Who lives, who dies, and who decides? For more than one hundred years, innovative pharmaceuticals have cured disease, prolonged life, and reduced human suffering. However, the social welfare benefits associated with pharmaceuticals come at increasingly steep costs. Millions of Americans are unable to afford lifesaving medications, leading to calls for reform at all levels of government—including proposals for nationalized drug companies, value-based pricing, and compulsory licensing of drugs approved by the Food and Drug Administration. Although some of these proposals might be socially beneficial, this Note argues that they are doomed to short-term political failure in the United States. By directing outrage primarily at the business decisions of innovative, for-profit companies with legal monopolies over pharmaceuticals, legal scholars and policy analysts advocating for increased government intervention overlook difficult policy considerations likely to stymie novel innovation and commercialization efforts directed by politically accountable actors. For example: In a resource-strapped world, which diseases should limited research and development funds be directed toward? Should the most effective drugs be pursued, regardless of cost and delays? And given high failure rates for pharmaceuticals reaching even Phase III clinical trials, how many experimental drugs should be investigated for a specific disease? Relying on the private sector for pharmaceutical innovation allows government officials to sidestep these politically toxic questions—the drug-development equivalent of “death panels,” a political term describing purported health care rationing administered by bureaucrats.

To clarify the tradeoffs policymakers face in formulating innovation incentives, this Note provides a conceptual framework for understanding pharmaceutical innovation, describes the U.S. government’s current approach to incentivizing drug development, and explains why recent proposals for government intervention in drug development markets are too politically fraught to gain the broad legislative support necessary to increase access to medicines in practice. Instead, this Note proposes “value-agnostic” programs, which indirectly influence innovation while leaving original disease- and drug-level value judgments in private hands, as a more realistic path for pharmaceutical reform. This Note suggests, as one example of this framework, a patent buyout system that enables the U.S. government to nudge pricing while substantially maintaining current innovation incentives. Specifically, before selling or exclusively licensing an approved drug or drug candidate, recipients of certain federal drug discovery subsidies would first be required to auction off related patents, with the U.S. government maintaining the right to purchase or license at the second-highest bid price.

* J.D. Candidate, Stanford Law School, 2019. Many thanks to Lisa Larrimore Ouellette, Gregory Ablavsky, Jacob Sherkow, Christopher Madl, Helen Christina Kondos, Mark Krass, and the editors of the Stanford Law Review, particularly Abby Walter, Yanni Chen, Christie Corn, Alex Yu, Jane Kessner, Catherine Yuh, Yoni Marshall, Annie Shi, Ethan Amaker, Lori Ding, and Nathan Lange, for immensely helpful comments. All errors and opinions are my own.