[Ip-health] New Scientist: Would cash prizes promote cheap drugs?

[James Love]

http://www.newscientist.com/channel/opinion/mg19626296.100-would-cash-prize=
s-promote-cheap-drugs.html

>From issue 2629 of New Scientist magazine, 10 November 2007, page 24

Would cash prizes promote cheap drugs?

James Love

WE ARE conditioned to think that research into new medicines will come to a=
 halt unless pharmaceutical companies continue to be allowed exclusive righ=
ts to sell the drugs they develop. But there is another way to stimulate re=
search that would greatly enhance access to drugs, encourage companies to d=
evelop medicines that are more medically useful - and save money too. Rathe=
r than rewarding success with legal monopolies, governments could use large=
 cash prizes.

There has recently been a surge of prizes for particular research challenge=
s, ranging from space travel and clean energy to video rental searches and =
yields from silver mining. Medical examples include the Prize4Life, which a=
ims to advance research on amyotrophic lateral sclerosis; the Archon X priz=
e for low-cost gene-sequencing techniques; the M prize to promote longevity=
 research; and the Grainger Challenge to protect the world's poor from cont=
aminated well water.

Prizes are a potentially powerful tool whenever there is a sustainable way =
to finance them, combined with an outcome that can be observed and measured=
. They are particularly promising in areas where companies do not otherwise=
 have a financial incentive to develop innovations that would benefit socie=
ty - often because the products would not have a high market value. Notable=
 examples include drugs for diseases that affect the developing world, demo=
nstrations of new technologies that are not yet commercially viable, or res=
earch tools that need to be freely shared.

But while individual prizes can encourage research in specific areas, they =
cannot address the wider problem of high drug prices. The cost of new medic=
ines has skyrocketed in the past 20 years. This affects everyone, from agei=
ng populations in high-income countries (where a new cancer drug can cost $=
100,000 per patient) to under-served populations in poorer countries. There=
 is also increasing awareness of the huge amount that drug companies spend =
on marketing, which is inevitably passed to the consumer.

Last month, US senator Bernie Sanders of Vermont, who sits as an independen=
t, proposed an ambitious bill that would change all this, and take the idea=
 of research prizes to a whole new level. The Medical Innovation Prize Fund=
 would do away completely with monopolies for new drugs in the US, while gi=
ving away more than $80 billion a year in cash prizes for innovations that =
improve health.

The bill redefines patent rights by doing away with the right of the holder=
 to monopolise the use or sale of an invention. Instead the owner would be =
able to claim a share of the prize fund. The amount each drug is awarded wo=
uld be decided by a national board, based on evidence submitted by drug dev=
elopers about the use and health benefits of their products. This evidence =
would be similar to that which insurance companies already use to decide wh=
ether or not to reimburse the cost of certain drugs.
=E2=80=9CThe proposal does away with patent holders' rights to monopolise t=
he use or sale of their invention=E2=80=9D

This would dramatically reduce the amount that drug companies spend on mark=
eting, and it would shift investment towards more useful medical research. =
Every new drug would win something from the prize fund - the amount dependi=
ng on the extent to which an innovation is expected to improve health. Inve=
sting in medically unimportant "me-too" products or hyping drugs that have =
little chance of benefiting patients would no longer be profitable. Parts o=
f the fund would be allocated to particular areas of need, such as neglecte=
d diseases, or diseases that affect the developing world.

The system would also mean that all drugs were available at cheap generic p=
rices - as happens in India today. This would be good news not only for peo=
ple with low incomes but also for middle-class families with medical insura=
nce, whose access to expensive new products is restricted under many insura=
nce schemes. And where the US leads, the rest of the world is likely to fol=
low.

At 0.6 per cent of GDP, the prize fund wouldn't come cheap, but it would ea=
sily pay for itself in lower prices for new drugs. The federal government a=
lready pays more than $100 billion per year for pharmaceutical drugs - and =
this is increasing fast as Medicare programmes are expanded - while state g=
overnments, private consumers, employers and insurance companies pay twice =
that.

Some might argue that such a dramatic change is unrealistic. But surely it =
is better than spending the next 100 years dealing with the super-aggressiv=
e pricing of medical innovations that are protected by monopolies, and tole=
rating enormous disparities in terms of access. Because of our reliance upo=
n monopolies, the world currently spends more than $500 billion a year in h=
igher prices for drugs, and gets very little back in terms of useful innova=
tions. I hope our imagination is not so limited that we can't design a syst=
em that gives us innovation and access in the same package.

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