Big news on pharmaceutical prizes

by on October 25, 2007 at 7:21 am in Economics, Medicine | Permalink

Senator Bernie Sanders, the first self-described socialist ever to be elected to the Senate, has introduced a bill that I might actually sign on to, The Medical Innovation Prize Fund Act of 2007In essence, the prize fund would pay pharmaceutical companies to release their patent rights to the public domain. 

The level of funding for medical innovation prizes would start at
$80 billion per year, and increase with the growth in GDP….

Under the Sanders
proposal, the patent system would still be used, but the patent owners
would no longer be given monopoly rights to control the manufacturing
and sale of products.  Instead, patents would be used to establish who
"owns" the right to the cash rewards given for new inventions.  Drugs
developed without patents would also be eligible for the prizes.

I like that the funding amounts are serious and would be available to non-patented products (innovations without property rights are underfunded).  I worry about corruption and funding directed according to political pressure.  I would be reassured if the system were clearly voluntary – that is, pharmaceutical manufacturers should have the option of the patent or the prize.  Clearly an option will increase profits for the pharmaceutical firms but medical innovation has many beneficial returns not captured by the pharmaceutical companies  so I am not worried about bigger transfers.

Most importantly, a prize fund would make clear the tradeoff between pharmaceutical revenues and R&D and it would reduce the pressure for price controls which I think are a serious threat to future medical innovation.

Thanks to Ben Krohmal for the pointer.

KipEsquire October 25, 2007 at 10:02 am

The notion that taxpayer-funded prizes would not be subject to the same Politics of Pull as the rest of the federal budget has no basis whatsoever in political reality.

One quick hypothetical: “prizes for cancer research versus prizes for AIDS research.” Does anyone seriously think that debate would be objective, scientifically grounded and strictly apolitical?

And, incidentally, we don’t even need hypotheticals — we already have real-world examples.

Anonymous October 25, 2007 at 1:02 pm

Can you really trust a socialist to propose a market oriented reform? No. Government ownership of the fruits of the “means of production” is government ownership of the means of production.

Can’t you just imagine that prize awarding committee? Lawyers and bureacrats, end to end-arguing about strict adherence to submission procedures and the finer points of administrative law, rather than efficacy and safety.

I’m sorry but this is a trojan horse, pure and simple. Take it from a bureaucrat.

Bruce G Charlton October 25, 2007 at 1:53 pm

I certainly favour prizes for innovations, but I don’t think that’s what this is.

One unacknowledged problem is that it is very expensive to market medical treatments, and if you don’t market them they don’t get used. I know of many very effective and very cheap treatments of which which the general public are unaware, but which are hardly used because it is not worth anybody’s money to go to the vast expense of informing/ educating them.

One example is the herb St John’s Wort/ Hypericum which is probably better than the SSRI (Prozac type) drugs for treating depression and anxiety states (ie. it is as-or-more effective and safer – and you don’t need a prescription to buy it) – but who knows this?

It isn’t patented or patentable, so nobody can make much money from selling it, so nobody will spend much money selling it.

Wilson October 25, 2007 at 4:17 pm

The problem, as I see it, is the government and the public are famously terrible at determinining which drugs are most valuable for the public good. The market, on the other hand, does this very well. The prizes would attach incentives to the wrong kind of R&D, in terms of the overall public good, because the largest prizes would go to whatever was percieved as the most valuable innovations, rather than what actually ARE the most valuable innovations.

Dan B October 26, 2007 at 4:26 pm

It is truly disheartening to see how many commenters who consider themselves to be such great advocates of the “free market” defend the status quo, which is a GOVERNMENT-GRANTED MONOPOLY IN THE FORM OF A PATENT. I am not endorsing the prize system per se, though I think it’s promising, but I just want all you supposed libertarians out there to think for a second about how heavily involved the Government already is in the Pharmaceutical market through the Patent system! With Pharmaceuticals as the Second most profitable industry in the country, behind only Oil (another heavily government-aided industry), there is clearly something wrong here.

