Prizes can be awarded based on interim or end results to spur innovation

Another pull incentive that can be used to stimulate innovation is giving cash rewards for the achievement of specified objectives. Prizes can be designed in many ways – they are most commonly set up as “end prizes” once the final target product is developed or “milestone prizes”, in which interim results are rewarded. Prizes are results-based: they are only paid if the objectives set by the prize sponsor are met, thereby rewarding only successful innovations. A 2011 assessment of prizes for development of health technologies concluded that milestone prizes were better at attracting different actors to the early stages of development – especially smaller companies or non-industry actors (148). It also noted, however, that it was important to include mechanisms to ensure that candidates are taken all the way to market.

As a pull incentive, prizes require organizations to make investments up front. Milestone prizes reduce the amount of investment necessary before any payment can be received, as opposed to end prizes, in which the investment has to be made all the way through the end of development to obtain a reward. Wilson & Palriwala (148) also suggested that the prize design should take accessibility into account, including conditions such as the licensing of IP to all interested manufacturers or including requirements about the final price of the product. Prizes are a way of delinking R&D investments from prices, as the investments are recouped through the prize and not through sales of the end-product (149).

Some innovation prizes have been implemented for the development of health technologies on a small scale. For example, the Prize4Life – dedicated to the discovery of treatments and a cure for amyotrophic lateral sclerosis – gave two US$ 1 million prizes for development of a biomarker to track the development of the disease and for development of a gene therapy approach to treat the disease (150,151,152). The Longitude Prize aims to award £10 million for the development of an affordable, accurate, fast and easy-to-use test for bacterial infections (153). The Life Prize was created to promote development of an affordable, short-course treatment regimen effective against all forms of tuberculosis through a combination of milestone prizes and grants at different stages of product development (154). The XPRIZE Rapid COVID Testing competition offered US$ 6 million for the development of a fast, cheap and easy-to-use test for COVID-19 (155).