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Funding Antibiotic Innovation with Vouchers: Recommendations on How to Strengthen a Flawed Incentive Policy

8 Pages Posted: 4 May 2016  

Kevin Outterson

Boston University School of Law

Anthony McDonnell

University of South Australia; Queen's University Management School

Date Written: May 1, 2016

Abstract

A serious need to spur antibiotic innovation has arisen because of the lack of antibiotics to combat certain conditions and the overuse of other antibiotics leading to greater antibiotic resistance. In response to this need, proposals have been made to Congress to fund antibiotic research through a voucher program for new antibiotics, which would delay generic entry for any drug, even potential blockbuster lifesaving generics. We find this proposal to be inefficient, in part because of the mismatch between the private value of the voucher and the public value of the antibiotic innovation. However, vouchers have the political advantage in the United States of being able to raise sufficient amounts of money without annual appropriations from Congress. We propose that if antibiotic vouchers are to be considered, the design should include dollar and time caps to limit their volatility, sufficient advance notice to protect generic manufacturers, and market-based linkages between the value of the voucher and the value of the antibiotic innovation. We also explore a second option: The federal government could auction vouchers to the highest bidders and use the money to create an antibiotics innovation fund.

Keywords: antibiotic resistance, patents, intellectual property, health law, pandemics

JEL Classification: I12, I18, I19, K32, K39

Suggested Citation

Outterson, Kevin and McDonnell, Anthony, Funding Antibiotic Innovation with Vouchers: Recommendations on How to Strengthen a Flawed Incentive Policy (May 1, 2016). Health Affairs, Vol. 35, No. 5, 2016; Boston Univ. School of Law, Public Law Research Paper No. 16-15. Available at SSRN: https://ssrn.com/abstract=2774324

Kevin Outterson (Contact Author)

Boston University School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Anthony McDonnell

University of South Australia ( email )

Australia

Queen's University Management School ( email )

25 University Square
Belfast, Northern Ireland BT7 1NN
Northern Ireland

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