To Fight Pandemics, Reward Research
http://www.nytimes.com/2013/05/05/business/an-economic-cure-for-pandemics.html?ref=health
THAT frightening word pandemic is back in the news. A strain of avian influenza has infected people in China, with a death toll of more than 25 as of late last week. The outbreak raises renewed questions about how to prepare for possible risks, should the strain become more easily communicable or should other deadly variations arise.
Our current health care policies are not optimal for dealing with pandemics. The central problem is that these policies neglect what economists call public goods: items and services that benefit many people and cant easily be withheld from those who dont pay for them directly.
Protection against communicable diseases is a core example of a public good, as is basic scientific research, which can yield new ideas that may be spread at very low additional cost. (In contrast, Medicare, which is publicly financed, has some elements of a public good, but any particular expenditure tends to benefit an individual receiving treatment, rather than being spread over a number of beneficiaries.)
One obvious step forward would be to exempt biomedical research from cuts of the current federal budget sequestration. Research and development grants are a way to pay potential innovators up front an important move, as an innovator cant always charge high-enough prices for the value of its remedies when theyre actually needed.