John Calfee on Government-Sponsored Innovation

by on June 16, 2008 · 24 comments

I have in past years learned a great deal from reading John Calfee’s book “Fear of Persuasion,” on the consumer benefits of advertising. Now he is writing on drug development in “The Indispensable Industry,”

He considers, one after another, various proposals to fund drug development using public funds, prizes, or other plans. He writes:

There are two problems with government and nonprofit R&D as a substitute for the traditional for-profit industry. One lies in what the nonprofit sector has not tried to do; the other lies in what it has tried to do. 

We have to remember that no laws, regulations, or traditions have prevented the public research system from inventing the drugs we need if it was really capable of doing that and no one else was. In principle, publicly funded drug research can run all the way from basic research through clinical trials to FDA approval and, if the believers in this approach are correct, it can be conducted at reasonable costs including the inevitable losses from drilling dry holes. 

But let’s look at the record. If we really had a reliably productive government-nonprofit drug development system, we should have seen its fruits by now. Those fruits would have arrived in such areas as the testing of off-patent drugs with great potential and the creation of new drugs where profit incentives are inherently weak because of inadequate intellectual property laws. We should have seen, for example, clinical demonstrations of aspirin for heart disease and cancer much faster than actually occurred…

The piece is well worth reading in its entirety.

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