International-level support for research occurs primarily through public research institutions. In the United States, national-level funding of research is conducted through several departments and agencies, including the Department of Health and Human Services (HHS) and it’s Assistant Secretary for Preparedness and Response (ASPR), NIH and CDC. NIH is the primary agency responsible for performing and supporting basic, clinical, and translational research and its support acts as a subsidy to drug development, as it funds the scientific research needed to identify new target organisms and drugs that are effective against those targets (Laxminarayan & Malani, 2007).
Under the ASPR, the Biomedical Advanced Research and Development Authority (BARDA) funds the development and procurement of medical countermeasures (MCMs). The Pandemic and All-Hazards Preparedness Act (PAHPA) (2006) specifies that the BioShield program can be invoked for an infectious disease as long as the MCM is also a national security countermeasure. PAHPA created the BARDA to help advance R&D in response to security threats (Mossialos, et al., 2010).
Privately- and publicly-funded prize incentives and product development partnerships (PDPs) for medical innovation have flourished in recent years. Prize incentives directly reduce R&D costs and risks or increase revenues. They can take a variety of forms, including milestone monetary prizes, best entry tournaments, elective systems (e.g., the optional reward scheme), and others. Under some of these schemes, the manufacturer retains its patent, while others require the manufacturer to relinquish the patent.
In this study, we model this category of incentives as sequential payments of lump-sum amounts upon successful completion of a phase with the amounts increasing for later clinical trial stages.