Picking winners fails.
Iancu and Kappos 23 – former undersecretary of Commerce for intellectual property and director of the U.S. Patent and Trademark Office; former undersecretary of Commerce for intellectual property and director of the United States Patent and Trademark Office.
Andrei Iancu and David Kappos, “Replacing Patents with Prizes Bad for Innovation,” Boston Hearld, 08-20-2023, https://www.bostonherald.com/2023/08/20/iancu-kappos-replacing-patents-with-prizes-bad-for-patients/
A major problem with prize systems is that they undervalue new medicines. While a drug is being developed, it’s very difficult to estimate how much it could eventually be worth — and government prizes rarely fall on the “large” side of the spectrum. As soon as drug developers see that the available award is unlikely to match the market value of a new drug — or even cover costs — the prize system will have no motivating effect.
Sanders’ proposal suggests that the government can do a better job than the free market system at incentivizing the invention of cutting-edge new drugs. But we have no reason to believe, and there is no evidence to support a view that such a federal takeover can improve on, or even sustain our current levels of innovation.
Indeed, we have a very recent example of what federal over-involvement in the drug market does. Last year’s Inflation Reduction Act (IRA) introduced government price-setting on a range of medicines. Already, at least 24 drug companies have cut research efforts thanks to that law. A study by the health data firm Vital Transformation estimates that we could see as many as 139 fewer new drugs come to market in the next decade as a result of the IRA.