CP - Prizes - JDI 2024

PRIZES COUNTERPLAN
Notes
This is a counterplan (a way to solve for the harms of the aff in a distinct way) for the Hatch Waxman aff. Instead of relying on patents (like the affirmative does) this counterplan has the govern offer prizes (sometimes called subsidizing—think giving money) to companies that develop novel drugs. The idea is that the counterplan gives an incentive to companies to create new drugs but without the negatives of patenting (in other words it does not link to the econ or innovation disads)
There are also affirmative answers to the counterplan. These arguments are primarily about how the counterplan is unable to solve the aff (under various “solvency” blocks)
CP_PRIZES
CP vs Hatch-Waxman---1NC
Next/first off is the Prizes Counterplan.
The United States federal government should offer significant prizes for therapeutics with high added clinical value.
Issuing payouts instead of patents stimulates optimal pharma innovation without spiking costs.
Johnson 12, MA @ Colombia, author, media theorist, and journalist. (Steven, 10-11-2012, "Big Pharma Incentives Are Out of Whack: Why We Need an X-Prize for Drugs," WIRED, https://www.wired.com/2012/10/prescription-drug-crisis/)
THE ENTIRE U.S. patent system needs serious repair, but the most broken thing about it is the way we patent prescription drugs. Federal and state governments spend billions of dollars on basic medical research, and the resulting science winds up informing (at least indirectly) the development of blockbuster pharmaceuticals. But our patent system then grants drug companies the exclusive right to sell their innovations without "generic" competition for years. Big Pharma points out that such patents are necessary because without them it can't recoup the massive costs of creating new products. Meanwhile, there are some classes of drugs that the world desperately needs—new lines of antibiotics, for example, or treatments for tropical, emerging, and rare diseases—but that the current system, dependent on blockbusters, doesn't readily produce. The incentives are out of whack.
There's another solution to this problem—a way to directly fund the drugs we're not getting and avoid the high cost of artificial monopolies. Let's take a page from some of our deep-pocketed philanthropists, who have used competitions to rejuvenate space technology (the X Prizes), mathematics (the Millennium Prize), and more. Instead of granting patents, the government should offer lump-sum payouts.
History shows this is not such a heretical idea. Indeed, stimulating innovation through prizes is actually as old as patent law. In the 1750s, Britain's Royal Society of Arts offered what it called premiums, rewards for solutions to pressing technical or commercial problems: Spinning wheels, mechanical telegraphs, naval construction, and brocade weaving were all "premium" inventions. Although the winners got a handsome prize in return—in total, the RSA paid out tens of millions in today's dollars—the solutions could not be patented. This meant that other people could adapt and improve on them.
Prizes create a kind of artificial economic system that maintains most of the key advantages of the free market. They create incentives and competition, and they diversify the number of minds working on the problem. But the prizes eliminate wasteful spending, since they are rewarded only when genuine solutions have been achieved. And when combined with limits on patent monopolies, prizes can ensure that those innovations will flow more readily through the society at large.
Right now, most of the marquee prize-backed challenges are still funded by philanthropists or the nonprofit sector. But governments have begun to get involved. The Obama administration's Open Government Initiative has created more than 150 challenges, everything from developing new fuel scrubbers for the Air Force to a Healthy App contest sponsored by the surgeon general.
Because they are targeted explicitly at individuals or groups who are not on the government's payroll, state-funded challenges offer a way around the traditional complaints about government bureaucracy. The problems may be defined by government insiders or politicians, but the solutions arise from the edges of the network, not the center. A prize system widens and diversifies the web of collaboration, encouraging scientists and entrepreneurs to make a contribution, even if they have no direct connection to the authorities in Washington.
Solvency---2NC
The counterplan rewards firms for making their drug breakthroughs open access---that stimulates research but doesn’t create monopoly prices.
