In praise of Bernie Sanders

This is an email from his press secretary:

I wanted to write to applaud your great piece in the NYT this weekend, and make sure you were aware of Sen. Sanders’ legislation on the issue.

During the last congress Sen. Sanders introduced a bill to create a $3 billion fund tasked with giving away prizes for drug breakthroughs.  Here’s a release for the bill and here’s a video of a hearing the senator held on it where Joseph Stiglitz, Lawrence Lessig and Jamie Love all testify in support.

I thought you might be interested.

He is referring to my piece from this Sunday.


Giving away "prices"? No entiendo.

Presumably he meant "prizes".

If Lawrence Lessig is for it, I'm against it.


Him, too.

If you dismiss a person out of hand, that's bias.

Lawrence Lessig is most likely a lot smarter and knowledgeable than either one of us. That's certainly true for me. You may be a genius, even though you appear to be hiding your brilliance.

People want to believe that only their side knows the truth. And that may be comfortable, but it's wrong.

You can choose to be biased against someone simply because they have too much influence.

I'm biased against people who respond to sarcasm with well reasoned arguments.

It is a fine idea. We need to do something to instigate development in needed areas, like antibiotics. The fact that it is Bernie Sanders proposing this gives one a sense of how likely this legislation (or something similar) is to receive a vote.

Re DC policy discussions, see Dan's comment above.

I thought the patent on the break through was the prize? Seems like a serious disservice to proper resource allocation.

Granting a one time cash prize would result in less market distortion than granting a legal monopoly.

If you set the prize to the correct level. Patents have the advantage of tying payoff to market demand, whereas government-awarded prizes are determined politically. The latter seems to me to be likely to be a much greater distortion.

Also, I think drug patents are less distortionary than most other patents due to insurance. Most people who can benefit from the drug will obtain it.

Brandon, you seem to be missing the point. The point IS to create a market distortion...this precisely because pharma market structural incentives are more likely to result in cures for baldness than for, say, sickle cell anemia...

Not if it is for a drug with low revenue potential and would serve as a public good.

"Not if it is for a drug with low revenue potential and would serve as a public good."

How does that work exactly?

Come on, as one of many examples, compare the revenue potentials and public health benefits of acne treatments versus new drugs for resistant tuberculosis. The former makes money because well-off parents put down the cash, while the other would serve millions well but those with TB can't pay for it.

Drugs for rare diseases - where the incidence rate is low, but highly harmful/fatal. Basically, not enough people to buy it to justify the cost of R&D.

Individual remuneration for a rare disease seems more like a coordination problem than a public good. Coordinating the overall system might be the public good, assuming it is a public good.

Links in the email are broken.

Didn't your Mum tell you not to brag?

So how would it work exactly? Do you get the prize after the drug has cleared clinical trials, or before? Can it be clawed back if the FDA rescinds approval?

Good questions. Drugs thought to be safe and effective are sometimes proven to be neither or just safe and not effective once they come on the market.

I suspect drug company lobbyists would exaggerate the threat of many pandemics for prize money and the program would basically just turn into ridiculous corporate welfare.

How big would a prize have to be to interest a drug company? They've got a lot of leads to develop, and most will be failures. Are they going to say "Let's keep plugging away with this unpromising drug because if it works we might win a prize"? I really doubt it, because drug trials cost a fortune. They'll look at the potential market and the technical risk. A prize won't enter into the equation, unless were talking about $100 million or more.

On the other hand, if the prize went directly to the scientist who had the idea for the drug, that might work. That guy just gets a salary, not a share of a successful drug. To him, a million bucks falling out of the sky would be big money. Even $100,000 would be nifty. It might be enough of an incentive to get him to spend more time thinking about ideas that fit the prize categories.

Well, NIH et al fund tens of billions in medical research with, since the 80s, incentives for researchers getting the funds to sell the patents to drug companies so the huge profits would drive getting the research turned into tested drugs and products. Further, the Federal government pays drug companies billions each month to buy the drugs.

Thus you would expect the drug companies to lobby heavily for much more funding for medical research to prime the drug industry pipeline. And they got their way with the Bush drug benefit which had no tax to fund it avoiding the obvious target of drug company profits.

But the drug industry has not lobbied to fund R&D or greater government funding of drug buying.

Instead they have lobbied to get greater monopoly power and to ramp up marketing to convince consumers to buy drugs irrationally.

