Health
Stiglitz on Patents and Health R&D
The topic of Advanced Market Commitments has been in the news recently, with several weighty proponents pushing it as a way to close the global drug research gap, particularly for vaccines. Now, Joseph Stiglitz has a very interesting article on patents, “prize funds”, and the problems of both. Reading it is particularly rewarding because it explains everything rather simply.
Stiglitz points out two fundamental problems with patents, both from a market perspective. First, that “it is based on restricting the use of knowledge.” And second, “the patent system not only restricts the use of knowledge; by granting (temporary) monopoly power, it often makes medications unaffordable for people who don’t have insurance.”
The result:
It is a matter of simple economics: companies direct their research where the money is, regardless of the relative value to society.
Stiglitz then goes on to propose a “prize fund”, that sounds similar to the AMC in that it goes to the first one to find a cure for a disease, after the cure has been delivered. With a little help from “the leviathan”, this would allow the “market” to direct resources to the most important diseases, not the ones which afflict the richest.
In closing, Stiglitz points out that AMCs are not a panacea, and the patent system will still be needed. As he points out, the healthcare market is not ordinary:
Most people do not pay for what they consume; they rely on others to judge what they should consume, and prices do not influence these judgments as they do with conventional commodities.
The market is thus rife with distortions. It is accordingly not surprising that in the area of health, the patent system, with all of its distortions, has failed in so many ways.
I suspect Stiglitz understates the extent to which the patent system adds to the distortions already in the market. But coming from a Nobel prize winning economist, the very statement that the patent system and health R&D need reform is quite something.
It makes a strong case for revisiting the patent system more extensively, and limiting its monopoly power. Without that, the invisible hand will be up to no good.
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[...] stifles innovation. The analysis of Joseph Stiglitz on the healthcare market is illuminating (covered on TDZ here): It is a matter of simple economics: companies direct their research where the money is, [...]