Innovation need not always be incentivised by potential profit. Alternative innovation models that “delink” the cost research and development from the eventual price of a medical product offer the potential to separate incentives for research and development from profit and to allow for a more public-health focused agenda. Several such alternative innovation models have been proposed, and many have been successfully implemented. They are detailed below.
Better innovation models: Solution contents
Innovation need not always be incentivised by potential profit. Alternative innovation models have been proposed that would take further the idea that medical research should serve primarily health needs. Click on the buttons below or scroll down for more information.
Related Issues: No product
Medicines development is currently incentivised by profit. Because of this incentive structure, products that are important for public health but unlikely to be profitable are often not developed. This means that some places of acute need are underserved, if the market they provide is not sufficiently profitable to motivate companies to develop medicines.
Product Development Partnerships
A good example of this is the Drugs for Neglected Diseases Initiative (DNDi), which has developed an impressive 8 treatments for 5 rare diseases within 15 years. Another example is GAVI (formerly known as Global Alliance for Vaccines and Immunization), which joined forces with vaccine developers, philanthropists and public health experts to ensure improved availability and accessibility of vaccines. GAVI is currently involved in the fight against the Covid-19 pandemic. PDPs also contribute to reducing R&D costs and applying innovative methods that have proved effective in other areas of work.
Governments could decide to directly support research through the product development phase, either through grants or other forms of financing. Such as Tax credits for the development of particular products. Direct financing currently occurs through public research institutions such as the National Institutes of Health and the Biomedical Advanced Research and Development Authority (BARDA). Tax credits can also be a form of direct support from governments, for example tax credits offered to companies in the US and the EU who develop medicines for “orphan” diseases [diseases with a very small patient population, insufficient to incentivise research under normal circumstances].
Advanced market commitments
“Grand challenge” funds are a sub-type of prize fund where a financial reward is offered for solving a clearly defined problem (where a novel solution is required but not yet defined), such as “preventing deaths during childbirth.”
Examples of prize funds include InnoCentive, which crowdsources solutions to pre-defined challenges and the X Prize Foundation, which runs competitions to find the best solution to solve a challenge such as how to build private spaceships or better clean up oil spills.