Innovation Economics (Pt. 2): “Push” Mechanisms, Mostly Private-Public Partnerships
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Transcript of Innovation Economics (Pt. 2): “Push” Mechanisms, Mostly Private-Public Partnerships
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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
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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 >
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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:)
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Agency Problems:
Sponsors
Agency Problems:
Researchers
Ex Ante Efficiency (v-c)
? ? ? ?
Eliciting Privately
Held Knowledge
Ex Post Efficiency
“Access”
Discussion
? ?
(Politics:)
Review: Social Challenges
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Hybrid Solutions
Prizes + Patents???
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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
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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:)
? ? ? ?
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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:)
? ? ?
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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:)
√ ? ?
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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:)
√ ?√
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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:)
√ √ √
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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
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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
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Reasons to Open The Black BoxDifferent Incentives for Different ProblemsAdding a New Tool: Contract R&D
Private-Public Partnerships & Contract R&D
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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
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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
√
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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???
√ √ ?
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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
√ √ √
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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?
√ √ √ √
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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…
√ √ √ √ √
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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…
√ √ √ √ √ √
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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
√ √ √ √ √ √
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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
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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
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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
√ √ √ √ √ √
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Can Non-Profits Pick Winners?Why Is The Private Sector Efficient?Foundations as Shareholders?An Empirical Question
Private-Public Partnerships & Contract R&D
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Interactions Between Incentives?End-to-End vs. Pay-as-You-Go
Private-Public Partnerships & Contract R&D
Stage 1 Stage 2
E2E
PaYG1 PaYG2
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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
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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
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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?
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>Gene CardsShare Prices
On-Line Forums
Database Queries
>>
>>
>
What?Architecture:
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Where? In silico DiscoveryPhase IV TrialsPhase I – III Trials???
Open Source Biology?
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How? Analogy to Conventional Open SourceMotivations
Ideology & AltruismEducationSignaling
Open Source Biology?
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Why?
AdvantagesEx Ante Efficiency
“Free” LaborInadequate Incentives?
Ex Post EfficiencyFree InformationIndirect Effects on Price
TransparencyValley of DeathDrug Company DataFDA Approval ???
Open Source Biology?
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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
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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?