Hyman 21, *MD, JD, Professor of Health Law & Policy at Georgetown University Law Center. **MA, JD, Chair in Civil Procedure and codirector of the Center on Lawyers, Civil Justice, and the Media at the University of Texas School of Law. (*David A. and **Charles Silver, “Are We ‘Paying Twice’ for Pharmaceuticals?”, Cato Institute, https://www.cato.org/regulation/winter-2020-2021/are-we-paying-twice-pharmaceuticals)
Alternatively, we can side‐​step these difficulties by moving to a prize system to reward pharmaceutical innovation. The competition spurred by a prize regime would also make it much harder for drug companies to set inflated prices. Under a prize regime, drug companies could only charge the marginal cost of production and payers could even run an auction to determine which manufacturer would have the right to supply any given drug to their beneficiaries.
Substituting prizes for patents would also make it possible to rationalize the financial incentives for developing new drugs. Currently, expected prices and sales volumes determine the strength of these incentives. This arrangement encourages pharmaceutical companies to create new cancer treatments that retail for hundreds of thousands or even millions of dollars despite extending patients’ lives only briefly. By contrast, it gives the drug makers little reason to develop new antibiotics with the potential to save lives because doctors will use the new antibiotics only when all previously existing medications fail. By linking financial rewards to delivered benefits, prizes will focus researchers on drugs that are needed.
A prize system will also eliminate the need for programs that use the prospect of earning monopoly rents and tax breaks to encourage researchers to develop treatments for uncommon diseases and establish the efficacy and safety of drugs that were on the market before testing requirements were imposed. Pharmaceutical companies have gamed these programs before and will do so again, but a prize system would render such stratagems useless.
A prize system has the potential to revolutionize the way public and private funds are used across the board, for all types of inventions. Because universities would no longer be able to patent discoveries made with public funds, as they have since the enactment of Bayh–Dole Act, grants funded with tax dollars could require open access to all results, thereby eliminating trade‐​secret protections as well. Expensive acquisitions of spinoffs would disappear, along with the resulting whopping private returns on research undertaken with public funds. The change would also facilitate cooperation among scientists because there would be little to gain by keeping secrets from others.
With all publicly funded basic research in the public domain, private entrepreneurs would be free to take advantage of new discoveries when trying to develop the treatments for which prizes are on offer. Presumably, prizes would offer lucrative compensation to talented researchers who reach the goal before others. But researchers would have only their talents to sell and private entities would bear the costs and risks associated with the process of turning basic research into marketable drugs. Consumers would continue to fund research, but they would buy the resulting drugs far more cheaply.
The more valuable the drug, the greater the prize---that creates market incentives to explore underdeveloped areas of medicine.
Gandjour 11, *MD, PhD, Professor of Health Management @ the Frankfurt School. **PhD, Assistant Professor in the Department of Cognitive Sciences at UC – Irvine. (*Afschin and **Nadja Chernyak, October 2011, "A new prize system for drug innovation," Health Policy, Volume 102, Issues 2–3, https://www.sciencedirect.com/science/article/pii/S0168851011001114) *VBP = value-based pricing, **λ = “acceptable price per unit of health outcome”
The outlined VBP approach to reward medical innovation minimizes the failures of the patent system outlined above. First, as long as threshold value λ reflects real willingness/ability to pay for health gains, the VBP approach is superior to monopoly profits under patents because no unrealized social benefits (deadweight loss) are created. Note that even if drug prices are higher than the marginal costs of their production, a deadweight loss may not occur. A deadweight loss does not occur as long as, from societal perspective, marginal costs equal marginal benefit (i.e., costs of a drug including downstream cost effects equal societal WTP). Note that manufacturers may set the price just below the level of the threshold ICER, which could lead to higher prices than without a VBP system. Still, this may not necessarily be an undesirable reaction as it may increase future R&D activities. In any case, a threshold based on the cost of palliative or nursing care, which in Germany, e.g., is no more than €23,000 per life year, does not seem to allow for much upward shifting of prices.
Second, as long as the expected social benefits exceed costs, private research incentives are in line with social incentives. If a drug price is based on the threshold cost-effectiveness ratio reflecting the social value of incremental health benefits, the innovator will be rewarded for the net health benefit actually created over time. Hence, the innovator also has an incentive to conduct trials on new indications for a drug that is already approved.
