Medicine for tomorrow

Some alternative proposals to promote socially benefecial research and development in pharmaceuticals

Arjun Jayadev, Joseph Stiglitz

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The current models of pharmaceutical drug discovery display significant inefficiencies. One inefficiency is the widespread prevalence of me-too drugs. Second, some patents can act as barriers to knowledge, by slowing down the pace of new discoveries. Third, there are higher costs for the public, who end up paying double costs – subsidizing or funding research and development (R & D) that leads to new discoveries on the one hand, and, on the other, paying the social costs of restricted access to knowledge when the discoveries are privatized. Fourth, when the market returns are the sole guide to R & D of new drugs, diseases that are prevalent in markets with weaker buying power are neglected. Thus, policymakers need to identify a new, more cost-effective and innovative productive system for R & D. Policymakers are faced with very complex choices in designing their regulations. They want to promote access to medicines, to lower costs and to encourage research. Politically, they have to balance pressure from the industry with increasingly forceful demands from health advocacy groups. The article looks at four different sorts of policies that may be used to address some of the inadequacies in the current system, especially with regard to the management of R & D: promoting prizes over patents; directing innovation toward socially beneficial outputs by adopting some form of valuebased pricing; publicly funding clinical trials to reduce conflicts of interest while reducing costs; and actively managing frontier technologies to maximize positive social spillovers.

About the Authors

Joseph Stiglitz
Co-President
Initiative for Policy Dialogue

Joseph E. Stiglitz is co-founder and Executive Director of the Initiative for Policy Dialogue at Columbia University, for which he also co-chairs the macroeconomics, Capital Market Liberalization, and Intellectual Property task forces. Dr. Stiglitz holds joint professorships at Columbia University's Economics Department and its Business School. From 1997 to 2000 he was the World Bank's Senior Vice President for Development Economics and Chief Economist. From 1995- 97 he served as Chairman of the U.S. Council of Economic Advisers and as a member of President Clinton's cabinet. From 1993 to 1995 he was a member of the Council of Economic Advisers. He was previously a professor of economics at Stanford, Princeton, Yale, and All Souls College. Dr. Stiglitz is a leading scholar of the economics of the public sector and was awarded the Nobel Prize in Economics in 2001 in addition to the American Economic Association's biennial John Bates Clark Award in 1979. His work has been recognized through his election as a fellow to the National Academy of Sciences, the American Academy of Arts and Sciences, the Econometric Society, and the British Academy.

Arjun Jayadev
Assistant Professor
University of Massachusetts

Publication Information

Type Working Papers
Program Intellectual Property
Download 105kb pdf
Posted 08/11/10