Who’s Gonna Make Our Drugs!?!?!
Daniel talks about incentives for drug innovation over at his blog.
Joseph Stiglitz, a Noble Prize winning economist, has written an interesting article arguing that medical a medical prize fund could improve the financing of drug innovations. The prizes would be funded by governments in advanced industrial countries and the prize winner would not own the intellectual property to the drugs or treatments.
This is an interesting idea, and I would endorse the plan if private individuals, not governments, financed it. Bureaucrats don’t make good decisions on the whole better they don’t have good incentives. Their incentives lead them to do things to increase their power and prestige, not the quality of their product.
His analysis is right on.
America hasn’t had a problem generating new drug patents. In fact we have been bearing most of the burden for drug development for the past 20 years. Nearly every new useful drug patent is developed in America or by an American drug company. Single payer healthcare systems like Canada’s or England’s eliminate much of the financial incentive drug companies have to develop new drugs. Americans currently end up subsidizing drug development for the rest of the world because our system doesn’t use the power of government to eliminate higher drug costs. As socialized medicine becomes the norm in more and more nations (Democrats will be pushing hard for it here over the next decade) governments will have to come up with creative ways to artificially provide incentives for drug companies to innovate. This is unfortunate because the market does a much better job of rewarding developers for inventing drugs people want/need than any prize fund manager could.
Medical innovation over the past 100 years has improved peoples’ lives more than nearly any other technological innovation. We will all be worse off when it is turned over to bureaucrats with competing agendas instead of being left to the market.
3 Comments »
RSS feed for comments on this post. TrackBack URI
Leave a comment
Line and paragraph breaks automatic, e-mail address never displayed, HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>
Very good observations.
Comment by Reach Upward — January 4, 2007 @ 1:56 pm
Ok, this is all fine and good, but what I really want to read is a good post on the US “war on drugs” in light of the details of Rhenquist’s not so little problem with prescription painkillers.
Comment by Nate Jones — January 9, 2007 @ 2:17 pm
“Nearly every new useful drug patent is developed in America or by an American drug company.”
Ex-act-ly.
I just listened to an NPR discussion of the studies that show that research by drug companies is statistically biased in favor of whatever drug company is conducting the study.
Seems like a no-brainer, but not a lot of people see it that way. They say that they follow the best practices of scientific method, yada yada. The problem is, we’re all human. And so we’re all gonna make mistakes in our favor.
As for the socialized medicine bit– I personally think that our current system is incredibly inefficient because it combines governmental funding/oversight with private ownership (insurance companies). We need it to be one or the other, or else a lotta money is going to keep getting wasted.
Personally, I don’t see what’s so wrong with the Massachusets system of mandated healthcare, or with Arnold’s new plan to promulgate it in CA. I think that it’s a good in-between– some government funding, but definitely no more than we were spending before in order to take care of those with NO insurance who ended up in emergency care and such.
And the other plus is, it will be an oversight of insurance providers to make sure they practice fair policy as regards acceptance of clients and amount of premiums, as well as the amount they pay back to the insuree.
I mean, if we let insurance companies operate like a corporation, they WILL operate like a corporation– provide as little as possible and gain as much as they can from the ‘consumer’. I personally don’t think that access to healthcare should fall under that sort of umbrella. Health is one of those things that you can’t restore to someone once it’s gone.
Comment by Sare — January 10, 2007 @ 9:53 pm