In addition, as the reward system does not provide for licensing copycat drugs, it prevents welfare losses from free riding and excessive market entry. This is in line with the reasoning of [36], who argued that if an entrant causes incumbent firms to reduce output, entry is more desirable to the entrant than to society. Further, there is no need to subsidise start-up and production costs of generic manufacturers. Litigation costs because of patent infringement lawsuits against generic manufacturers also vanish. Finally, firms currently allocate substantial resources to marketing8 in order to protect their profits. Restricting excessive entry and competition for market share could change the proportion between R&D and marketing expenditures.
To provide sufficient incentives for innovation the terms of any award must be fixed before the informational asymmetry with regard to costs and benefits of research is resolved [57]. The threshold value λ, which is used for monetary valuation of health benefits under VBP, may offer credible and time consistent incentives for medical innovation, particularly if based on the cost of palliative or nursing care. Of course, future WTP for health improvements may change due to government budgetary pressures. However, under current patent system there is also a risk of future modifications of patent law as well as enforcement of discounts by the government.
Solvency---Added Clinical Value---2NC
It’s possible to calculate the monetary value of health benefits.
Gandjour 11, *MD, PhD, Professor of Health Management @ the Frankfurt School. **PhD, Assistant Professor in the Department of Cognitive Sciences at UC – Irvine. (*Afschin and **Nadja Chernyak, October 2011, "A new prize system for drug innovation," Health Policy, Volume 102, Issues 2–3, https://www.sciencedirect.com/science/article/pii/S0168851011001114) *λ = “acceptable price per unit of health outcome”
5. Monetary valuation of health benefits
Clearly, the reward size for the innovation depends on the value of λ. The value of λ is specific to time, place, perspective, available medical technologies, population needs, and budgetary restrictions [25], [29]. λ can be defined as a value function over health and money [1]. In case of a fixed budget, the value of λ is a function of the size of the budget and the incremental cost-effectiveness ratios of existing medical interventions, where λ represents the opportunity cost of health care resources at the margin or equivalently the shadow price of the budget constraint [56]. If the budget is set by a socially legitimate process, then the threshold value represents the implicit social valuation of health [13].
In practice, full information about the cost-effectiveness of existing medical interventions is not available [24]. However, it has been argued recently that threshold cost-effectiveness can be thought of as the cost-effectiveness of the medical technologies which would be displaced by the new ones and empirical estimates are feasible [13]. As more benefits are produced we might expect that the value of λ increases at a slower rate.
AT: Underpayment---2NC
Value-based pricing compensates inventors just as much as the market would.
Gandjour 11, *MD, PhD, Professor of Health Management @ the Frankfurt School. **PhD, Assistant Professor in the Department of Cognitive Sciences at UC – Irvine. (*Afschin and **Nadja Chernyak, October 2011, "A new prize system for drug innovation," Health Policy, Volume 102, Issues 2–3, https://www.sciencedirect.com/science/article/pii/S0168851011001114)
3. New prize system based on value-based pricing
As implied above and discussed by [32], cost-effectiveness thresholds are not only a means to control prices but also to reward innovation. Hence, reimbursement prices derived from the cost-effectiveness threshold could be considered a form of a monetary reward (prize) for marginal health benefits created by the drug [11].
Our proposal is to determine the prize based on total population health benefits. To determine the latter, we propose using sales data but adjust them for treatment overuse. Furthermore, sales data need to be combined with information on incremental health benefits of a unit of sales (i.e., the individual health benefit). To provide a real-world estimate of the latter, the comparator of the new drug has to be the current treatment pattern.
The approach we suggest sets a maximum WTP for research activities based on the maximum WTP for a health gain. Hence, we suggest rewarding an innovator for the full social value which is in line with [52] as well as [32]. If drug prices are increased beyond societal WTP, further research activities may be stimulated, but these additional activities, even if they lead to great discoveries, are, by definition, not acceptable pricewise. On the other hand, if drug prices are reduced below societal WTP, it may decrease research activities and may prevent discoveries that society is actually willing to pay for.
