We analyze the problem of incentivizing research and development (R&D) into developing world disease from an economic efficiency perspective. We view the problem as how to best promote R&D into goods with positive external effects in the sense that medicines that directly affect the health of the poor also indirectly affect the utility of the altruistic “rich.” We demonstrate why existing policy proposals – such as price concessions by manufacturers – adversely impact the poor by placing the burden of R&D only on innovators rather than all altruists in the rich world. We offer policy solutions that are based on economic efficiency and therefore rely on a broad sense of how the world values the treatment of developing world disease. We estimate that global altruism toward those with malaria is, at a minimum, valued between $835 million and $2.4 billion annually and for HIV/AIDS, between $9.1 billion and $26.6 billion annually. We argue that future policies toward neglected diseases need to better incorporate how efficient R&D meets the need of this global altruism.
Available at: http://works.bepress.com/stephane_mechoulan/15/