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Comment by ikesau | Hacker News Reader

I highly recommend you listen to the recent 80000hours podcast with Rachel Glennerster on Market Shaping, or read her book, Strong Medicine.

Advanced market commitments, i.e. governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done, is the way to incentivize this while avoiding the disincentive of governments becoming extremely tough monopsonic price negotiators once the drug has been developed.

The development of more drugs could be funded this way, through global health organizations like GAVI, such that medicine wouldn't need to be developed by gouging some for the benefit of others.

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> governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done

Did you say "hundred million" intentionally? Because the average cost of a drug has been estimated in the billions for over a decade now. [1] I'll take a listen to the podcast, I'm generally skeptical of the government deciding funding levels since they're likely to be worse at assessing demand than consumers.

[1] https://www.appliedclinicaltrialsonline.com/view/tufts-cente...

Great, thanks. I'm sure you'll find it thought provoking.

re: hundred million: I was trying to imply that AMCs can be large but not necessarily always in the billions - it depends on the market size and estimated economic damage of the thing we're trying to incentivize R&D for - though yes, both medical AMCs to date (pneumococcal and covax) were in the billions.

Just to clarify, AMCs aren't the same thing as governments "fixing" the price of R&D with wishful thinking. It's when a government/funder uses epidemiology and economics to calculate the cost of leaving a disease untreated, and agreeing in advance to pay that much for it. That way, if set correctly, companies will invest to develop a solution without fear of being punished by the moral/political forces that make them suppress their prices once the solution is developed.

It's a way to fix the incentives that have left us with a whole class of neglected tropical diseases (firms needing to recoup investments, governments needing to negotiate cheapest possible prices)

Bounties are tough imo. You quickly run into goodharts law where everyone just looks for loopholes or how to satisfy whatever requirement as easily as possible. With markets we know that everyone involved is better off for partaking. With billions of dollars on the line you better believe the pharma lawyers will find some way to get the bounty with a suboptimal product. A bounty on QALYs would probably be the best method, but that makes it difficult to commit to a sum before development.

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