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Patent to Prizes? A Change in Paradigm
Transcript of Patent to Prizes? A Change in Paradigm
Poon Kai Hong Objectives of the Patent System: spur innovation by allowing legal monopoly to bring greater good for the society Utilitarian & Social objectives Benefits vs Costs vs Benefits Costs inequitable distribution of resources high prices deadweight loss counterfeit problem Pharmaceutical Industry An entitlement to a monopoly in patented drugs -rewards are tied to the profits from sale of drugs
-need to cover high R&D costs with drug revenue
-extorbitantly high prices Consequences 1. limits access to life-saving medicines
2. gives rise to 'orphaned' diseases
3. gives rise to 'copycat' drugs
4. encourages counterfeit drugs e.g. malaria, tuberculosis, clorea, typhoid FDA, Centre for Drug Evaluation and Research found that out of 1,284 new drug approvals, only 22.5% has a "significant improvement compared to marketed products in the treatment, diagnosis, or prevention of a disease" U.S. Brand Name drugs are on the average more expensive than generic drugs -Generic Pharmaceutical Association 12 times -when parties have the right to exclude one another from the use of a scarce resources
-no one has an effective of use of the resource Tradegy of the Anti-Commons Pharmaceutical Context -industry survives on patents
-environment where there is a proliferation of patents
-cross-licensing is integral for research progress
-difficulty in obtaining patented knowledge
-slows down innovation decreased knowledged sharing Nature, July 2003 Privately funded Organizations Grainger Challenge Prize to protect the world's poor from contaminated well water to advance low-cost gene-sequencing techniques Archon Genomics X Prize Privately funded Prizes Growing awareness of the inefficiency of the patent system Medical Innovation Prize Act of 2005 pending U.S. bill... source: http://olpa.od.nih.gov/legislation/109/pendinglegislation/medicalinnovation.asp -use of a Medical Innovation Prize Fund as an incentive for innovation
-Prize will be given out on the basis of incremental health benefits to consumers Benefits:
1. incentive to innovate does not lie on the commercial success of the drug
2. drug prices will fall
3. the Prize Fund will provide better security for investors and innovators to From Challenges & Limitations of the Prize System 1. Who will fund the prize money?
2. Subject to bias
3. Firms won't share R&D knowledge
4. Implementation not probable in near future US$80 billion per year! 'opened sourced dividends'? set clear and objective standards? US$602 billion global sales in 2005 Conclusion - implementation not probable
- the bill is still in its infant stages
- encouraging to see efforts to address significant social issues
- cannot be sure that the Prize System is the ultimate solution for innovation Thank You for Your Attention!