The Scoop on PDUFA

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  • 05/10/2012

It’s time to excise the Ben and Jerry’s Clause from the Senate HELP Committee’s draft of PDUFA.

That would be the amendment (adopted this April) that would require an evaluation of the so-called “prize fund approach” to drug development.

It’s same old and tired and false proposition put forth by Bernie Sanders – the independent Senator from the great state of Ben and Jerry’s – since time immemorial.

It’s not a new idea. The “prize” model has been used in the past—in the old Soviet Union. It didn’t work. The Soviet experience was characterized by low levels of monetary compensation and poor innovative performance.

The experience in the United States hasn’t been much better. The federal government paid the father of American rocketry, Robert Goddard, $1 million as compensation for his basic liquid rocket patents. A fair price? Not when you consider that during the remaining life of those patents, U.S. expenditures on liquid-propelled rockets amounted to around $10 billion.

Senator Sanders wants to replace a patent system that has fueled innovation allowing the average American lifespan to increase by almost a full decade over the past 50 years with a prize program that has a solid record of failure. As the healthcare economists Joe DiMasi and Henry Grabowski have argued, under a prize program, pharmaceutical innovators would lack the incentive to innovate. DiMasi, director of economic analysis for the Tufts Center for the Study of Drug Development, and Grabowski, director of Duke University’s Program in Pharmaceuticals and Health Economics, said, “The dynamic benefits created by patents on pharmaceuticals can, and almost surely do, swamp in significance their short-run inefficiencies.”

Who could support the idea of a prize? As DiMasi and Grabowski presciently observed in 2004, “The main beneficiaries in the short-term would be private insurers and public sector purchaser of pharmaceuticals.” That’s because, as they note, governments and insurers are focused “myopically on managing health care costs” and are not likely to be “strong advocates for funding new drug development that can increase individual quality of life and productivity.”

Those who support this idea view it as a solution to all the world’s health care ills. “Research is risky, new drugs are too expensive, and industry focuses far too much of its effort on drugs of minimal medical significance,” Merrill Goozner, director of the Integrity in Science Project at the Center for Science in the Public Interest, has said. “The prize fund solves all these problems by disconnecting the incentives for generating breakthroughs from the price that individual patients or their insurers must pay.”


According to Jamie Love, director of Knowledge Ecology International, “By separating the markets for innovation from the markets for the physical goods, the Prize Fund would ensure that everyone, everywhere, could have access to new medicines at marginal costs.”


Here’s Jamie’s spin on Senator Sander’s legislation -- a highly revisionist history.

The truth of the matter is that the promotion of innovation and the creation of new medicines cannot be based on a top-down process. Rather, they should be based on bottom-up solutions by the actual players involved in this process—companies, research institutions, and the regulatory and IP authorities.

Clearly Senator Sanders and Jamie Love do not concur. And that is their privilege.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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