[Ip-health] Fwd: [uaem-cc] Slate: Invent a Drug, Win $1 Million

[Matt Price]

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---------- Forwarded message ----------
From: Sandeep Kishore <sunny.kishore@gmail.com>
Date: Jan 24, 2008 11:13 AM
Subject: [uaem-cc] Slate: Invent a Drug, Win $1 Million
To: univ-list@lists.riseup.net, UAEM CC <uaem-cc@googlegroups.com>


Prize concept (e.g. Advance market commitments, etc...) trickling through t=
o
popular press, now on the radar of presidential candidates. Can we push our
univs to engage?

http://www.slate.com/id/2182663/pagenum/all/#page_start

Invent a Drug, Win $1 MillionShould the government start handing out prizes
for science breakthroughs? By Catherine Rampell
Posted Wednesday, Jan. 23, 2008, at 1:16 PM ET The X Prize trophy

Right now, senators, inventors, and tech companies are squabbling about how
to reform the patent system to encourage more innovation. Some version of
the embattled patent-reform
legislation<http://www.thomas.gov/cgi-bin/bdquery/z?d110:s.01145:>is
expected to pass next month, and stakeholders are preparing for a gory
fight over all sorts of itty-bitty nitty-gritties, such as how to calculate
damages for patent infringement.

Meanwhile, some scholars and politicians are proposing something far more
radical: They want to junk, rather than just rejigger, the patent system.
Instead of handing out patent monopolies, they say, the government should
offer cash prizes for inventions. In an ideal world, this would lead to
cheaper products and motivate more research and development in fields that
are unprofitable but socially valuable=97such as new treatments for disease=
s
that affect poor people. This solution may seem extreme, but targeting
certain elements of the idea to particular inventions would be both
politically feasible and entrepreneurially effective.

Patents are supposed to motivate innovation by guaranteeing monopolies on
sales of inventions. Let's imagine, for example, that you invent and patent
a vaccine for malaria. For 20 years, no one can compete with you in selling
your invention to your customers.
------------------------------
------------------------------

The problem with malaria drugs, though, is that few manufacturers *want* to
compete over your (almost entirely poor, almost entirely African) clientele=
.
The few that do=97mostly nonprofits and the governments of developing
countries=97can't afford to pay the colossal licensing fees you'd need to
cover your $1.2 billion research and development costs. As a result,
inventors like you, or big drug companies like Merck and Pfizer, aren't
developing drugs for poor people. Like any other profit-driven industry,
drug companies devote their resources to products that earn them money. In
fact, in the most oft-cited case where a major pharmaceutical company
developed a drug just for poor Africans, the drug was initially intended to
treat an ailment with much deeper pockets: worms in domesticated
animals<http://www.aps-pub.com/proceedings/1454/415.pdf>(PDF).

What if the reward for innovation were an upfront cash prize, independent o=
f
the market for the invention? This is what Sen. Bernie Sanders, I-Vt., is
proposing in a bill
<http://www.thomas.gov/cgi-bin/bdquery/z?d110:s.02210:>that's escaped
the notice of the heavyweights fighting over the
patent-reform legislation. Sanders' bill would eliminate drug monopolies;
instead, all medical developments would automatically enter the public
domain, so more companies could manufacture each new drug. With increased
manufacturing competition and zero licensing fees, drug prices should,
theoretically, plummet.

It's an enticing idea, and one that's not original to Sanders. Perhaps
because it relies on using market forces to motivate socially conscious
entrepreneurship, politicians and scholars from all over the political
spectrum have had their eyes on prizes. This past year alone, John
Edwards<http://johnedwards.com/news/headlines/20070614-health-care-costs-qu=
ality.pdf>(PDF),
Lindsey
Graham<http://lgraham.senate.gov/public/index.cfm?FuseAction=3DPressRoom.Pr=
essReleases&ContentRecord_id=3D10a56a86-4123-4a3d-aa29-0bf16c52d207&Region_=
id=3D&Issue_id=3D>,
Hillary Clinton<http://clinton.senate.gov/news/statements/details.cfm?id=3D=
269765&&>,
Newt Gingrich <http://www.slate.com/id/2176957/>, and Nobel laureate Joseph
Stiglitz <http://www.project-syndicate.org/commentary/stiglitz81>, among
others <http://www.thomas.gov/cgi-bin/bdquery/z?d110:h.r.00632:>, have each
suggested prize systems for medical and environmental inventions. And there
are well-known precedents for this scheme: Over the past few centuries,
prizes have been designated for a longitude-measuring device (announced
1714, for up to 20,000 British pounds), a nonstop flight from New York to
Paris (announced 1919, for $25,000; eventually awarded to Charles
Lindbergh), and private space travel (announced 1996, the $10 million
X-Prize).

