Alternatives to Monopolies : Prizes
Today’s second panel will discuss the possibility of prizes as alternatives to monopolies. The panel will be moderated by Rishab Ghosh of UNU-MERIT, and the panelists will include James Love of Knowledge Ecology International (KEI), Bard Geesaman of X-Prize Foundation, Erika Duenas from the Embassy of Bolivia in Washington D.C. and Pierre Chirac, Médecins sans Frontières (MSF)
It is today widely recognized that the current approach to rewarding the development of essential new knowledge goods, such as medicines and diagnostic devices, has major deficiencies. Patent enforced monopolies often lead to high prices. In the case of medicines, the system’s critics also argue that relying on such monopolies focuses too much investment in products that do not offer significant improvements over existing therapies, and often fails to stimulate investments in areas of public interest and priority. There are now different efforts aimed at addressing the current systems deficiencies. One such initiative is the effort at the World Health Organization (WHO) to implement a global strategy and plan of action for essential health research, which would address the question of complementary and alternative incentive mechanisms including those that address the linkage between the cost of research and development (R&D) and the price of medicines. However, such initiatives are not limited to the area of health. There are initiatives in a host of other areas including increasing focus on the climate change related technologies.
Consequently, governments, donors and businesses are increasingly being asked to consider prizes as a viable alternative to marketing monopolies as the reward for successful investments in R&D. This panel will examine and debate the importance, viability and challenges in implementing a prize-based system of rewarding innovation with a special focus on health and climate change.
The questions to be addressed will include:
* Should prizes be thought of as an alternative reward system or as a compliment to the existing exclusive rights system?
* In which ways might prizes work more efficiently (in terms of delivering better innovation and assuring access to the results of R&D while supporting follow-on innovation) as compared to the current patent system?
* Concretely, how would a prize system work in the areas of health and climate change?
* Where should the money for prizes come from, and will the prospect of prizes be credible?
* What global infrastructure and institutions are needed to manage an international prize-based system?
Panel Notes
Jamie Love
What do we mean by Prizes?
• Prizes is a term that loosely is used to describe a set of rewards that are tied to performance outcomes. The prizes can take different forms from cash, valuable preferences (such as the FDA priority review voucher), or advanced marketing commitments).
• Prizes and Patent: There is enormous freedom in how prizes are designed and this freedom extends to the relationship between the patents and prizes. Prizes can be offered as alternatives to Patents.
Why Prizes?
• Prizes can be an alternative to monopolies and can thus reach a much wider number of people. Through prizes you can bring in new actors, and stimulate business. Prizes also reward people who might not be able to get their patent or afford to get one. They also avoid the obstacles and social costs to having monopolies.
• James Love’s work has been focused specifically on medial innovations. Working with a US Senator, he is trying to eliminate private rights to drug inventions in exchange for massive prizes. These prizes will be allocated according to how drugs affect the market over a ten-year period.
• Recently Barbados and Bolivia have proposed new models for how to use prizes in Medical innovations which rely heavily on open source models. Their proposals call for “open source dividends.”
Important new development in medical Innovation prizes
• The new WHO Global Strategy Documents endorse the de-linking of R & D incentives from prices and the use of prizes to reward developers of new drugs
• Two major companies including Johnson and Johnson have been supporting prizes in connection with UNITAID patent pool because it will be more efficient and more affordable for them to provide drugs to the developing world.
• There is also an enormous growth of proposals for prizes in the area of energy, environment and climate change.
Erika Duenas
Bolivia is very concerned with the issue of access to medicines at reasonable prices. Bolivia has been a strong supporter of using prizes to encourage innovation and access to medicine in their country. Bolivia wants to encourage R & D in their country, but recognize that there aren’t always incentives for R & D when it relates to the medical needs of developing countries. It is because of this that they support prizes as an alternative and why they, along with Barbados and other developing countries, are pushing for prizes as an alternative to the traditional patent approach.
The background of their proposal is based on the WHA 60.30, which aims to encourage the development of health-based initiatives. They have made 6 major proposals, five of which involve prizes. Prizes are linked with an open pricing system to draw in generic manufacturing. Prizes will also be awarded according to need. Prizes will be given under strict requirements. Hopefully they will give incentives for access to knowledge and communication. Bolivia wants the prize fund to be administered by the WHO and through a committee. They would like governments to donate to these prizes and fund them.
