Institutions, Innovation and Public Health

This study concerns the economics of innovation in the area of medical innovation -new diagnostics, medicines and vaccines-, and in particular how innovation contributes to meeting public health needs. Significant advances have taken place in medical science and technological innovations to prevent and treat diseases that are associated to the strong research and innovation system characteristic of the biomedical and pharmaceutical industry in developed countries. However, firms are reluctant to mobilize this capacity towards disease areas where there are significant health needs but the market is not profitable. As a result, less socially valuable innovation takes place than would otherwise be desirable. This problem is analysed in this study through institutional analysis, applied to the area of neglected diseases. The term neglected diseases is used to refer to a group of diseases that affect over 1 billion people worldwide, persist under conditions of poverty and are concentrated mainly in developing countries. Previous studies of the problem of the gap of innovation in neglected diseases have focused on identifying the market failures that cause for-profit firms to invest very little in R&D and innovation in neglected diseases, and advance ideas for new or additional incentives that could encourage greater participation of firms in this area, such as guaranteed payments for R&D efforts or new medical products developed. This study takes on a different approach, centred on analyxing the institutional framework in which R&D and innovation dynamics take place. In particular, the study analyses a recent phenomena: the appearance of a new form of institutional experiment - private non-profit entities organized as product development partnerships (PDPs) that act as "system integrators" to leverage the resources and capabilities of a network of public, philanthropic and private sector partners towards R&D in neglected diseases. The study also examines how this novel PDP institution responds to a well-known incentive mechanism in medical innovation - intellectual property rights. The study finds that PDPs respond differently to IPRs than for-profit firms, and this indicates there are variations in the value, use and impact of IPRs under different institutional settings, beyond the firm. Finally, the study analyses the challenges in leveraging traditional medicinal knowledge to address health needs, particularly in developing countries, and finds that as the traditional institutions that have supported traditional medicine are under strain, new institutions are needed to support this knowledge as it becomes fragile and is more likely to suffer from deterioration or even disappearance, as compared to scientific knowledge.