The connection between research and product delivery is so long that Wall Street will not tolerate it. Someone like Warren Buffett, Bill Gates, Jeff Bezos will invest when the timelines to maximum profit are 5-10 years away, but they have the control to ithstand Wall Street. Look at Steve Jobs who was booted out of his company because he was looking to the long term rather than short term profit maximizing.

Patents are already ridiculous corporate welfare. The prize approach just makes the cost explicit.

I've honestly never understood how prizes are supposed to act as a financial incentive. I don't know of any available prize that comes close to covering the cost of the winning effort.

This is true even for university-based efforts, which have access to lots of very smart young PhD researchers for a tiny fraction of the salary of a research engineer employed in industry. If you look at the $1M DARPA Grand Challenges, for example, the research groups involved often have >$1M in DARPA and other research grants. The $10M Ansari Xprize was one of the largest ever, and it didn't come close to covering the development costs for the eventual winner (White Knight and SS1).

I understand that the prize can be a source of legitimacy (i.e. help justify long-shot activities in the grand challenge area) or to support interdisciplinary collaborations that might be institutionally hard to motivate otherwise, etc.

But does anyone understand how they're supposed to work financially?

@ the commentariette
What if the prize was $3bn for one drug?

Seriously, instead of all the grab bag of research grants, bureaucracy and other rigmarole, we should move most research funding to prizes. For instance; the US Government will spend $6.7bn on "clean energy" research in 2013, with various bureaucrats getting to pick winners ahead of time, likely strongly influenced by politics. Why not allocate by prizes instead and compound over time if the prize is not won. I am not sure what the goals are of the clean energy initiative, but say it is to commercialize a zero carbon technology which can generate electricity at a cost equal to shale gas supplied electricity. The first person to do this (if they succeed in 2013) gets the full $6.7bn. Every year the prize increases by the same amount, so in 2014 the prize rises to $13.4bn, and the next year to $20bn and so on. Don't you think that there would very quickly be a lot of people working very hard to achieve this goal? We get this kind of hunger in people working to develop the next Facebook, why not get this for a more worthwhile goal? Instead of funding the most politically connected, or the best grant writer, the funds would go to the most innovative and hardest workers.

Now you may argue that research goals are sometimes hard to define exactly. I say that moving to a prize system forces the funders of the research to get very clear about what their goals really are. If they can"t articulate the goals well enough to be able to clearly say when they will have achieved their goals then surely we shouldn't be funding the activity in the first place.

Prizes for research also have the benefit that when the goal is achieved there is no longer any need to keep the organisation going. NASA is a great example of this, it was set up basically to achieve the moon goal. Afterwards, politics would not allow it to be shutdown so we ended up with monstrosities like the space station and the space shuttle. NASA's current budget is $20bn per year, and their current goal (if one exists beyond pork) is to put someone on Mars by maybe 2020. I have got to believe that a faster way of doing this would be to have the $20bn per year (compounded) placed as a prize for the first company able to fly someone to Mars and back. By 2020 that prize would be over $120bn. Can you imagine the size of the industry that would be created to chase that prize?

"Now you may argue that research goals are sometimes hard to define exactly. I say that moving to a prize system forces the funders of the research to get very clear about what their goals really are."

That's not necessarily a good thing. Pure research that does not have any particular goal can lead to a new innovation not covered by the prize.

Now if you make the goals vague enough, then it would work. Perhaps a prize that rewarded based on life years saved, reduction in health care costs, quality of life metrics, or some other measure of public good would be most efficient.


I would agree that making the prize only dependent on outcomes rather than requiring specific means to achieve a goal would be most optimum. But I don't like the idea that you can give clever people a bunch of money without defined goals in the hope that they will come up with something useful. Especially if it is other peoples money. Also, in the process of achieving the main goal that the prize is for, you can bet that many other smaller problems will be solved anyway, such as the famous example of teflon which supposedly was one of the spin offs from the moon landing.

Bernie Sanders is easily one of the best Congressmen there is. I don't even like most of his ideas, but he's sincere and there's not a party boss who can tell him anything.


And I don't like 99.99% of his ideas.

+1. I think being from Vermont helps. (e.g. Senator George Aiken).

"Vermonters showed Aiken such respect and affection that he reportedly spent only $17.09 on his last reelection bid."

One wonders how someone like Aiken would fare in the G.O.P. today.

From whom does BS "take" the proposed $3 bilillion?

Will Rogers, "If pro is the opposite of con, what is the opposite of congress?"

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