes not patent monopolies

James Love

John Edwards has issued a statement on affordable health care, and one new
item is the newest idea to control drug costs -- to replace monopolies
with prizes, to reward drug developers. The details of the Edwards
statement on prizes are here. The fact sheet said:

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Edwards will convene an expert panel to identify whether there are
discoveries where prizes - not patent monopolies--would offer new
incentives to researchers, guaranteed gains to companies, and lower costs
to patients. Drug companies would know that if they generated a
life-saving breakthrough, they would be guaranteed a significant payment
in exchange for allowing competition in manufacturing and distribution.
With prizes, the government will pay more up front, but it will save
taxpayers in the end because companies will generate breakthrough drugs
more quickly and provide it to patients at a lower cost. Key questions
about the pricing of prizes, the appropriateness of prizes for different
diseases, and the relationship to patent protections remain to be
resolved, but prizes are a promising innovation that Edwards will pursue.
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It is quite important that Edwards has raised this issue, which is both
the most radical and the most insightful reform of the crazy mess we have
to finance new drug development. The clearest explanation of the use of
prizes to pay for drug development was given in an August 22, 2003 guest
editorial in the Washington Post by the economist Burton Weisbrod. The
most complete explanation of the possible approaches is this paper: The
Big Idea: Prizes to Stimulate R&D for New Medicines, which I recently
co-authored with the Welcome Trust Scientist, Tim Hubbard.

Legislation to create a medical innovation prize system was introduced in
the Congress in 2005 (109th Congress, HR 417), and will soon be
re-introduced in the U.S. Senate, by Bernie Sanders.

Edwards has taken just a first step, calling for the creation of an expert
committee to see how prizes can be used to enhance access to medicines,
while stimulating more innovation (by targeting incentives much more
efficiently than market monopolies have done). This is a big idea, and can
solve a very big problem -- how do you reconcile access and innovation?
How do you control costs, without introducing rationing?

The use of prizes to stimulate innovations that become public goods is
becoming the next big thing. (see these (1,2) blog entires on other
prizes). Edwards is on to something quite important, and it may stimulate
a broader debate on the way we foster innovation for health care and other
important areas of the economy.

There is indeed a growing interest in the use of innovation prizes, as
people look for ways to get a payday for things that cost a lot of money
to do, but which should be freely available (such new medicines).
Economists from the right (Steven Shavell), left (Stiglitz) and the middle
(Suzanne Scotchmer) have championed the use of prizes, and a number of
politicians, foundations and others are calling for the use of prizes for
everything from clean energy, to agricultural inventions and medical
research.

In the area of medicines, there is a lot going outside the United States.
Several countries have called for the WHO's new initiative on innovation
and access to medicines to create new innovation prizes for R&D on
neglected diseases, and this idea will be discussed next Thursday in
Noordwijk, the Netherlands, at a high level OECD forum on "medicines for
neglected and emerging infectious disease, policy coherence to enhance
their availability." Policy coherence? What an interesting idea -- having
both innovation and access to the innovation.