The successful prizes=97that is, those that found a winner=97tended to have=
 a
few features in common. They were usually for solutions to specific, clearl=
y
defined problems, rather than being part of a blanket system to reward all
innovations. They also allotted a generous amount of time for the feat to b=
e
accomplished before the prize expired (if it expired at all); they offered
high rewards that presumably outweighed the costs of research as well as th=
e
profits that could be earned from diverting resources into alternate
endeavors; and they were high-profile, guaranteeing the prizewinner fame as
well as fortune.

But there were failures, too=97most notably the wholesale prize systems
offered by the Soviet Union (set up in 1919, for virtually all inventions)
and the U.S. Patent Compensation Board (established in 1946 for private
innovations in atomic energy, which couldn't be patented for national
security reasons). By most accounts, these initiatives failed to generate
much entrepreneurial creativity because the pots weren't big enough to
motivate investment in multiple large-scale research programs. Perhaps also
because they were so generalized, they didn't seem to attract the same
attention to whatever problems they were trying to solve.

These two failings would likely afflict the industrywide prizes-not-patents
system Sanders proposes. That is, if it ever survived the U.S. drug lobby's
reflexive defense of its precious business model. Even if the bill could
pass, its $80 billion annual price tag would make the prize fund difficult
to sustain. Inventors and venture capitalists would have little reason to
believe that the government would make good on its prize promises.

The good news is we don't need to punt the whole patent system to promote
research for neglected diseases or other worthy causes. Instead of setting
up an industrywide prize system, a few reputable charities (or a government
agency with a brilliant PR team and an ironclad escrow account) should offe=
r
attractive prizes for solutions to carefully chosen problems. After all, if
a malaria-vaccine prize could match or even surpass the expected profits fo=
r
a weight-loss/hair-growth/allergy drug, companies would follow the money.
And if the prize were given on condition of forgoing a patent, the drugs
could still be manufactured royalty-free. As for which unprofitable causes
to target, these types of prizes may be most helpful for problems that look
the most hopeless. (Research grants, after all, are the traditional way of
subsidizing worthy but unprofitable causes, but they are less useful than
prizes in areas where there are no promising leads on which specific
research or researchers will succeed.)

One of the best ideas in the Sanders bill could be adapted to this
more-targeted system of prizes. The legislation proposes an interesting way
to solve the problem of incremental drug development. The development of a
new drug tends to happen in small steps, often contributed by different
companies. Under the traditional patent system, there's seldom incentive to
do the expensive initial legwork, since a newcomer could reverse-engineer
your drug, improve upon it slightly, and push you out of the market. One
alternative is to offer an advanced market
commitment<http://www.slate.com/id/2133355/>,
in which a government or nonprofit guarantees purchase of a minimum number
of doses. But with AMCs, such as the one the Gates Foundation promised for =
a
pneumococcal-disease vaccine, there's no incentive to make those incrementa=
l
improvements.

The Sanders solution rewards both the pioneer and the newcomer, who must
share prizes every year over the course of a decade, based on an annual
recalculation of how many people (or quality-adjusted life
years<http://en.wikipedia.org/wiki/Quality-adjusted_life_years>)
each drug is responsible for saving. Here's how this system might be applie=
d
to a prize for curing malaria: Let's say Company A developed an AIDS
treatment that cured some percentage of the disease's victims; at first it
would receive the entire payout from the prize fund every year. But Company
B would get a share if it figured out a way to improve the formula. If the
new drug were twice as effective as the original, the two companies would
split the annual prize 50-50 every year thereafter.

Sanders' bill reminds us that adapting incentives to specific industries'
research processes and business models is key. This observation explains wh=
y
the lawmakers brokering the comprehensive patent-reform legislation are
being drawn and quartered by different industries that want different
provisions suited to their very different business models. There may be no
all-encompassing solution to bring morality to the inherently amoral
marketplace. But there are niches where=97through private charities or more
targeted legislation=97we can create new markets that steer the
entrepreneurial spirit toward the social good.


--
Sandeep P. Kishore, M.Sc.
Medical Scientist Training Program (MSTP) Fellow
Weill Cornell / The Rockefeller University / Sloan-Kettering Cancer
Institute
Tri-Institutional MD-PhD Program
420 East 70th St, Suite 10M
New York, New York, USA  10021
email: sunny.kishore@gmail.com
tel: (917) 733 -1973
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