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Glyn Moody's look at all levels of the enterprise open source stack. The blog will look at the organisations that are embracing open source, old and new alike (start-ups welcome), and the communities of users and developers that have formed around them (or not, as the case may be).

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The Great Prize: Innovating Without Monopolies

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Last week I was in Brussels, talking at the European Parliament - not, I hasten to add, talking to the Parliament. This was a more intimate gathering in one of the smaller (but still quite large) conference halls, discussing a rather interesting matter:

On 18 November 2010, EU policy makers, experts, industry, civil society and patient representatives meet at the European Parliament in Brussels to discuss new models of biomedical innovation and to formulate specific policy recommendations for the European Union in line of the EU Council Conclusions on the EU role in Global Health and the EU Innovation Union 2020 Strategy that have called for further exploration of innovation models that de-link the cost of R&D from the price of medicines.

The meeting concluded that the recent price cuts of patented medicines by various European governments, the lack of important innovation and the growing burden of medicines on national healthcare budgets make it clear that the current model for biomedical innovation is unsustainable and inefficient, both for developing countries and for EU Member States, increasing the calls within EU for new models of medical innovation.

Some of the proposals that were presented and discussed included Innovation Inducement Prizes for a variety of diseases, including cancer, HIV/AIDS and tuberculosis. These proposals raised interest among EU policy makers and will be discussed by the WHO Consultative Expert Working Group on R&D financing and coordination implementing the mandate of the Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property.

The purpose of this new meeting at the European Parliament is to deepen the discussion concerning Innovation Inducement Prizes for biomedical technologies and proposals for prizes to address both developed and developing countries health needs and challenges.

There are a number of important issues here. The most pressing one is finding a way to provide low-cost medicines to the developing world. For example, currently there 33 million people living with HIV worldwide, but only six million are receiving antiretroviral drugs in lower and middle income countries. And no wonder: the cheapest drugs there cost $100 annually, while newer drugs cost from $1,000 to $12,000 - impossible prices for people whose annual income is way below this.

Even the US is unable to provide medicine for all those affected, despite spending over $9 billion on antiretroviral drugs each year. Moreover, as the number of people with HIV rises, and older drugs loses their effectiveness, these costs will continue to rise. And that's just for a high-profile disease: there are many others that affect developing countries disproportionately for which there are very few drugs available at any price, because Western pharma companies see them as “unprofitable” markets, and therefore not worth addressing with new compounds.

The meeting in Brussels was to explore ways of encouraging pharmaceutical companies to come up with new drugs that can be given to the needy at very low cost. The means of doing this is through offering extremely attractive prizes for winners of open competitions; the winning medicines would then be available for anyone to manufacturer as so-called “generics” - typically, very low cost.

Alongside the European group who discussed this in Brussels, there is a pair of new US bills that seek to introduce this approach. Here are some of the main ideas there:

Both bills would eliminate all legal barriers to the manufacture and sale of generic versions of drugs and vaccines. The more ambitious bill is the Medical Innovation Prize Fund Act, which would apply to all prescription drugs. The narrower proposal is the Prize Fund for HIV/AIDS Act, which would only apply to treatments for HIV/AIDS. The Medical Innovation Prize Fund would create a prize fund equal of .55 percent of US GDP, which is more than $80 billion per year at current levels of U.S. GDP. The HIV/AID Prize Fund would be funded at .02 percent of U.S. GDP, which is about $3 billion per year at current levels of U.S. GDP.

Yes, you read that correctly: if the first bill were passed, it would create prizes worth more than $80 billion per year. And that's not all:

Both bills have some similar features to Senator Sanders' earlier prize fund bills, but there are also a number of changes. Among those changes are the introduction of an open source dividend element to the bills, which would have at least 5 percent of the prize money going to persons or communities that put knowledge, data, materials or technology into the public domain, or provide royalty free and non-discriminatory access to patents and other intellectual property rights. Annually, this would be more than $4 billion for S. 1137, and $147 million for S. 1138, at 2010 levels of GDP, as an incentive to open source research.

That is, considerable sums of money would be set aside to encourage participants to share knowledge during the competition. That's just one reason why I'm very interested in this area. The other is that pharmaceutical patents are often held up as one domain where intellectual monopolies are absolutely indispensable, and proof that we must keep patents. 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.

You can watch a streamed video of the entire Brussels session on the media site of the Green Party, which organised the meeting. My talk (if you're interested) can be found towards the end, starting at 2:35:00. It's entitled “Innovation inducement prizes as a possible mechanism to unlock the benefits of open innovation models”, and in an imminent post I'll be exploring some of the underlying ideas and their relation to open source.

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