Thursday, November 09, 2006

Peter Pitts on Prizes

by Ben Krohmal

Peter Pitts took part in a brown bag discussion today at CPTech during which he covered several topics, including prize fund approaches to medical innovation like H.R. 417 (title from 109th Congress). Peter co-founded and currently works full time for the Center for Medicine in the Public Interest (CMPI), a group that is funded by major pharmaceutical companies. Peter previously served as the FDA’s Associate Commissioner for External Relations, and has held positions at the Hudson Institute, as well as the Washington Times, the New York Post, Readers Digest, McCalls, and other publications. (See his CMPI bio here).

Pitts was invited to CPTech to present his perspective after writing some critical posts about the prize fund on CMPI’s blog The visit consisted of a fruitful give and take with Peter asking as much as he was asked. Peter expressed a number of concerns about a prize system for medical innovation, but the main complain was this: Pitts did not want governments to determine the value of pharmaceutical innovations.

In response to the concern about government involvement, it was suggested that prizes should be compared the current system, which involves a government run patent system that is frequently gamed by pharmaceutical lawyers, and prices set by third-party payers, including employers, insurers and increasingly, governments. Indeed, the role of the government in setting "prices" is likely to expand following the Democrats' takeover of the US House and Senate this week. Peter agreed that the patent/monopoly price system for drugs was flawed, but was skeptical that a prize system could be better.

One key feature of the prize system approach was discussed at length. The Sanders bill from the 109th Congress (HR 417) would look at evidence of the "incremental therapeutic benefit" of a drug. Pitts was quite uncomfortable with the notion that the incentives to innovate would be focused on incremental benefits.

A related technical issue that was discussed concerned the ways that a Prize fund would treat products that were in development at roughly the same time, and how incremental benefits would be calculated in such cases -- a point earlier raised by Dean Baker. One proposal by participants was to consider drugs that were developed at roughly the same time as if they were simultaneous developments, for purposes of determining incremental benefits.


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