Jim Manzi points out that funding drug trials with public money exposes you to the inverse problems of the current system. Namely, "bureaucrats and politicians tend to have enormous career risk from an unsafe drug introduction, but almost none from a rejected drug that would have been effective had it been introduced...[it] would likely result in fewer new drugs being brought to market." No one wants to be against "innovation." The word is practically a synonym for "awesome." And who wants to be anti-awesome? But the problem with our health care system is that far too little effort is expended making sure the innovation is good innovation. Take the case of Claritin, the wonder anti-allergy drug. In 2001, loratidine, Claritin's active ingredient, went off patent. Generic producers streamed into the market. Many more people could access Claritin, or at least the compounds that made Claritin powerful. Right on schedule, Schering, Claritin's producer, emerged with Clarinex. Now the active ingredient was desloratadine, and it was said to be effective, for longer. There was little evidence of that. But it was eligible for patent protection, and Schering spent billions of dollars convincing doctors to prescribe it, and so they made profits and health care became a bit more expensive. That was bad, or at least useless and costly, "innovation." On the other side, there's much good innovation. And there should be some status quo bias in favor of protecting a system that does produce important advances. The problem is, we actually do need to strike a balance. In health care, unlike in other industries, almost anything that is approved is prescribed and paid for. By all of us. bad innovation imposes public costs. Pharmaceutical companies are incredibly sophisticated at generating their own demand. So what to do? My preference, at least in the short-term, would be an alternative track for drug development based around prizes, not patents. This would not replace the current patent system, but compete with it. Nobel prize winning economist Joe Stiglitz advocates this idea ("The fundamental problem with the patent system is simple: it is based on restricting the use of knowledge"), and Senator Bernie Sanders has turned it into legislation. It could do much to ease the most perverse incentives of the private sector -- the need to induce demand and wall off research -- while preserving the incentives for innovation. It could be funded by the public sector but the decision makers -- those competing for the prize -- would remain private. It might not solve our problems, but it could help. It's worth trying. PHARMACEUTICAL INNOVATION.
Jim Manzi points out that funding drug trials with public money exposes you to the inverse problems of the current system. Namely, "bureaucrats and politicians tend to have enormous career risk from an unsafe drug introduction, but almost none from a rejected drug that would have been effective had it been introduced...[it] would likely result in fewer new drugs being brought to market." No one wants to be against "innovation." The word is practically a synonym for "awesome." And who wants to be anti-awesome? But the problem with our health care system is that far too little effort is expended making sure the innovation is good innovation. Take the case of Claritin, the wonder anti-allergy drug. In 2001, loratidine, Claritin's active ingredient, went off patent. Generic producers streamed into the market. Many more people could access Claritin, or at least the compounds that made Claritin powerful. Right on schedule, Schering, Claritin's producer, emerged with Clarinex. Now the active ingredient was desloratadine, and it was said to be effective, for longer. There was little evidence of that. But it was eligible for patent protection, and Schering spent billions of dollars convincing doctors to prescribe it, and so they made profits and health care became a bit more expensive. That was bad, or at least useless and costly, "innovation." On the other side, there's much good innovation. And there should be some status quo bias in favor of protecting a system that does produce important advances. The problem is, we actually do need to strike a balance. In health care, unlike in other industries, almost anything that is approved is prescribed and paid for. By all of us. bad innovation imposes public costs. Pharmaceutical companies are incredibly sophisticated at generating their own demand. So what to do? My preference, at least in the short-term, would be an alternative track for drug development based around prizes, not patents. This would not replace the current patent system, but compete with it. Nobel prize winning economist Joe Stiglitz advocates this idea ("The fundamental problem with the patent system is simple: it is based on restricting the use of knowledge"), and Senator Bernie Sanders has turned it into legislation. It could do much to ease the most perverse incentives of the private sector -- the need to induce demand and wall off research -- while preserving the incentives for innovation. It could be funded by the public sector but the decision makers -- those competing for the prize -- would remain private. It might not solve our problems, but it could help. It's worth trying. 
