Something is clearly wrong if pharma companies need prizes to motivate themselves into innovation. The market should provide all the invective necessary in terms of money, prestige and lives improved/saved. If that's not happening then it has either become so hard to bring a new drug to market that it's just not worth it, OR the company is so big that the potential of a new drug is too small for such a large company to consider--or both. In the first case restrictions needs to be eased. In the second case (and under the free market conditions) a new company with a smaller balance sheet can take advantage of the opportunity the larger company had turned down.
One contributing factor to this problem is that patent protections are likely too strict, creating the incentive for companies to expend a lot of resources restricting rights to drugs that already exist. By emphasizing prizes, which could be offered by private foundations as well as governments, incentives become more directly targeted to solving the most important problems.
But the prizes would have to be large enough to out weigh the cost of development AND surpass the opportunity cost of the other medications that have existing markets. I doubt that you could offer something large enough to outpace existing market demand. Especially if the prize is a one time thing--it's hard to justify investments in PP&E for a one time prize.
It is definitely an incentives problem. Small businesses can't solve these problems because it's so costly to develop new drugs. Big companies don't want to solve these problems because 1. The ROI is unknown and 2. The projections are small (relative to other product lines)--but of course they are small and unknown since a new product has to have a new market. A new market doesn't have data to indicate size because, it is, after all, new or undeveloped.
Something is clearly wrong if pharma companies need prizes to motivate themselves into innovation. The market should provide all the invective necessary in terms of money, prestige and lives improved/saved. If that's not happening then it has either become so hard to bring a new drug to market that it's just not worth it, OR the company is so big that the potential of a new drug is too small for such a large company to consider--or both. In the first case restrictions needs to be eased. In the second case (and under the free market conditions) a new company with a smaller balance sheet can take advantage of the opportunity the larger company had turned down.
One contributing factor to this problem is that patent protections are likely too strict, creating the incentive for companies to expend a lot of resources restricting rights to drugs that already exist. By emphasizing prizes, which could be offered by private foundations as well as governments, incentives become more directly targeted to solving the most important problems.
But the prizes would have to be large enough to out weigh the cost of development AND surpass the opportunity cost of the other medications that have existing markets. I doubt that you could offer something large enough to outpace existing market demand. Especially if the prize is a one time thing--it's hard to justify investments in PP&E for a one time prize.
It is definitely an incentives problem. Small businesses can't solve these problems because it's so costly to develop new drugs. Big companies don't want to solve these problems because 1. The ROI is unknown and 2. The projections are small (relative to other product lines)--but of course they are small and unknown since a new product has to have a new market. A new market doesn't have data to indicate size because, it is, after all, new or undeveloped.