Prizes instead of patents



The Medical Innovation Prizes are a creative proposal that offers an alternative to patents for medicines. Prizes for innovation could encourage more efficient research leading to better health outcomes by promoting the development of cures for sickness that have been disregarded by producers, leading to cheaper medicines, and eliminating some of the problems associated with the current patent system. The main focus of this new prize system is to see health as a public good, where effective treatment of people should come before economic benefits.


1. The shortcomings of the current system of patents for medicines



The current system of financing research and development (R&D) for new medicines through giving a patent to the inventor has severe consequences on public health budgets and on research for new medicines. The system does not solve current health challenges and needs.


Patents on medical products provide a temporary monopoly (10 to 20 years) on a product to the inventor or firm which comes up with the product. Patents are supposed to be a return on the cost of research. The patent grants a producer the possibility of fixing the price of the patented drug regardless of the price of production. This hinders access to the patented medicines. During the life of the patent, generic versions of drugs cannot be produced nor sold. The companies owning a patent seek to delay and deter competition from the generic by extending the life of the patent with innovations of hardly any therapeutic effect. The link between the cost of R&D and the prices of medicines in the current system yields medicines that are unaffordable, unavailable, or unsuitable for some developing country contexts (i.e. heat stable, paediatric formulations).  In fact, using industry assertions of Research and Development (R&D) spending, pharmaceutical related R&D spending by the private sector was less than 8% of global sales in 2010.


The granting of patents makes most current health research profit-driven rather than needs-driven. Companies invest huge amounts on R&D for medically unimportant products (slimming, hair loss, or impotence) within a large market but fail to invest in areas of public interest, such as neglected tropical diseases, as these patients are poor and the market would bear small benefit. According to Médecins Sans Frontières (MSF), of the 1,393 total new drugs approved between 1975 and 1999, only 1% (13 drugs) were specifically indicated for a tropical disease (MSF).  According to Prescrire International, out of the 984 new medicines developed over the period of 2000 – 2009, only 2% represented a real therapeutic advancement for patients.


Another collateral aspect of patents is the restriction of information to others in such a way that patents become a barrier for researchers and further innovation of drugs. Other factors added to those mentioned above such as the aging of the population, the high price of medicines for certain diseases (cancer, heart), and the impact of the economic crisis in health budgets show even more limits of the patent system.  Even in rich countries, the growing burden of medicines prices on national healthcare budgets becomes unbearable.  For example, Spain and Germany have already cut medicine expenditure.


Today it is clear that the monopoly of patents, data exclusivity, and other intellectual property (IP) measures are inefficient incentives in health innovation. The current model of granting patents for biomedical innovation is unsustainable and inefficient for both developing and developed countries. In rich countries, the most expensive medicines are pushed through the medical system far beyond the benefit of the drugs. In developing countries, many patients cannot be treated due to the high costs of drugs from the health system often paid out of the pocket of the patients. Despite growing acknowledgment of the failures of the IP-based R&D model, the EU and other industrialised countries continue to export this model to developing countries through bilateral and international trade agreements.


In the last years a series of factors regarding innovation have become evident: the need to delink the price of medicine from the cost of research, to prioritize a needs-driven approach in research priorities, and to consider access as an integral part of the R&D process. The search for new models of medical innovation and research in the area of medicines has become a priority.


2. The new models


Delinking the price of medicines from the cost of research means finding new ways to pay for R&D on medicines.  Another need is to search for models driven by societal needs and public health priorities. A condition for this to become a reality is to make public the “knowledge” attached to the research.


These last years a range of proposals and initiatives on R&D on health products that promote access and therapeutic benefits with real health impacts have been tried and proposed. They vary from R&D models similar to the traditional IP rights (patents), to those with no IP rights attached. We present some of the initiatives already in use, an on-going process to move us towards new more sustainable models of medical R&D that bring the access and innovation that the public needs.


A series of decisions have been taken at international level (WHO[1], USA[2], EU[3]) in the effort to delink the cost of R&D from the price of medicines. The World Health Organization (WHO) has formed a new expert working group (EWG) on innovative R&D financing. The EU has committed to explore de-linkage and set out some principles to ensure affordability and accessibility such as third-party competition, R&D grants to small companies (push  funding) , and prizes (pull funding) to stimulate research in priority areas and reward results that meet the criteria for affordability, accessibility, and real health impacts.


The UNITAID & Medicines Patent Pool has established a patent pool for medicines to provide patients with increased access to more appropriate and lower price medicines. Patent holders are encouraged to join the pool. The pool encourages the development of adapted formulations, such as for paediatric use and allows competitive generic manufacturing. It focuses on financing that supports sustainable access to medicines. The initial focus would be exclusively on antiretrovirals (ARVs).


