Where is the motivation for Merck to pour funds into a drug they don't get any return on?
And if the government is doing this R&D instead of pharma cos, what is their motivation to perform? If you're a government apparatchik making decisions about what drugs to invest into R&D for, what penalty and upside do you get for being wrong/right? Getting fired or getting a promotion? That's hardly motivating at all.
Your proposal has terrible incentives for everyone all around and would certainly reduce innovation in the long run.
I think you completely misunderstand my point. Merck would be inventing new drugs on its own dime with no government input so it would own that IP outright, yes?
This allows universities to concentrate more on the kind of fundamental basic research that underlies all applied research discoveries; this basic research may not produce IP but is utterly foundational for new applied discoveries.
But the entire reason Merck and co don't pour money into foundational and/or exploratory research is because it's unprofitable. Giving the money to universities to do the research instead of doing it themselves doesn't change that. This is why things like DARPA exist in the defense industry: to fund exploratory research that would otherwise be unprofitable.
Government is already "profiting" by getting novel lifesaving drugs for their money. That's why if your research doesn't deliver results you don't get more grants. They also get a return in the form of jobs for their citizens. I don't see why it's govt's job to make profits off every venture, since their goal should be to maximize wellbeing of their citizens instead. And even if you think they should profit, the tax dollars from even a single successful drug would easily pay for a full year's NSF grants to the entire scientific community.
Bell Labs was hardly unprofitable, was it? So Merck can fund its own Bell Labs, can it not? Just invert the current typical R&D : S&M budget at any pharma outfit, which is like 1 : 3 at present (research vs. marketing).
Yes, they may have to cut shareholder dividends, yes a more competitive market will mean lower profits. However we are talking about people's lives here, and I don't care about Merck's shareholder dividends at all in relation to that.
AT&T was a national monopoly. Merck has a monopoly on a few drugs. The difference is huge.
> lower profits... I don't care about Merck's shareholder dividends
Aaand we're back to terrible incentives. You can't force people to do things that don't have incentives. Even the Soviet Union had incentives. The more you mandate regulation, the more people will find ways around it, either by finding creative ways around your regulations or just moving to other nations with more friendly policies (e.g. China, Europe). The only regulations that work are the ones where peoples' incentives are aligned with what government wants to achieve.
And if the government is doing this R&D instead of pharma cos, what is their motivation to perform? If you're a government apparatchik making decisions about what drugs to invest into R&D for, what penalty and upside do you get for being wrong/right? Getting fired or getting a promotion? That's hardly motivating at all.
Your proposal has terrible incentives for everyone all around and would certainly reduce innovation in the long run.