Impact of economic, regulatory, and patent policies on innovation in cancer chemoprevention.

Chemoprevention agents are an emerging new scientific area that holds out the promise of delaying or avoiding a number of common cancers. These new agents face significant scientific, regulatory, and economic barriers, however, which have limited investment in their research and development (R&D). These barriers include above-average clinical trial scales, lengthy time frames between discovery and Food and Drug Administration approval, liability risks (because they are given to healthy individuals), and a growing funding gap for early-stage candidates. The longer time frames and risks associated with chemoprevention also cause exclusivity time on core patents to be limited or subject to significant uncertainties. We conclude that chemoprevention uniquely challenges the structure of incentives embodied in the economic, regulatory, and patent policies for the biopharmaceutical industry. Many of these policy issues are illustrated by the recently Food and Drug Administration-approved preventive agents Gardasil and raloxifene. Our recommendations to increase R&D investment in chemoprevention agents include (a) increased data exclusivity times on new biological and chemical drugs to compensate for longer gestation periods and increasing R&D costs; chemoprevention is at the far end of the distribution in this regard; (b) policies such as early-stage research grants and clinical development tax credits targeted specifically to chemoprevention agents (these are policies that have been very successful in increasing R&D investment for orphan drugs); and (c) a no-fault liability insurance program like that currently in place for children's vaccines.

The paradox of openness revisited: Collaborative innovation and patenting by UK innovators

© 2016 The Authors.We revisit the "paradox of openness" in the literature which consists of two conflicting views on the link between patenting and open innovation-the spillover prevention and the organizational openness views. We use the data from the Survey of Innovation and Patent Use and the Community Innovation Survey (CIS6) in the UK to assess the empirical support for the distinct predictions of these theories. We argue that both patenting and external sourcing (openness) are jointly-determined decisions made by firms. Their relationship is contingent upon whether the firms are technically superior to their rivals and lead in the market or not. Leading firms are more vulnerable to unintended knowledge spillovers during collaboration as compared to followers, and consequently, the increase in patenting due to openness is higher for leaders than for followers. We develop a simple framework that allows us to formally derive the empirical implications of this hypothesis and test it by estimating whether the reduced form relationship between patenting and collaboration is stronger for leaders than for followers.