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  • Print publication year: 2018
  • Online publication date: January 2018

16 - Can Government Help with the Creatively Unexpected?


We have a good idea of what is happening with the discovery process in the biomedical sciences in the second decade of the twenty-first century. There is a flow of new products – drugs, devices, and agricultural innovations – which appears to be at a pace similar to or at worst only slightly below the pace of the last 40 years: 20–30 new drugs, some new devices, and an assortment of genetically modified crops. When patent protected, as they usually are, the prices of these products seem “high” by comparison with the prices of their traditional forerunners or even older patent-protected innovations. They are definitely higher than they would be if patent law did not prohibit competing producers from making the same product. While the share of newly approved drugs that promise major improvement has been increasing modestly over time, there are nevertheless many new products of relatively small marginal benefit over current offerings. The rate of failure in R&D efforts is high and growing, and both regulatory and market barriers to highly priced innovations are said to be increasing, but without much evidence of prices coming down until a drug becomes generic or the restrictions on a device's patent are relaxed. The average R&D cost per new product that makes it to market is increasing at a rapid rate, somewhat faster than the high growth in revenues, but has slowed slightly in the last few years. Biotech firms as an aggregate have had more success in R&D productivity than their big pharma counterparts, but their costs are high and also increasing. Consumers would of course like more and better new products at lower prices, but there is no mechanism in place or on the horizon that promises this.

The overarching question of public policy that these trends raise is deceptively simple: In terms of current regulations, laws, taxes, and subsidies, are there any things that government could or should do (or stop doing) at any level that on balance would make present and future generations of consumers better off? Can government make things better?

Simple as this question is, the answer is both complex and less than satisfactory because we lack so many of the key facts or measures needed to come up with a persuasive answer.