Ideas to Encourage Innovation for Diseases without a Market

Without proper economic incentives companies in aggregate will not be able to engage in the optimal level of R&D to find products for these diseases.
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Introduction

This paper is an overview of a variety of ways that have been suggested to encourage innovation/research and development (R&D) for diseases that are endemic to the developing world but not the developed world (neglected diseases). Because the economic market for these diseases is very limited while the average cost for bringing a product to market exceeds $1 billion, additional incentives are needed to encourage R&D for these neglected diseases. Without proper economic incentives companies in aggregate will not be able to engage in the optimal level of R&D to find products for these diseases. Therefore, strategies and incentives to encourage innovation focused on developing products for neglected diseases are necessary.

While the economic conditions of the developed world can not in the short run be replicated in the areas where these neglected diseases are endemic, there are a variety of incentives that might be provided that would help encourage companies to engage in R&D into neglected diseases. Some of the ideas presented in this paper have been tried with varying degrees of success. Others have not been tried and remain only theoretical. Connected to each idea is a list of advantages and challenges/limitations. The list of advantages and challenges/limitations associated with the different ideas are not exhaustive, but rather, the list should serve to give the reader an idea of some of the benefits and some of the problems that might be encountered with the different strategies. One should not construe a problem as insurmountable. Rather, one should view the listing of a problem as raising awareness that the issue is potentially present. Finally, it should be noted that all of these incentives could be designed and implemented in a variety of ways, and the differences in the specifics of the design and implementation could profoundly affect the outcomes. Truly, the “devil is in the details” for these proposals. That being said, what follows can serve as a basis to begin understanding ways to encourage innovation for these diseases.

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