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A new prize system for drug innovation

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  • Gandjour, Afschin
  • Chernyak, Nadja

Abstract

We propose a new prize (reward) system for drug innovation which pays a price based on the value of health benefits accrued over time. Willingness to pay for a unit of health benefit is determined based on the cost-effectiveness ratio of palliative/nursing care. We solve the problem of limited information on the value of health benefits by mathematically relating reward size to the uncertainty of information including information on potential drug overuse. The proposed prize system offers optimal incentives to invest in research and development because it rewards the innovator for the social value of drug innovation. The proposal is envisaged as a non-voluntary alternative to the current patent system and reduces excessive marketing of innovators and generic drug producers.

Suggested Citation

  • Gandjour, Afschin & Chernyak, Nadja, 2011. "A new prize system for drug innovation," Health Policy, Elsevier, vol. 102(2), pages 170-177.
    • Handle: RePEc:eee:hepoli:v:102:y:2011:i:2:p:170-177
    DOI: 10.1016/j.healthpol.2011.06.001
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    2. Skliaustyte, Egle & Weber, Matthias, 2021. "Subsidies or Tax Breaks Versus Intellectual Property Rights: Dual Markets," SocArXiv x87fy, Center for Open Science.

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