Varying WTP for R&D across industries (biomedical, energy, agriculture, etc.) to provide differential incentives and maximize overall research activities presupposes that the public has more information on where research yields a higher return for society than the market. Assuming that no such information is available (on which areas of investment yield a higher return) which corresponds to the assumption that each field has the same return, WTP per health gain is set equal across industries.
AT: Rent-Seeking---2NC
Fixed amounts and public accountability check regulatory capture
Hollis 05, Professor of Economics at the University of Calgary. (Aidan, 1-17-2005, “An Efficient Reward System for Pharmaceutical Innovation,” https://keionline.org/misc-docs/drugprizes.pdf)
In order to lessen the risks of “regulatory capture”, the PIF should be of a fixed amount. Each firm could put forward its best case of how many points it should be awarded, and perhaps even present evidence to show why other firms should get less. The fixed total payout of the PIF would lead to a zero-sum game so that firms would compete to obtain points. In these circumstances, collusion seems more difficult to sustain, although direct bribes by individual firms to PIF employees could always be a risk. BrillEdwards (1999) discusses some problems with regulatory capture in the context of pharmaco-economic evaluation.
Political interference with rewards might also be a concern. Government preferences for giving points to domestic firms would certainly be a problem. This suggests that the rationale for how points were to be awarded would have to be made public and fully documented. In addition, since the order of approval of new drugs could influence reward amounts, one could expect political interference on behalf of domestically developed therapies.
There would also need to be a substantial investment in analysis of health outcomes and health economics by a “Pharmaceutical Innovation Fund Agency” to enable a reasonable allocation of points. With hundreds of significant drugs under patent at any given time, substantial resources would be required for determining QALYs and costs for all these medicines. The ALLHAT study of a few anti-hypertensive medications reportedly cost some $125m (Nash and Clarke, 2003). Possibly such an agency would suffer from efficiency problems. However, there are several reasons for believing that such costs and inefficiencies are not an insuperably large problem. First, undertaking evaluations of drugs and treatments is socially valuable, since it enables better treatment.34 At present, there is a case to be made that there is significant underinvestment in “post-marketing” studies of drugs.35 Second, the costs of drug evaluation after the drug is already approved and on the market would be relatively small compared to the huge potential gains from the proposed system. Third, the bureaucracy would be less likely to suffer from inefficiency given a well-defined mandate of measuring therapeutic benefits and costs. Fourth, such an agency would to some extent simply replace existing pharmaco-economic evaluation and price-control agencies in countries where they already exist, and indeed, one option would be to conduct head-to-head trials along with placebo trials during phase III testing of drugs.36
It links to them---big pharma tampers with the patenting process all the time
Gubby 20, PhD, Law; lawyer in England. (Helen, February 2020, “Is the Patent System a Barrier to Inclusive Prosperity? The Biomedical Perspective,” Global Policy Volume 11, Issue 1, p. 47, https://onlinelibrary.wiley.com/doi/pdf/10.1111/1758-5899.12730)
Patent strategies
The decision to patent has become in part uncoupled from the original core purpose of the patent: to protect an invention from unfair imitation by other market participants. Larger firms, with the capital assets to pay for the cost of patenting, use their patent portfolios strategically.
Patents have become useful as bargaining chips; they provide leverage. Large patent portfolios are a means to get access to important co-operations or cross-licensing arrangements (Blind et al., 2009, p. 431). Yet while building the portfolio requires enormous legal costs, it contributes little to research incentives. Furthermore, these portfolios can be used not just to oblige competitors to take licences, but also the terms of these licences can restrict competitors to certain areas of technology (Barton, 2000).
Larger firms can afford to play the ‘wrap around’ strategy. Instead of applying for a single patent to cover an invention, other patents are filed around the main patent. These related patents lock down the discrete features of an invention. The tactic hinders entry to the market. Competitors will be put to time, effort and cost to fight their way through all the relevant patents covering the 

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