INNOVATION MODELS IN THE BIOPHARMACEUTICAL SECTOR - Innovation in the Biopharmaceutical Industry - page 4

Research on the rate and extent of the adoption of an innovation — the diffusion
rate — has identified a number of factors which affect diffusion (Dosi, 1992). Among
others, they include:

•

Relative advantage or value : the degree to which an innovation is perceived as
better than competing products.
• Compatibility : the degree to which an innovation is perceived to be consistent
with the existing values, experience and needs of potential adopters.

• Complexity : the degree to which an innovation is perceived as being difficult to

use or understand.

• Trialability : the degree to which an innovation can be experimented with on

a limited basis. An innovation that is trialable represents less uncertainty for
potential adopters, and allows for “learning by doing”.

• Observability : the degree to which the results of an innovation are visible to

others. The easier it is for others to see the benefits of an innovation, the more
likely it is to be adopted.

Distinguishing Features of the Biopharmaceutical Sector and
Its Environment

Economic growth through innovation has become the watchword of governments.
Advances in bioscientific knowledge and their application in medicine by the bio-
pharmaceutical sector, is seen by many as the epitome of this type of sector (Baumol,
2002). This “knowledge-industry” complex has a number of distinguishing features
defining both its modus operandi and its near environment. For example, (1) The
World Health Organization has argued that good health through equal access to the
best available healthcare is a human right, and that medical knowledge is a “pub-
lic good” which should be free from proprietary ownership rights; (2) There is a
widely held view that patients should have equal access to medicines, regardless
of ability to pay for them. But under market regulation, particularly in competition
law, the biopharmaceutical sector is regarded as a private, for-profit sector just like
any other; (3) Increasingly refined systems of technical legislation have evolved to
ensure that medicines will only be licensed for commercialisation as long as they
meet stringent standards of efficacy, safety and quality; (4) Long experience sug-
gests that, in practice, the biopharma innovation model is critically dependent upon
strong IP rights, especially in the form of patents (Mansfield, 1986).
Within this short list lie the seeds of much conflict and confusion regarding the
nature of biopharmaceutical innovation, decisions about who should manage it, and
mechanisms to ensure a fair balance in appropriating the value it creates. A number
of policy issues flow from the interplay of these considerations. As we go forward,