Dan B October 26, 2007 at 4:26 pm

It is truly disheartening to see how many commenters who consider themselves to be such great advocates of the “free market” defend the status quo, which is a GOVERNMENT-GRANTED MONOPOLY IN THE FORM OF A PATENT. I am not endorsing the prize system per se, though I think it’s promising, but I just want all you supposed libertarians out there to think for a second about how heavily involved the Government already is in the Pharmaceutical market through the Patent system! With Pharmaceuticals as the Second most profitable industry in the country, behind only Oil (another heavily government-aided industry), there is clearly something wrong here.

R. Richard Schweitzer October 26, 2007 at 9:04 pm

Come on now! Doesn’t this take us right back to v.Mises and Hayek on the inability of Socialism to calculate?

Kevin Carson October 27, 2007 at 3:02 am

I don’t think it’s that clear that the patent system encourages innovation. A study by F. M. Scherer found that around 80% of product and process innovations would have been developed even if patents didn’t exist, solely for the sake of remaining competitive. Patents also impede the “shoulders of giants” effect, the cumulative process of building on previous innovations, by erecting toll gates on the use of existing technical building blocks. They encourage a business model based on living off of one-hit wonders, rather than coming up with new innovations.

In the specific field of drugs, patents skew R&D toward “me too” drugs rather than fundamentally new drugs–tweaking existing drugs just enough to justify repatenting them. And most of the much-vaunted “high cost of R&D” comes, not from developing the version of a drug actually marketed, but from securing patent lockdown on all the possible major variations of the drug. In other words, much of the drug companies’ costs are the direct result of gaming the patent system.

On top of all that, some 50% of drug R&D is actually conducted at taxpayer expense, and some of the biggest cash cow drugs currently under patent were developed on the government tit. At the absolute bare minimum, anything developed with taxpayer money ought to be declared in the public domain.

It’s no accident that all the industrial sectors that flourish in the global economy are heavily dependent either on direct taxpayer subsidies (e.g., armaments and agribusiness) or on artificial “property” rights like copyright and patents (biotech, software, electronics, and entertainment).

Dan B October 27, 2007 at 2:02 pm

Kevin Carson, good analysis about government-funded research being used by drug companies as basic science. This is undeniable really, and was similarly evident in the rise of technology post-WW2. Much of the basic science of these innovations- the computer, the internet, etc. was done by government-financed research and then refined by private firms. That is fine and worked great, as long as you didn’t have a screwy patent system that discouraged innovation and idea-sharing, which the tech sector did not, hence the boom of the tech sector.

Yancey, I have to respectfully disagree with you on the notion that the profitability of “me-too” drugs is a sign of the FUNCTIONING of the market rather than a sign of the DYSFUNCTION of the market. What you have basically is a situation where the basic science for a drug has been done long ago, then companies try to continue making monopoly profits off of the drug by creating supposedly “new” versions of the drug when the old patent expires and the Market brings the old drug’s price down to reasonable levels through generic drug manufacturers’ competition. The “new” versions are relentlessly marketed to both patients (who have little knowledge in this area) and to DOCTORS (who are relied upon for accurate information by patients), and you end up with a situation where patients are told by their bribed doctors (bribed through junkets, merchandise, etc.) that this “new” drug is really much better than the old drug. The doctor proscribes the “new” drug and only the pharmaceutical firm is better off, not the patients who pay higher insurance fees to pay for these drugs.

And you call THAT a healthy system that incentivizes innovation?

James Love October 29, 2007 at 4:56 pm

Some of the comments reflect knee jerk reactions against doing anything different in the drug development field, and a few others make the predictable but fairly empty assertions that prizes are somehow more socialistic or political than the grant of government backed legal monopolies (such as patents, sui generis rights in pharmaceutical test data, patent extensions for registration delays, orphan drug exclusivity, orange book 30 month stays in generic drug registrations, pediatric testing exclusivity, etc) and government policies regarding front end R&D subsides (such as R&D and orphan drug tax credits, $7 billion in NIH funded clinical trials, other federal grant and contract funding now given to for profit and non-profit drug developers) and reimbursements for products (VA, medicaid, medicare, federal drug benefits for employees, special programs for kidney products, etc).