Proposal 1: Prize Fun for Development of Low-Cost Rapid Diagnostic Test
• Only using grants is not a solution to increasing drug development. Prizes offer a better alternative or addition to grants.
• This proposal deals with prizes to address a discrete public health need. For example a prize could be used for TB, which is a public health threat that kills nearly 2 million people a year most of whom live in the developing world. There is a need for a rapid low cost diagnostic tests that can be manufactured cheaply.
Proposal 2: Prize fund for the Development of New Treatments for Chagas Disease
• Chagas is an important problem for Bolivia and other Developing countries.
• R & D is specifically for neglected diseases. While this proposal is for a specific disease, they hope that it can be a model for other neglected diseases
Proposal 3: Priority Medicines and Vaccines
Proposal 4: Prizes as a reward mechanism for new cancer treatments
Proposal 5: Licensed Products prize fund for Donors
Bard Geesaman
The XPrize foundation is the largest organization that organizes prizes. Their organization isn’t concerned with retrospective prizes like the Nobel Prize, but rather prospective prizes that aim to incentive.
Incentives and prizes have a long history. The first famous prize was the Longitude Act, which offered a prize to figure out a simple way to determine the latitude of a ship. Perhaps the most famous prize is the Orteig Prize to the first person the fly across the ocean.
The first X Prize was modeled after the Orteig price. They wanted a space shuttle that could go and come back from space twice in one week safely.
Prizes generate a huge response and can be great incentives because they create excitement, change government incentives and motivate people around the globe. There is also a big psychological aspect to prizes to – as the ego boost from winning prizes adds onto the money value the people get for their prizes.
Bard Geesaman isn’t particularly interested in space, but he is concerned about the needs in health care that pharmaceutical companies cannot address. He isn’t concerned with areas where there already are great financial incentives, but to look at neglected areas.
Donors only have to pay out prizes if someone actually accomplishes the intended goal.
He wants to encourage innovation where it is needed most and where the market has failed to incentivize. He hopes to maximize both financial and psychological leverage and they want the recipients inventions to be long lasting.
There are currently 3 prizes at XPrizes available to the public.
Bard Geesaman is also interested in prizes that aim at disease prevention and those that avoid regulatory hurdles. He is currently developing several prizes related to health care.
Pierre Chirac
Pierre Chirac works for MSF and is concerned with issues around TB. Every year TB kills approximately 2 million people and 9 million develop the disease. It is now of the main killers of people with HIV/AIDS and increasingly people are become drug resistant. TB is very contagious and spreads through the air like a common cold. However, only one of ten people infected by TB actually develop the disease although it does remain dormant in the body and when a person is weak, the disease can be developed. Prisons and refugee camps are places of rampant TB infection.
TB is still a neglected disease. MSF has inadequate and out dated tools for rapid diagnostic and treatment. MSP needs diagnostic tools that are simple, reliable and adapted for use in remote, resource poor settings. They also need drugs that have shorter treatment times, address with drug resistant strains and do not have side effects that worsen other ailments such as HIV/AIDs. Yet while there is a huge need, there is also a huge lack of funding.
The current technique for diagnosing TB is cheap and easy enough, but it doesn’t have very good results and only ends up diagnosing less than 50% of people with TB. As a result, people often end up getting the wrong treatments, which in turn creates drug resistant strains of TB.
More recently there have been a couple stakeholders beginning to help but it is not enough. They will probably be unable to deliver a POC TB test that will be cheap because of patent barriers
In January of 2007 there was a big meeting hosted by MSF bringing TB experts from around the globe together. They determined that there is a huge RD gap and that the public sector will need to get involved because the private sector has failed. Another meeting in Geneva followed these discussions this past April. At this meeting participants advocated working together collaboratively and decided that patents are blocking the path to developing an innovative mechanisms for working against TB.
Public funding would need to be involved in these mechanisms and governments would contribute to the prizes. Under his model participating high-income countries would, be expect to donate 90% of the funds needed for the prizes. He also suggests that the WHO administer the prizes
