Economics - Innovation - Inclusive Growth - Public Purpose

RETHINKING HEALTH INNOVATION

Rethinking Health innovation

Professor Mazzucato’s work on health focuses on both the rate and the direction of the innovation model itself. For all the large sums of public and private money invested in research and development, there are concerns about the pharmaceutical-focused, private, profit and patent-driven model of innovation that currently dominates. Beyond limited success stories based on particular drugs, the current model still fails to meet critical medical needs, secure sufficient therapeutic advance, or offer good value for money. Mazzucato is interested in whether there are realistic alternatives to this innovation model that could achieve better outcomes.

In 2004, Professor Mazzucato and Professor Dosi edited a book, with Cambridge University Press, Knowledge Accumulation and Industry Evolution: Pharma-Biotech, that explored the relationship between the way that innovation occurs in the pharmaceutical and biotechnology sector and the socio-economic dynamics of access to those products. Particular emphasis was placed on the problematic way in which intellectual property rights are being used, increasingly upstream, to block innovation rather than encourage it. As the Economic Director of the ESRC Institute for Innovation Generation and the Life Sciences (Innogen Centre) from 2006 to 2010, she led work trying to link innovation and access issues in multi-disciplinary contexts. With the team of Professor Sebastiao Loureiro at the University of Bahia in Brazil, she coordinated a project with the main objective of joining an understanding of the construction of capabilities in innovation and manufacturing in pharmaceuticals with the construction of ‘health system capability’ to deliver access to the innovative outputs.

She also organized several events bringing together innovation economists, economic historians and industrial economists to think creatively about the way that innovation and inequality co-evolve—and how this relationship has changed over the course of capitalism. The case of the bio-pharmaceutical industry is of particular significance in this respect because it goes beyond inequality in income and wealth to include other fundamental dimensions of well-being like health and 'access' (to innovations).

Mazzucato's work in the biotech and health sector is concerned with both the system failures that lead to problematic outcomes and the dysfunctional relationship between public and private sector actors. Mapping these relationships is the first stage in understanding the dysfunctions in the current health innovation model and in 2015, she organized a workshop on this topic with the Open Society Foundations (OSF).

Her work has also been looking at the feedback between the type of finance that is received in different parts of the innovation chain, and the effect that this has on the direction of innovation. In particular, her work with Bill Lazonick has looked at the increasing financialization of the pharmaceutical sector, with many companies spending an increasing proportion of their net income on share buybacks (to boost stock prices and stock options). The effect that this financialization has on biotech and pharmaceutical companies’ ability and willingness to invest in long-run innovation has been a central feature of their joint work. A recent special issue of the British Medical Journal, for which Mazzucato wrote an editorial, highlighted the dysfunctions that can arise from an over-financialized health innovation model.

With OSF, she is now developing a new project focused on the need to redefine the purpose of medical innovation, based on a broader conception of public value, and develop an alternative, mission-oriented approach to medical research. Comparisons will be made between the breadth and depth of public policy in areas related to defense and energy, whereby the final products are bought at negotiated prices, based on the public input.

MISSION-ORIENTED
INNOVATION POLICY

Mazzucato’s work on health innovation is part of a wider project, which aims to develop the mission-oriented policy approach more systematically as a means to address complex societal challenges, and as an engine of more sustainable and inclusive growth. To meet these challenges, and transform societal problems into economic opportunities, there is an urgent need to expand the range of frameworks and tools policy-makers can draw on with confidence.

Her research is developing a new framework that understands the role of the state as shaping and creating markets, not only fixing them. It asks challenging questions about the ways in which public sector investments are currently envisioned, justified and measured, and considers how to build the type of public sector institutions that can welcome the fundamental uncertainty—and hence risk-taking—inherent in the innovation process. Read more about the project here.

Key Questions

  • How to transform the current profit-led innovation model to be more long-term and ‘mission-oriented’?
  • How to define the ‘purpose’ of a broader model of health innovation based on public value and human rights?
  • How can mapping relationships between different innovation actors help in understanding system and outcome failures?
  • What implications might alternative models of innovation imply for reimagining the roles of public, private and third sector actors?
  • How do the costs of the current innovation model compare with alternative models?
  • What lessons can be learned for health from the history of innovation in other sectors, such as defense, where downstream prices are negotiated based on upstream public investment?

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What is needed in the pharmaceutical industry is more radical innovation, including radical thinking about the ‘innovation division of labour, writes Mazzucato.

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Knowledge Accumulation and Industry Evolution: Pharma-Biotech

Knowledge Accumulation and Industry Evolution: Pharma-Biotech

Mazzucato, M. and G. Dosi (Eds. 2006) “Knowledge Accumulation and Industry Evolution: Pharma-Biotech”, Cambridge University Press, Cambridge UK ISBN 0-521-85822-4 446 pages

Written by internationally acclaimed experts in the economics of innovation, this volume examines how the biotechnology and pharmaceutical sector is affected by the dynamics of innovation, institutions, and public policy. It contributes both theoretically and empirically to the increasingly influential Schumpetarian framework in industrial economics, which places innovation at the centre of the analysis of competition. Both quantitative and qualitative studies are included, and this varied perspective adds to the richness of the volume’s insights. The contributors explore different ideas regarding the historical evolution of technology in the sector, and how firms and industry structure have co-evolved with innovation dynamics. Important policy questions are considered regarding the future of innovation in this sector and its impact on the economy.

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