In every area, the Sanders Prize Fund approach needs to be compared to the world we actually live in, and the incentives outlined in the bill should be considered as alternatives to an extremely expensive system that provides few innovative new drugs at the cost of about $.5 trillion per year globally in terms of higher prices.

The Sanders bill looks to market incentives to stimulate R&D, but it does not package those incentives as government granted monopolies. The advantages of avoiding the monopolies are quite large, empirically.

Serg December 16, 2007 at 2:23 pm

Levitra (vardenafil HCl) is a prescription medicine that is indicated to
treat erectile dysfunction (ED). Consistent with the effects of PDE5 inhibition, administration of Levitra with nitrates and nitric oxide donors is
contraindicated. Caution is advised when PDE5 inhibitors, including Levitra, are used
concomitantly with stable alpha-blocker therapy, because of the potential for lowering blood pressure. Levitra is not recommended for patients with uncontrolled hypertension (>170/110
mmHg).

Serg December 16, 2007 at 2:24 pm

Nonarteritic anterior ischemic optic neuropathy (NAION) has been reported rarely postmarketing in temporal relationship with the use of PDE5 inhibitors, including Levitra. Sudden loss of hearing, sometimes with tinnitus and dizziness,
also has been reported rarely in temporal association with the use of PDE5 inhibitors, including Levitra. It is not possible to determine if these events
are related to PDE5 inhibitors or to other factors. Physicians should advise patients to stop use of PDE5 inhibitors, including Levitra, and seek prompt
medical attention in the event of sudden loss of vision or hearing.

络龙医疗搜索 January 22, 2008 at 4:34 am

Medical related to human life, it should encourage research of new drugs, greater investment of funds and manpower.

Bob March 14, 2008 at 1:12 am

hi,I University majoring in the legal profession.After graduation,I 徵信 the work of the strong interest.Has worked in several徵信社.Has a wealth of experience. Now I immigrants France,Hope to continue to engage in the work of徵信 credit.
now,is to wake up every day to drink å’–å•¡, shopping. I hope that early awareness of Boles.
thanks,thank very much.

花蓮租車旅遊網 May 29, 2009 at 10:52 am

花蓮旅遊,花蓮租車,花東旅遊,花蓮租車,花蓮租車,花蓮旅遊,租車,花蓮旅遊,花蓮旅遊景點,花蓮旅遊行程,花蓮旅遊地圖,花蓮租車,花蓮租車,花蓮租車旅遊網,花蓮租車,花蓮租車,花蓮租車,花蓮旅遊景點,租車,花蓮旅遊行程,花蓮旅遊地圖,花蓮租車,花蓮租車,租車,花蓮租車,花蓮賞鯨,花蓮旅遊,花蓮,花東旅遊,花蓮租車,花蓮租車,花蓮租車,花蓮旅遊,花蓮租車,花蓮租車,花蓮賞鯨,租車,花蓮租車,花蓮賞鯨,花蓮泛舟,花蓮溯溪,花蓮旅遊,花蓮旅遊景點,花蓮旅遊行程,花蓮旅遊地圖,租車,花蓮租車,花蓮租車,租車,花蓮租車,花蓮租車,花蓮租車,花蓮租車,花蓮一日遊,花蓮租車公司,花蓮租車,花蓮租車,花蓮租車,花蓮一日遊,花蓮租車,花蓮旅遊地圖,花蓮租車,花蓮旅遊行程,花蓮旅遊景點,花蓮旅遊地圖,花蓮賞鯨,花蓮旅遊行程,花蓮旅遊,花蓮租車

Comments on this entry are closed.

Previous post:

Next post: