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→Prize System for Inventions
The current patent system allows companies to file for the right to exclude if they have a novel, non-obvious invention. The right to exclude creates a temporary monopoly for a certain product, which leads to higher product costs for the consumer. One example of a patent leading to exorbitantly high prices would be Daraprim, a drug produced by Turing Pharmaceuticals. Martin Shkreli, the CEO of Turing Pharmaceuticals, led the charge to increase the price of Daraprim from $13.50 to $750 per pill. [http://www.bbc.com/news/world-us-canada-34331761]
Because of such abuses of patent protections, economists and legislators have advocated for a prize system (see [[Medical Innovation Prize Fund Act]]) instead of a patent system for pharmaceutical drugs.[https://www.washingtonpost.com/national/health-science/radical-bill-seeks-to-reduce-cost-of-aids-drugs-by-awarding-prizes-instead-of-patents/2012/05/19/gIQAEGfabU_story.html] Under this system, companies that invent a new drug will receive a lump sum prize. The rights to the drug will then be placed in the public domain, creating generic drugs. The biggest benefit of a prize system is the ability to target research towards a specific problem. With prize money as the incentive, research companies are more likely to devote time and resources towards the identified issue. In addition, the prize system lowers barriers to entry; nontraditional parties are encouraged to participate.
Although the prize system idea sounds promising for individuals requiring medication without high reservation price, the issue of sustained government funding for such endeavors hurts this proposal. Private investors, such as the Bill and Melinda Gates Foundation, offer similar prize systems for pharmaceuticals discoveries. However, if private investment has proven to be effective, why does the government need to intervene?
