I was skeptical at first – of this plan to switch from the familiar patent system to a prize system for pharmaceutical companies developing AIDS drugs – but after reading the article I think it could work. The incentives seem to be properly aligned. The issue (I am left pondering) is whether it really would save money, and here I’m thinking of the tax payers. The government funds the prize. Pharma gets the prize. The tax payers are this third party that for the most part do not benefit from either the prize or the drug. This seems like a classic Milton Friedman case of wasting other people’s money; but maybe not. Or if so, maybe there isn’t much money being wasted.

It’s interesting. This issue is briefly discussed by AGR CEO Neil Cohen in Evolve, Part 1: Unintended Consequences when discussing some of the strategic moves AGR made early in its history.

-JD Cross

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