Incentives for innovation

Pharmaceutical innovation has made a decisive contribution to the reduction of mortality and the improvement of quality of life. The role of patents in providing incentives for innovation has been crucial. Yet at the same time there are limitations that need to be overcome in the future. Here we will mention just two examples orphan drugs and parallel imports. Patents do not offer incentives to develop drugs for low-prevalence diseases, known as orphan drugs. Governments are sometimes faced with the option of public production, as the private sector does not invest in them. Yet these would be precisely the cases in which experiments would be conducted with new models for promoting innovation, as discussed in this chapter. 

If products under patent are exempted from the RP system, do the negative effects on the R D of the pharmaceutical sector disappear The exclusion of medicines with a current patent may reduce the economic erosion of the rights granted by the patent, and also the disincentive to invest in R D. But negative effects on innovation are not totally eradicated, as (a) RP increases the uncertainty on the expected return on the investment, (b) incentives for innovation will be damaged due to the fact that the R D process is a joint production process, since the overall return is reduced when RP is applied, and (c) the exclusion of patented products has proved to be only partial in some cases (for example, not excluding drags under a process patent). 

The article by Rovira10 stands out for the clarity of its ideas. It sets out an up-to-date description of the pharmaceutical industry and the Spanish market before and after the single market, and its chief merit is its suggestions for a common strategy for the EU. The diagnosis focuses on three points the need for different policies for innovative and non-innovative products, the importance of expected benefits as an incentive for innovation and the existence of conflicts of objectives at national level and between national and EU interests, the solution of which requires compromises of different sorts. 

In a recent assessment of various pricing and profit cost containment schemes Scherer(2004) makes the point that most such schemes are a dis- incentives for innovation his view of the PPRS is less unfavourable less impairment of such incentives would be expected with a system such as that used in Great Britain under which... 

Drugs for Neglected Diseases New Incentives for Innovation Aidan Hollis... 

The basic purpose of the patent system is to provide incentives for innovation, industrial development and industrial investment. A patent entitles its owner to exclude others from the commercial exploitation of the patented invention for a limited time. In exchange for this temporary monopoly the public receives an accurate and detailed description of the invention, which makes the knowledge available to the public at an early point of time and, after the patent has expired, enables others to exploit the invention. 

To insure the supply of an item resulting from a research and development project, the Government should protect itself with the necessary patent and data rights and this is understandable and proper in everyone s mind. However, there are individuals in Congress and in the agencies who carry this protection idea to such an extreme that there is no opportunity for profit to industry possible from participating in a program. This constraint is a very real and substantial block to any incentive for innovation. 

Unlocking innovation also demands that we rethink our ideas about intellectual property (IP). Some believe the best way to provide incentives for innovation is by... 

While the central administration succeeded again in coping with a reduction of imports, the chemical industry felt more and more the lack of sufficient incentives for innovations. 

Incentives for Innovation New Perspectives, 2004 Policy Conference, Merck Company Foundation, March 2004 www.merck.com/about/cr/pppi/incentives for innovation.pdf (accessed November 1,2005)... 

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