There are many policy proposals aimed at curtailing the high cost of pharmaceuticals and/or encouraging innovation. Briefly analyze the costs and benefits of the following policy proposals:
a. The government uses an auction to estimate the private value of patents and then offers to buy out patents at this private value. Most patents purchased would be placed in the public domain.
b. The government offers a $5 billion prize to the first drug company that develops a cure for Alzheimer’s disease.
c. In order to control the rising costs of new drugs, the government puts a cap on drug prices at $10,000 per month.