Monday, December 26, 2005

It's an incentive problem 

The local paper headlined this AP story wherein a deposition of the head of AIDS research for the National Institute for Health says private firms are underinvested in R&D in combatting the disease:

"We had to spend some time and energy paying attention to those aspects of development because the private side isn't picking it up," Dr. Edmund Tramont testified in a deposition in a recent employment lawsuit obtained by The Associated Press.
"If we look at the vaccine, HIV vaccine, we're going to have an HIV vaccine. It's not going to be made by a company," Tramont said. "They're dropping out like flies because there's no real incentive for them to do it. We have to do it."

"They will eventually � if it works, they won't have to make that big investment. And they can make it and sell it and make a profit," he said.

The pharmaceutical industry is in denial. But it makes sense to me that there would be a lack of investment when the intellectual property rights to an AIDS vaccine are under threat constantly by international policymakers.

Interested readers are invited to read this short paper by Webber and Kremer on orphan drugs, and Chapter 7 of the 2005 Economic Report of the President for policies designed to address these issues.