Robust intellectual property (IP) rights are the bedrock of innovation. By protecting new ideas and incentivizing investment into risky research and development (R&D), IP has long been vital to fostering new discoveries. IP protection is especially key to the global biopharmaceutical sector, which relies on IP rights like patents to spur the complex and costly development of breakthrough new treatments and cures.
On the surface it sounds straight forward but replacing intellectual property with so-called “delinkage” schemes would only harm the innovation ecosystem.
Despite IP’s record of success, a small but vocal group of international actors continue to propose replacing IP incentives with so-called “delinkage” schemes. Delinkage supporters criticize the current model where patents reward innovators with a time-limited period to benefit exclusively from their inventions. They want to dismantle this system in favor of offering government-funded prizes to compensate companies for new medicines. In exchange, the government would then take full ownership over the “winning” company’s discovery.
On the surface the proposal sounds straightforward. Yet weakening or eliminating IP incentives would lead to a host of new problems and jeopardize the innovation ecosystem. A recent report from the Information Technology and Innovation Foundation and Geneva Network took a closer look at the claims of delinkage proponents and found some alarming pitfalls:
- “Prizes” don’t work well as incentives for innovation. Delinkage proponents lack evidence that offering prizes would be able to spur the levels of innovation that society wants. This is especially true for certain kinds of inventions, such as medicines, where a new discovery can be just the start of a long, risky, and even more expensive process to bring it to market. Also, prizes have a bad track record: one historian who studied their use in Europe and the United States in the nineteenth century found that countries moved away from offering prizes because “improvements in market demand and competition offered more effective inducements for inventive activity.” The fact that so few countries today offer prizes for new inventions reflects this understanding and shows why prizes aren’t viable substitutes for patent protections.
- Governments can’t replace private sector R&D spending. The global biopharmaceutical industry invests $180 billion each year into private medical R&D. For delinkage to work, governments – many of whom are already cash strapped – would have to raise or redirect billions of dollars to replace this massive pool of R&D funding. Given the many demands of today’s global economy, governments almost certainly won’t be able to mobilize enough resources to replace private sector investment in expensive, cutting-edge biomedical research.
- Drug development would become politicized. IP incentives, such as patents, reward any inventor who comes up with a valuable new discovery. But if a prize system or other government-directed R&D model were to replace IP, then the government would get to pick and choose which innovators deserve to be rewarded. This increases the risk that political factors, rather than demand, could influence R&D and decision-making.
- Government committees – not the market – decide value. Robust IP protections help set the value of new discoveries: more valuable inventions will demand a higher price, which, over time, inspires more competitors to enter the market. Delinkage, on the other hand, rejects market incentives – it would instead require government price committees to determine the economic and social value of new treatment of cure. This determination has historically been difficult to make, usually undervaluing innovation and leading to inefficient outcomes.
- Delinkage threatens to stifle innovation. Biopharmaceutical research today is riskier and costlier than ever. Just 1 out of every 5,000 potential new drugs make it from the discovery phase all the way to market, and the average cost of creating a new drug has risen to $2.8 billion. IP rights incentivize innovators and companies to continue to research and develop new medicines despite the significant costs, time and resources required. Getting rid of these incentives now – at a time of unprecedented new biotech discoveries – risks missing out on the next generation of novel treatments and cures.
This concept of delinkage, while obviously not viable for most health-related innovation, is hardly new. Its proponents have been calling for many years to institute a global system of government-funded prize incentives for drug development. Yet not a single country has seriously pursued this proposal and, given all the challenges delinkage presents, this is perhaps not surprising.
Nevertheless, protracted and fruitless debates on delinkage schemes continue, often with harmful results. For example, last year saw the issue nearly derail negotiations last year on a declaration at the United Nations and a resolution in the UN Human Rights Council in Geneva. These arguments divided countries and distracted from efforts to find solutions to the real barriers – such as poor health financing and infrastructure, broken supply chains and a lack of trained health professionals – standing between patients and the medicines they need. It’s time to get real: delinkage won’t work.