I am glad to see that Roderick is largely in agreement with my comments on patents and copyrights. As I am afraid that Tim Lee’s comment has misrepresented my views on alternatives to drug patents, I’ll take this opportunity to clarify what I view as the best system.
I do not support a prize system, for many of the reasons mentioned by the author. A prize system would preserve what I see as some of the worst problems of the patent system, most importantly encouraging secrecy in research.
My ideal system would be a system in which the government allocates a pot of money (@$30 billion a year—approximately equal to private R&D in the pharmaceutical sector) that would be awarded in long-term contracts to a relatively small number of master contractors. For example, there can be 10 master contractors getting grants of roughly $30 billion each spread over 10 years.
The model here should be government contracts for major projects, like building an airport. There are certainly problems with such contracts, but these problems seem relatively minor compared with the costs associated with charging hundreds of dollars for drugs that would sell for just a few dollars in a competitive market.
There are two conditions on the funding. First, all results are posted fully and promptly. This will allow researchers throughout the world to quickly gain the benefit of research funded through this system. They will be able to independently analyze the data and compare findings across studies. This should substantially hasten the research process.
Second, all patents are placed in the public domain subject to copyleft rules. This means that any drugs based on this research can be produced and sold as generics. Researchers outside the system can take advantage of research in the publicly funded system, but they must either place any derived patents in the public domain or negotiate an agreement with the contractor who holds the patent. This should result in the vast majority of new drug patents being placed in the public domain.
Of course this is not a perfect system and there may well be better alternatives, but the point is to get the discussion started. It is remarkable how little attention mainstream economists pay to such an enormously important issue. Perhaps a progressive-libertarian alliance can force economists/policy makers to take this issue seriously.