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Designing Strategies for Neglected Disease Research Law 284.26 Public Policy 190/290. Innovation Economics (Pt. 2): “Push” Mechanisms, Mostly Private-Public Partnerships. Stephen M. Maurer. Introduction. Old Business Hybrid Mechanisms Push Mechanisms Grants - PowerPoint PPT Presentation
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Innovation Economics (Pt. 2):Innovation Economics (Pt. 2):““Push” Mechanisms, Mostly Push” Mechanisms, Mostly
Private-Public Partnerships Private-Public Partnerships
Stephen M. Maurer
Designing Strategies for Neglected Disease ResearchLaw 284.26
Public Policy 190/290
Introduction
Old Business Hybrid Mechanisms
Push MechanismsGrantsPrivate Public Partnerships & Contract R&D
Contract R&D Opening the Pipeline
Mixing Push and PullInteractions?
Open Source Biology?
< Discussion >
Review: ToolboxBoosted Demand, Prizes, Advanced Purchase Commitments, Grants, Private Public PartnershipsContract R&D, Open Source.
Review
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
? ? ? ?
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
? ?
(Politics:)
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
? ? ? ?
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
Discussion
? ?
(Politics:)
Review: Social Challenges
Hybrid Solutions
Prizes + Patents???
Why you might want patents after all…Sponsor can’t judge valueTaking advantage of rich nation revenuesPolitics
But…High PricesCrowding outMaking claims on sponsor’s future budget
A Possible Solution: Access Price Clauses
Hybrid Solutions
Grants
Ex Ante EfficiencyNo attempt to judge “c”But: No internal financing problem!
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
√ ?
(Politics:)
? ? ? ?
Grants
Eliciting Privately Held Knowledge
Agency Problems:
Sponsors
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
√ √
Short-term suppression, but reasonably quick disclosure.
Agency Problems:
Researchers
Ex Post Efficiency
“Access”
?
(Politics:)
? ? ?
Grants
Agency Problems: SponsorsUp-front or periodic payments
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
√ √ ?
(Politics:)
√ ? ?
Grants
Agency Problems: ResearchersGrant budget vs. Idea Quality
S. Maurer & S. Scotchmer, “Procuring Knowledge,” in G. Libecap (ed.), Advances in the Study of Entrepreneurship, Innovation and Growth: Vol. 15, at p. 1 (JAI Press 2004).
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
√ √ ?
(Politics:)
√ ?√
Grants
Ex Post Efficiency: AccessSee above!
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
√ √ ?
(Politics:)
√ √ √
Private-Public Partnerships(Definitions)DNDi, One World Health, etc. What’s New: Managing Drug Portfolios
Drug Discovery is Not Monolithic!How Pharma Organizes DiscoveryVirtual Pharma Companies
Private-Public Partnerships & Contract R&D
Basic ResearchFinding TargetsOptimizing TargetsFinding Lead CompoundsOptimizing Lead CompoundsProcess DevelopmentPre-Clinical TestingPhase I TestsPhase II TestsPhase III TestsApprovalManufacturingPhase IV TestsMarketing & Distribution
Open Science
“Wet” Chemistry & Biology
Clinical Testing
Off Label Testing
In Silico Biology
Animal Models
Chemical Engineering
Irrelevant?
Private-Public Partnerships & Contract R&D
Reasons to Open The Black BoxDifferent Incentives for Different ProblemsAdding a New Tool: Contract R&D
Private-Public Partnerships & Contract R&D
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
? ? ? ?
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
? ?
(Politics:)
Private-Public Partnerships & Contract R&D
Contract R&DPart 1: Getting the Best Price
Competitive BiddingAccess to Financing
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
? ? ?
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
? ?
(Politics:)
Private-Public Partnerships & Contract R&D
Ex Ante EfficiencyPart 2: Enforcing the Best Price
Buying Power & Repeat Business Economies of Scale
√
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
? ?
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
?
(Politics:)
Private-Public Partnerships & Contract R&D
Eliciting Privately Held KnowledgeWho Needs It???