The Open Source Drug Discovery (OSDD) initiative is an open innovation model partnership (4511 members across 130 countries) aiming at providing affordable healthcare to the developing world. It works on challenges in the drug discovery process based on a system of attribution and rewards for solutions to interim challenges. This is a way to overcome the constraints of the IP-based model. OSDD focuses on diseases that are neglected by larger market-driven pharmaceutical companies, currently tuberculosis and malaria.


3. Prize fund model for innovation and access


In the last years, the idea of prizes instead of patents to be awarded in order to further advance pharmaceutical solutions to global problems such as AIDS, TB, and many others, has kept growing. Offering extremely attractive prizes for winners of open competitions would encourage R&D on new medicines. This would delink the prices of medicines from the incentive of offering a prize as opposed to a patent, can be an incentive for R&D of new medicines in developing countries, and would provide products immediately affordable instead of pending on a patent expiration. The prize will allow the final product to be available to all people.


The ideal would be a global prize. In waiting for that global prize to come into being, other partial models are already being tried upon. In the US, two new bills seek to introduce prizes in order to eliminate all legal barriers of manufacturing and selling the  of generic versions of drugs and vaccines. The more ambitious bill is the Medical Innovation Prize Fund Act (MIPF), which would apply to all prescription drugs. It would create a prize fund equal of 0.55% of US GDP, which is more than $80 billion per year at current levels of U.S. GDP. The narrower proposal is the Prize Fund for HIV/AIDS Act, which would only apply to treatments for HIV/AIDS. It would be funded at 0.02 % of U.S. GDP, which is about $3 billion per year at current levels of U.S. GDP.


The Medical Innovation Prize Fund (MIPF) proposes a reward for reimbursing R&D investments for new medicines. This would allow eliminating patent and other IP barriers to research and access to medicines. The prize system seeks to reconcile both supporting innovation and access to new treatments. It will be oriented towards drugs for illnesses where the market fails and will allow for generic competition in order to lower the price of medicines.


In the Donor Prize Fund for HIV/AIDS treatment, a certain amount of money would go into a fund. To receive the reward, companies would have to license to the UNITAID patent pool. The fund would also have an innovation dividend. This would allow donors to buy the medicines at marginal cost. Both prizes will make available the “knowledge” of the winning medicines for anyone to manufacture it as a generic, at very low cost, being then accessible to the needy. The prizes could be funded by public money, foreign aid assistance funds, foundations, global organizations, and insurance companies that will benefit from lower medicine prices.


Another proposal is the Cancer prize fund, which would pay out to companies based on the therapeutic and health impact value of their medicines. Generic production would reduce restrictions on access giving every patient access to the most effective cancer treatments. The reward could include provisions for researchers that published through open access fora, shared data, or contributed to the development of the medicine in question.


The prizes system will support increased sharing and access to knowledge; more efficient incentives to innovation; rewards based on improvements to health outcomes; reduced incentives for marketing and promotion; elimination of high prices for medicines and a market based on affordable (generic) manufacture of medicines. This means that the result of the research would be “open source”, made public and available to others who want to use it with certain conditions to improve the product or to make a new product. The conditions to use the open source are that the end-product, source-material, blueprints, and documentation is in turn available to the public at no cost. This contrasts with the current business model which is more centralized and where the documentation is kept secret.


What's interesting about the prize idea is that it rewards companies for innovation directly, not by granting them intellectual monopolies, which are then inevitably used to deny people life-saving medicines because there is no profit in making them available at affordable prices. By decoupling the rewards for successful R&D investment from the sales of products, the new model will permit governments to create more efficient and useful incentives for R&D that focus on inventions that improve health outcomes. Patents would still be available for medicine related inventions, but they would not block generic competition. Research funded by public money would also be eligible to receive rewards from the Prize Fund.


Please visit to see the video of the event at the European Parliament on Prizes and innovation in Medicines.


Begoña Iñarra, AEFJN Executive Secretary

[1] The World Health organization (WHO) WHO’s Global Strategy and Plan of Action (GSPA) on Public health, Innovation and Intellectual property,

[2] USA, the Medical Innovation Prize Fund Act of 2007 would provide a profound change in the way we finance new drugs. A link to the text of the bill and a detailed description of how it works is available.

[3] European Union (EU) The Council Conclusions on Global Health (May 2010) calls for a coordinated global framework for R&D. The EU Communication on the Innovation Union (June 2010), proposes a more efficient system with more value for money on R&D, cooperation between researchers and innovators, and recognition of the importance of competition.

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