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Assistant Professor of the Practice, David
B. Ridley, is researching Developing Drugs for Developing
Countries: An Economic Model of Market Mechanism.
Approximately one million people die each year from malaria, but
because most of the victims live in low-income countries, there
is little financial incentive for private pharmaceutical manufacturers
to invest in research and development (R&D) for a treatment
or vaccine. The researchers believe that governments, social entrepreneurs,
and corporations can work together to create an environment that
rewards R&D for such neglected diseases. They propose research
to evaluate mechanisms that foster R&D for diseases such as
malaria and tuberculosis. Using a rigorous economic analysis, this
research project will evaluate the conditions under which certain
mechanisms will provide greater net social benefit.
To stimulate the development of drugs for developing countries,
governments and social entrepreneurs have developed and/or proposed
a variety of push mechanisms that subsidize research inputs and
pull mechanisms that reward research output. All of these mechanisms
have strengths and weaknesses. This project will develop an economic
model that will facilitate comparisons of costs and benefits for
a given mechanism and across mechanisms.
First, the model will consider push strategies that decrease R&D
costs of drugs for developing countries. Second, the model will
consider a pull strategy that offers a prize for successful development
of a drug for developing countries. Third, the model will consider
a pull strategy that provides a transferable voucher that can be
applied to increase profits for a product for a developed country
(likely a blockbuster). Fourth, the model will consider a pull strategy
that provides a transferable voucher that can be applied to FDA
review time. The researchers will use backward induction to solve
the models and then use comparative static analysis to compare welfare
effects across the various push and pull mechanisms. Finally, the
researchers will conduct simulations using reasonable estimates
of the values in each mechanism.
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