√ √ ?
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
? ?
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
?
(Politics:)
Private-Public Partnerships & Contract R&D
Agency Problems (Sponsors) Progress payments
√ √ √
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
?
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
?
(Politics:)
Private-Public Partnerships & Contract R&D
Agency Problems (Researchers) Incentives to suppress bad newsA history of scandalA Manageable Problem?
√ √ √ √
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
?
(Politics:)
Private-Public Partnerships & Contract R&D
Ex Post EfficiencyThe Usual Answer…
√ √ √ √ √
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”(Politics:)
Private-Public Partnerships & Contract R&D
PoliticsThe Usual (Terrible) Answer…
√ √ √ √ √ √
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”(Politics:)
Private-Public Partnerships & Contract R&D
The Case for PPPs/Contract R&D
√ √ √ √ √ √
Basic ResearchFinding TargetsOptimizing TargetsFinding Lead CompoundsOptimizing Lead CompoundsProcess DevelopmentPre-Clinical TestingPhase I TestsPhase II TestsPhase III TestsApprovalManufacturingPhase IV TestsMarketing & Distribution
Manageable Agency Problems(Researchers)?
LargeAgency Problems(Researcher)
Private-Public Partnerships & Contract R&D
Basic ResearchFinding TargetsOptimizing TargetsFinding Lead CompoundsOptimizing Lead CompoundsProcess DevelopmentPre-Clinical TestingPhase I TestsPhase II TestsPhase III TestsApprovalManufacturingPhase IV TestsMarketing & Distribution
75% of Costs
25% of Costs
Private-Public Partnerships & Contract R&D
Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”(Politics:)
Private-Public Partnerships & Contract R&D
PitfallsCan Non-Profits Pick Winners?Interactions Between Multiple Incentives
√ √ √ √ √ √
Can Non-Profits Pick Winners?Why Is The Private Sector Efficient?Foundations as Shareholders?An Empirical Question
Private-Public Partnerships & Contract R&D
Interactions Between Incentives?End-to-End vs. Pay-as-You-Go
Private-Public Partnerships & Contract R&D
Stage 1 Stage 2
E2E
PaYG1 PaYG2
How Are Incentives Affected?Case 1: No Learning
End-to-End = Pay-as-You-Go
Yooki Park, Essays in the Economics of Innovation Incentives (2006)
Private-Public Partnerships & Contract R&D
E2E
Redecide?
PaYG1 PaYG2
How Are Incentives Affected?
Case 2: Both Parties Learn – PaYG PreferredCase 3: Researcher Learns – E2E Preferred
General Case?
Private-Public Partnerships & Contract R&D
E2E
Redecide?
PaYG1 PaYG2
What?
A SpeculationJust Like PPPs were 10 years ago …
Working DefinitionVoluntary, Organized Production
Without Payment!Here: Primarily Non-Corporate
IntuitionDNA = Code, Sitting at Terminals
Open Source Biology?
>Gene CardsShare Prices
On-Line Forums
Database Queries
>>
>>
>
What?Architecture:
Where? In silico DiscoveryPhase IV TrialsPhase I – III Trials???
Open Source Biology?
How? Analogy to Conventional Open SourceMotivations
Ideology & AltruismEducationSignaling
Open Source Biology?
Why?
AdvantagesEx Ante Efficiency
“Free” LaborInadequate Incentives?
Ex Post EfficiencyFree InformationIndirect Effects on Price
TransparencyValley of DeathDrug Company DataFDA Approval ???
Open Source Biology?
Innovation Economics (Pt. 2):Innovation Economics (Pt. 2):““Push” Mechanisms, Mostly Push” Mechanisms, Mostly
Private-Public Partnerships Private-Public Partnerships
Stephen M. Maurer
Designing Strategies for Neglected Disease ResearchLaw 284.26
Public Policy 190/290
Discussion
PrizesAssumptions
Offer $800 millionBare bones program costs $300
What Happens?What do you tell the first company?
A secret program?What do you tell the second company?What do you tell the third company?How much industry effort is elicited?
