Translation: "There is no such thing as a free lunch.”
More to the point, when it comes to pharmaceutical innovation, there is no such thing as a cheap lunch. In other words, there are rarely simple answers to complex questions.
Today the U.S. Senate Committee on Health, Education, Labor and Pensions will be holding a markup on the Pandemic and All-Hazards Preparedness Act (PAHPA) reauthorization that includes a patently absurd patent prize proposal from the Senator from Ben & Jerry’s, Bernie Sanders.
Let’s look at the hard facts versus the silly soundbites.
The “innovation prize model” has been used in the past, for example in the old Soviet Union. It didn’t work. The Soviet experience was characterized by low levels of monetary compensation and poor innovative performance. The US experience isn’t much better. The federal government paid Robert Goddard (the father of American rocket science) $1 million as compensation for his basic liquid rocket patents. A fair price? Not when you consider that during the remaining life of those patents, US expenditures on liquid-propelled rockets amounted to around $10 billion.
This is certainly not what Schumpeter had in mind when he wrote about “spectacular prizes thrown to a small minority of winners.” Creative destruction indeed!
Does Chairman Sanders really want to replace a patent system that has allowed the average American lifespan to increase, over the past 50 years, by almost a full decade with a prize program that has a solid record of complete failure.
As Joe DiMasi (Tufts University) and Henry Grabowski (Duke University) have argued, under a prize program, pharmaceutical innovators would lack the incentive to innovate. To quote DiMasi and Grabowski, “The dynamic benefits created by patents on pharmaceuticals can, and almost surely do, swamp in significance their short-run inefficiencies.”
As DiMasi and Grabowski presciently observed in 2004, “The main beneficiaries in the short-term would be private insurers and public sector purchaser of pharmaceuticals â€¦ Governments and insurers are focused myopically on managing health care costs. They are not likely to be strong advocates for funding new drug development that can increase individual quality of life and productivity."
Sound familiar? Correct. Europe. Sound familiar? Correct. Evidence-Based Medicine.
To be sure, there will be other unworkable, ill-considered, and precarious suggestions for ways to “fix” the U.S. health care system. But a prize system may be the worse of them all.