And it incentivizes innovation on existing technology.
Ganjour and Chernyak 11 – Afschin Gandjour is a medical doctor, health economist, and Gandjour received an M.D. from Hannover Medical School in Germany, an M.B.A. from Duke University, a Ph.D. in health economics from the University of Cologne in Germany, and an M.A. in philosophy from the University of Düsseldorf in Germany. He held faculty positions at the University of Cologne Medical School, Baylor College of Medicine, and Louisiana State University Pennington. Nadja Chernyak, Department of Public Health, Center of Health and Society, Heinrich-Heine University Düsseldorf, Düsseldorf, Germany.
Afschin Gandjour and Nadja Chernyak, October 2011, “A new prize system for drug innovation,” Health Policy, https://www.sciencedirect.com/science/article/pii/S0168851011001114?via%3Dihub#!
However, the proposed prize system considers the cumulative nature of medical innovation and does not preclude approval of therapeutically similar innovations (me-too drugs) if they offer additional health benefits or cost savings. There have been concerns that therapeutic substitutes might crowd out drastic innovations by reducing the budget available for R&D. But different drug versions are often innovated in so-called R&D races, implying that therapeutically similar innovations are already in the ‘pipeline’ when the first drastic innovation enters the market [10]. Thus, increased competition because of the race to be the first might further stimulate innovation and possibly speeds up commercialization. Moreover, even drugs with the same effectiveness can provide incremental benefits because of reduced side effects or improved compliance [35]. In any case, the prize system considers as a comparator of a new drug the current treatment, which may be a recently approved drug or no treatment in case of market expansion.