Jan 28 & 29, 2008 KEI & UNU-MERIT Medical Prize Fund Workshop

Prizes are an appealing answer to a thorny dilemma. How can society ensure that knowledge goods, which are both costly to create and potentially non- rival in use, be shared freely?

There is little doubt today that the current approach to rewarding the development of new medicines or diagnostic devices has severe deficiencies. Patent enforced monopolies often lead to high prices. Critics also say that a system that depends upon such monopolies focuses too much investment in products that do not offer significant improvements over existing therapies, and often fails to stimulate investment in areas of public interest and priority.

The prize system is a way of rethinking the problem. If the incentive for innovation can be divorced from the product’s price, the R&D for a new medicine can be placed in the public domain immediately, so that competition among suppliers leads to low prices and greater access to new medical inventions.

Prizes can be implemented in many different ways[1], as illustrated by several recent prizes that have been implemented or proposed for biomedical research. In some formulations, prizes would be used as an incentive to reward R&D directed to early stages of scientific research, while in other cases, prizes would reward the development of products that would be used to provide treatment or care for patients. Prizes have been proposed to solve specific problems, such as to identify biomarkers for a disease, low cost gene sequencing techniques, or to develop a rapid diagnostic test for tuberculosis. They have also been proposed as an alternative reward mechanism for drug development, including proposals that would cover all prescription drugs or only drugs that treat certain diseases that primarily impact patients in developing countries.

Governments, donors and businesses are increasingly being asked to consider prizes as an alternative to marketing monopolies as the reward for successful investments in R&D.

In May 2007, the World Health Assembly passed resolution WHA60.30, which called upon the WHO Director General to "encourage the development of proposals[…] that includes a range of incentive mechanisms including also addressing the linkage of the cost of research and development and the price of medicines, vaccines, diagnostic kits and other health-care products." In October 2007, legislation for an $80 billion per year medical innovation prize fund was introduced in the U.S. Senate. There has also been a proliferation of prizes for early stage biomedical research offered by philanthropic organizations and for profit businesses, as well as growing interest and use of prizes in fields as diverse as predicting movie preferences, space travel, mining, energy and the environment.

This high-profile workshop organised by KEI[2] and UNU-MERIT[3] will bring together outstanding leaders in policy, academia, industry and civil society from all over the world. We will consider the economics of the use of monetary prizes as an alternative mechanism to stimulate private investments in R&D.

The workshop will take place on Jan. 28/29, 2008, at UNU-MERIT in Maastricht, The Netherlands.

Working Questions

At the heart of the workshop will be the following questions:

Relationship to the patent system: Should prizes be thought of as an alternative reward system, or one that is complementary with the exclusive right to use an invention? If an objective of a prize is to eliminate monopolies on the use of inventions, how should this be done? Should patents be redefined as a claim to share in the prize type rewards, or should governments or donors tie the prize rewards to voluntary open licensing of patents?
Valuation: How does one determine of the size of prizes? Is the problem of determining prices or reimbursement rates for new drugs easier or harder than determining the value of prizes? What are the different challenges in determining values for prizes for early stage research, diagnostic devices or pharmaceutical drugs or vaccines?
Push versus pull: To what degree should society finance drug development through up-front grants and other "push" mechanisms, and to what degree should they rely upon prizes as a "pull" mechanism? Why is it beneficial to sponsor competitions for rewards that are tied to successful outcomes of R&D programs?
Sustainable financing: Where should the prize money come from, and will the prospect of prizes be credible?
Follow-on innovation: How will prizes deal with the need for incentives for follow-on innovation?
Transition:How can the transition from the current monopoly-based system be organized?

For more information, please contact Karsten Gerloff <gerloff at merit.unu.edu> or Malini Aisola <malini.aisola at keionline.org>.

[1] see e.g. Love, James/Hubbard, Tim (2007) The Big Idea: Prizes to Stimulate R&D for New Medicines. KEI ResearchPapers,Nr.1. URL: https://www.keionline.org/misc-docs/bigidea-prizes.pdf
[2]Knowledge Ecology International,
[3] Maastricht Economic and Social Research andTraining Centre on Innovation and Technology, http://www.merit.unu.edu

Categories