Senator Bernie Sanders, an Independent from Vermont, has introduced a bill that would replace our current patent system for pharmaceuticals with a “Medical Innovation Prize Fund.”

 

It’s not a new idea. The “prize” model has been used in the past—in the old Soviet Union. It didn’t work. The Soviet experience was characterized by low levels of monetary compensation and poor innovative performance.

 

The experience in the United States hasn’t been much better. The federal government paid the father of American rocketry, Robert Goddard, $1 million as compensation for his basic liquid rocket patents. A fair price? Not when you consider that during the remaining life of those patents, U.S. expenditures on liquid-propelled rockets amounted to around $10 billion.

 

Senator Sanders wants to replace a patent system that has fueled innovation allowing the average American lifespan to increase by almost a full decade over the past 50 years with a prize program that has a solid record of failure. As the healthcare economists Joe DiMasi and Henry Grabowski have argued, under a prize program, pharmaceutical innovators would lack the incentive to innovate. DiMasi, director of economic analysis for the Tufts Center for the Study of Drug Development, and Grabowski, director of Duke University’s Program in Pharmaceuticals and Health Economics, said, “The dynamic benefits created by patents on pharmaceuticals can, and almost surely do, swamp in significance their short-run inefficiencies.”

 

In other words (and to paraphrase Winston Churchill), our pharmaceutical patent system is the worst way to stimulate and support health care innovation—except for every other system.

 

Who could support the idea of a prize? As DiMasi and Grabowski presciently observed in 2004, “The main beneficiaries in the short-term would be private insurers and public sector purchaser of pharmaceuticals.” That’s because, as they note, governments and insurers are focused “myopically on managing health care costs” and are not likely to be “strong advocates for funding new drug development that can increase individual quality of life and productivity.”

 

Those who support this idea view it as a solution to all the world’s health care ills. “Research is risky, new drugs are too expensive, and industry focuses far too much of its effort on drugs of minimal medical significance,” Merrill Goozner, director of the Integrity in Science Project at the Center for Science in the Public Interest, has said. “The prize fund solves all these problems by disconnecting the incentives for generating breakthroughs from the price that individual patients or their insurers must pay.”

 

Jamie Love, director of Knowledge Ecology International, has said that “By separating the markets for innovation from the markets for the physical goods, the Prize Fund would ensure that everyone, everywhere, could have access to new medicines at marginal costs.”

 

The timing of Senator Sanders’ bill is interesting. It coincides with the upcoming meeting of the WHO’s Intergovernmental Working Group on Public Health, Innovation and Intellectual Property whose goal is “to prepare a global strategy and plan of action on essential health research to address conditions affecting developing countries disproportionately.”

 

The truth of the matter is that the promotion of innovation and the creation of new medicines for the sake of developing countries cannot be based on a top-down process. Rather, they should be based on bottom-up solutions by the actual players involved in this process—companies, research institutions, and the regulatory and IP authorities.

 

Clearly Senator Sanders and the Jamie Loves do not concur. They want the philosophy of the Intergovernmental Working Group on Public Health to become the law of the land in the United States—hard facts, economic theory, and historical precedents not withstanding.

 

Hopefully the U.S. delegation in Geneva will strongly argue against this philosophy and refuse to enter into “consensus.”

 

A prize in every box does not a Crackerjack idea make.