Transcript Slide 1

Stephen M. Maurer
Goldman School of Public Policy
[email protected]
Drugs for the Developing World
Introduction
Neither Hopeless Nor Inevitable
Wanted: Rational, Evidence-Based R&D Strategies
Design Choices Matter
The Incentives Viewpoint
Overview
Background: The Patent System
Existing Drugs
New Drugs - Three Main Schemes
Details - Open Source & Patents
Conclusion
Existing Drugs
Price
Background
Price
“DWL”
Marginal
Cost
Demand
Quantity
Classical Markets – Monopoly
What’s Wrong With Monopoly?
Price
Background
“DWL” disappears
Marginal
Cost
Demand
Quantity
The Price Discrimination Loophole
The Price Discrimination Loophole
Existing Drugs
Selling Existing Drugs to LDCs
Price Discrimination is Good
Beyond Price Discrimination
LDC Markets ~ 2% of Total Revenue
Suppressing “Parallel Imports”
Public Understanding
New Drugs
Funding New R&D
New Drugs
Many Possible Incentive Systems
Patents Don’t Work!
Patent-Like Schemes
Non-Patent Schemes
Prizes, Grants, Open Source,
Contract R&D, etc.
Multiple Interventions Along The Pipeline
New Drugs
Patent-Like Schemes (I): Boosted Demand
The Basic Idea: Give Sponsors a Bigger Budget
Is It Feasible?
Is It Optimal?
The Sunk Costs Problem & Risk Premiums
New Drugs
Patent-Like Schemes (II):
Advanced Purchase Commitments (“APCs”)
The Basic Idea: Boost LDC Markets With Matching Payments
Is It Feasible?
Is It Optimal?
The Overpayment Problem ~ Estimating Costs
What Are Costs?
First Answer: $802m + $115m
Second Answer: R&D Costs are Endogenous!
A 20 – 30% Cost Penalty!
New Drugs
Patent-Like Schemes (II):
Advanced Purchase Commitments (“APCs”)
Details: Open Source and Outsourcing
New Drugs
Non-Patent Schemes: Virtual Pharma
The Basic Idea: Use Non-Profit Drug Development Teams
+ Outsource Testing.
Is It Feasible?
Don’t Need to Estimate Costs!
What Would It Look Like?
Step 2:
Pick Incentives
(“Bioshield 4”)
Social
Challenge
Patent
System s
Bioshield
4
s
Moral Risk
Eliciting Information
Grants, Prizes,
Patents
(Universities)
Grants
Prizes
(Universities)
Early Phase Drug
Discovery
Moral Risk
Eliciting Information
Patents
(Biotech)
Grants
Prizes
(Virtual Pharma)
Pre-Clinical &
Human Testing
Cost
Patents
(Big Pharma)
Contract R&D
(Virtual Pharma)
Manufacturing
Cost
Patents
(Big Pharma)
Contract R&D
(Virtual Pharma)
Basic Research
Step 3:
Identify & Manage
Areas of Weakness
Social
Challenge
Bioshield
4
s
Evidence
Moral Risk
Eliciting Information
Grants
Prizes
(Universities)
Pre-1980
System
Early Phase Drug
Discovery
Moral Risk
Eliciting Information
Grants
Prizes
(Virtual Pharma)
Can
Government
Pick Winners?
Pre-Clinical &
Human Testing
Cost
Contract R&D
(Virtual Pharma)
Drug Company
Outsourcing
Manufacturing
Cost
Contract R&D
(Virtual Pharma)
Drug Company
Outsourcing,
March of Dimes,
Avian Flu
Basic Research
New Drugs
Is It Optimal?
Purchasing Power
“Private Sector Efficiency” ~
“Shareholders De-Fund Failure”
Will Foundations De-Fund Failure?
New Drugs
Details: Open Source and Patents
Open Source (“OS”)
Drug Discovery
The Tropical Disease Initiative:
DNA ~ Code, Drugs ~ Patches
Bioinformatics ~ Computer Science
Biologists ~ Computer Scientists
Will OS Drug Discovery Work?
A Social Experiment
Biology Grad Students ~ CS Grad Students
Ideology, Education & Signaling
A Scientific Experiment
How High Is The Bar?
New Modes of Science?
Open Source (“OS”)
Drug Discovery
Is OS Drug Discovery Worth Doing?
Volunteer Labor
Improved R&D and Manufacturing Costs
Transparency Pt. 1: Results Can Be Trusted
Transparency Pt. 2: Pooling Data
And The Big Reason for Doing It…
…You Don’t Have to Ask Permission!
Patents
The Usual Claim – Getting The Private Sector
to Contribute R&D Funds
Bad Uses of Patents
Re-Distributing Income Between Sponsors
Remedy: Making Access Prices Explicit
Good Uses of Patents
Rich Nation Users
Remedy: A Simple License
Conclusion
From Politics to Business Plan