Medicine for tomorrow
Some alternative proposals to promote socially benefecial research and development in pharmaceuticals - Working Paper #252
The current models of pharmaceutical drug discovery display significant inefficiencies. One inefficiency is the widespread prevalence of me-too drugs. Second, some patents can act as barriers to knowledge, by slowing down the pace of new discoveries. Third, there are higher costs for the public, who end up paying double costs – subsidizing or funding research and development (R & D) that leads to new discoveries on the one hand, and, on the other, paying the social costs of restricted access to knowledge when the discoveries are privatized. Fourth, when the market returns are the sole guide to R & D of new drugs, diseases that are prevalent in markets with weaker buying power are neglected. Thus, policymakers need to identify a new, more cost-effective and innovative productive system for R & D. Policymakers are faced with very complex choices in designing their regulations. They want to promote access to medicines, to lower costs and to encourage research. Politically, they have to balance pressure from the industry with increasingly forceful demands from health advocacy groups. The article looks at four different sorts of policies that may be used to address some of the inadequacies in the current system, especially with regard to the management of R & D: promoting prizes over patents; directing innovation toward socially beneficial outputs by adopting some form of valuebased pricing; publicly funding clinical trials to reduce conflicts of interest while reducing costs; and actively managing frontier technologies to maximize positive social spillovers.
About the Authors
University of Massachusetts
Initiative for Policy Dialogue (IPD)
Joseph E. Stiglitz is co-President of the Initiative for Policy Dialogue, and Chairman of the Committee on Global Thought at Columbia University. He is University Professor at Columbia, teaching in its Economics Department, its Business School, and its School of International and Public Affairs. He chaired the UN Commission of Experts on Reforms of the International Monetary and Financial System, created in the aftermath of the financial crisis by the President of the General Assembly. He is former Chief Economist and Senior Vice-President of the World Bank and Chairman of President Clinton’s Council of Economic Advisors. He was awarded the Nobel Memorial Prize in Economics in 2001.