10 September 2016

Mechanics of Delinkage

Because delinkage is defined in the negative, policymakers have the option of considering any policy option that does not rely upon high prices. Among the many proponents of delinkage, there are diverse views on how delinkage should be implemented. The freedom to design R&D funding methods has both positive and negative aspects. On the one hand, there is the freedom to choose among countless alternatives, including those that can be described as direct funding (through intramural projects, or intermural grants or contracts), subsidies (such as the orphan drug tax credit), and incentives (including most importantly cash rewards). On the other hand, a lack of consensus among delinkage proponents can be unnerving for policy makers, who need to focus on the implementation of specific proposals.

Some delinkage proponents have proposed the elimination of R&D incentives in favor of mostly direct funding, through government research grants and contracts. Others, including KEI, have advocated combinations of direct funding, subsidies, and incentives based upon cash rewards. There are no advocates for eliminating direct funding of research by governments.

The international aspects of delinkage are as important as the international aspects of the intellectual property system. The intellectual property system involves a multitude of treaties, trade and other agreements, and informal norms that collectively establish obligations on governments to grant and enforce legal monopolies and tolerate high prices on products. These involve norms on patents, test data for new drugs, and sui generis regulatory monopolies relating to the development of orphan drugs and research for pediatric populations, as well as other measures. The international aspects of delinkage include efforts to establish global norms for funding R&D, such as through R&D funding agreements or treaties, cross-border collaboration on innovation inducement prizes or prize funds, and proposals for agreements on the supply of public goods.

For a discussion of each of these issues, see the following links:

There is also the challenge of managing the transition from the current system of monopolies and high prices to the delinkage alternative. The policies to navigate this transition are referred to as progressive delinkage.

Among the various proposals for delinkage, some take a voluntary approach, and others make delinkage mandatory. The voluntary approaches have a role, particularly in a transition to full delinkage, for certain cross border implementations, and to address some specific innovation objectives, such as to induce investments in R&D in areas of significant market failure. Over the longer run, however, and to address other policy objectives, mandatory approaches should be preferred or required.

The relationship between intellectual property rights and delinkage depends upon how delinkage is implemented. For example, under a series of legislative proposals in the United States by Senator Bernie Sanders, delinkage would be implemented by eliminating exclusive rights to make and sell products, but patents would still pay a role in determining the owners of the innovations and the claims on billions of dollars in cash rewards.