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Incentive Programs for Neglected Diseases

By Pranav Ganapathy   

We propose and evaluate an auction mechanism for the priority review voucher program. The 2007 voucher program rewards drug developers for regulatory approval of novel treatments for neglected tropical diseases. Previous papers have proposed auctioning vouchers for the priority review voucher program but have offered neither a mathematical model nor a framework. We present a mechanism design problem with one pharmaceutical company producing one drug for a neglected tropical disease. The mechanism that maximizes the regulator’s expected surplus is a take-it-or-leave-it offer, with three different offers based on low, intermediate, and high neglected disease burdens. We demonstrate how mechanism design can be applied to settings in which the buyer pays for public access to a product with regulatory speed. Finally, this paper may be useful to policymakers seeking to improve access to voucher drugs through modifications of the program.

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Advisors: Professor David Ridley, Professor Giuseppe Lopomo, Professor Michelle Connolly| JEL Codes: I1, D44, D82

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