April 13, 2016
Eduardo Porter had an interesting piece discussing the extent to which patents can pose an obstacle to the diffusion of technology, especially in the case of drugs and clean energy. The piece points out that some folks have suggested alternatives to patent financing for drug research, generously linking to a CEPR paper. However, the piece only mentions the routes of buying up patents and placing them in the public domain and paying drug makers based on how much their drugs increased quality adjusted life-years.
There is another route preferred by some of us, which would just pay for the research upfront. The United States already does this to a substantial extent with the National Institutes of Health, which funds over $30 billion annually in biomedical research. The advantage of paying for the research upfront is that the results can be fully public and available to other researchers from the beginning. Also, there is no need for complex calculations to determine how important a specific contribution was to the end product.
An obvious point of entry would be to finance clinical trials, which account for more than 60 percent of research costs. The trial results would be fully public with detailed data (consistent with anonymity) on individual outcomes. Also, the drugs themselves would be available as generics from the day they are approved. The trials would be paid for on a contract basis, similar to the way the Department of Defense pays contractors to develop new technologies, with the difference that everything is placed in the public domain.
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