Commentary: Innovation Policy for a New Era

See World Health Organization [WHO], World Health Report 2008, available at <http://www.who.int/whosis/whos-tat/2008/en/index.html> (last visited April 15, 2009).

On these latter two points, see “Report of the Commission on Macroeconomics and Health, Investing In Health for Economic Development” (2001), available at <http://www.cid.harvard.edu/archive/cmh/cmhreport.pdf> (last visited April 15, 2009).

See, e.g., WHO, Everybody's Business: Strengthening Health Systems to Improve Health Outcomes: WHO's Framework for Action (WHO: Geneva, 2007), available at <http://www.who.int/entity/healthsystems/strategy/everybodys_business.pdf> (last visited April 23, 2009)

WHO, Equitable Access To Essential Medicines: A Framework For Collective Action (WHO: Geneva, 2004): At 1, 5 (patients in low and middle income countries pay 50–90% of their medicines themselves); see also id., at 5 (median private insurance coverage in Asia is 10% and in Africa is less than 8%).

See, e.g., Arrow K. J. , “Economic Welfare and the Allocation of Resources for Invention,” The Rate And Direction Of Inventive Activity: Economic And Social Factors 609 (Princeton: National Bureau of Economic Research edition, 1962).

Trouiller P. , “Drug Development for Neglected Diseases: A Deficient Market and a Public-Health Policy Failure,” Lancet 359, no. 9324 (2002): 2188–94.

See, e.g., Nelson R. R. , “The Simple Economics of Basic Scientific Research,” Journal of Political Economy 67, no. 3 (1959): 297–306, at 302; Landes W. M. Posner R. A. , The Economic Structure of Intellectual Property Law (Harvard University Press: Cambridge, 2003): at 306.

See, e.g., Nalebuff B. J. Stiglitz J. E. , “Prizes and Incentives: Towards a General Theory of Compensation and Competition,” Bell Journal of Economics 14, no. 1 (1983): 21–43; Wright B. D. , “The Economics of Invention Incentives: Patents, Prizes, and Research Contracts,” American Economic Review 73, no. 4 (1983): 691–707.

Love J. , “The Big Idea: Prizes to Stimulate R&D for New Medicines,” Chicago-Kent Law Review 28 (2007): 1519–1554, at 1529–30.

Sonderholm J. , “Wild-Card Patent Extensions as a Means to Incentivize Research and Development of Antibiotics,” Journal of Law, Medicine & Ethics 37, no. 2 (2009): 240–245; Spellberg B , “Societal Costs Versus Savings from Wild-Card Patent Extension Legislation to Spur Critically Needed Antibiotic Development,” Infection 35, no. 3 (2007): 167–174.

As Outterson Kevin . put it, “Wildcard patents sever the historic connection between innovation and reward.” Outterson K. Samora J. B. Keller-Cuda K. , “Will Longer Antimicrobial Patents Improve Global Public Health?” The Lancet Infectious Diseases 8, no. 8 (2007): 559–566, at 561.

For example, would me-too versions of an antibiotic get the same term extension as an older version? If me-too research is substantially less expensive as well as substantially less valuable from a public health perspective, the failure to exclude me-too drugs would dramatically increase the cost of the proposal. They may put downward pressure on the prices of originator drugs, but prizes of this magnitude would be a very expensive way to try to achieve this. Could existing drugs gain the designation even with very limited effectiveness? See Outterson , id., at 561. Such questions would have critical implications for the cost of the proposal, and again mirror precisely the problem of prize design.

See Outterson , supra note 11, at 561.

See Sonderholm , supra note 10.

See, e.g., Barzel Y. , “Optimal Timing of Innovations,” The Review of Economics & Statistics 50, no. 3 (1968): 348–355.

If multiple antibiotics in the same class can gain the term extension, there are other problems: Such “me too” research is likely cheaper and far less valuable than the pioneering research. Now we would be paying a $1.9 billion bonus to obtain a drug with similar clinical outcomes but a different side-effect profile a few days or months sooner than would be obtained with the patent system alone.

Pronovost P. , “An Intervention to Decrease Catheter-Related Bloodstream Infections in the ICU,” New England Journal of Medicine 355, no. 26 (2006): 2725–2732.

See, e.g., Lewis T. R. Reichman J. H. So A. D. , “The Case for Public Funding and Public Oversight of Clinical Trials,” Economists' Voice 4, no. 1 (2007):1–4; Baker D. , The Benefits and Savings of Publicly-Funded Clinical Trials of Prescription Drugs (2008), available at <http://www.cepr.net/index.php/publications/reports/the-benefits-and-savings-of-publicly-funded-clinical-trials-of-prescription-drugs/> (last visited April 16, 2009); Jayadev A. Stiglitz J. , “Two Ideas to Increase Innovation and Reduce Pharmaceutical Costs and Prices,” Health Affairs 28, Web Exclusive (2008): w165–w168, available at <http://content.healthaffairs.org/cgi/reprint/hlthaff.28.1.w165v1.pdf> (last visited April 24, 2009).

More attention is now being paid to innovation issues as they affect developing countries, however. See, e.g., Report of the Commission on Intellectual Property Rights, Innovation, and Public Health, Public Health, Innovation, and Intellectual Property Rights (Geneva: WHO, 2006).

Flynn S. Hollis A. Palmedo M. , “An Economic Justification for Open Access to Essential Medicine Patents in Developing Countries,” Journal of Law, Medicine & Ethics 37, no. 2 (2009): 184–209.

See, e.g., Sykes A. O. , “TRIPS, Pharmaceuticals, Developing Countries, and the Doha ‘Solution’,” Chicago Journal of International Law 3 (2002): 47–68, at 63. For rebuttals of the arbitrage argument, see Outterson K. , “Pharmaceutical Arbitrage: Balancing Access and Innovation in International Prescription Drug Markets,” Yale Journal of Health Policy, Law & Ethics 5 (2005): 193–291; Outterson K. Kesselheim A. S. , “Market-Based Licensing for HPV Vaccines in Developing Countries,” Health Affairs 27, no. 1 (2008): 130–139, at 136–137.

See Flynn , supra note 21.

See Frontières Médicins Sans , Untangling the Web of Antiretroviral Price Reductions, 11th ed. (Médecins Sans Frontières: Geneva, 2008).

Thai Ministry of Public Health and National Health Security Office, White Paper Facts and Evidences on the 10 Burning Issues Related to the Government Use of Patents on Three Patented Essential Drugs in Thailand (2007), available at <http://www.cptech.org/ip/health/c/thailand/thai-cl-white-paper.pdf> (last visited April).

See, e.g., Hewett A. , “Cheap Drugs, Our Duty to the Poor,” Sydney Morning Herald (July 23, 2007), at 11.