Big news on pharmaceutical prizes

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 2007.  In 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.