UCL Institute for Innovation and Public Purpose


Rethinking the economics of medical innovation

IIPP will research the ways health innovation can be more mission-oriented to realise major advances in areas of unmet health need, as well as accessibility for patients and populations.

 Over the past few decades, huge advances in biomedicine and biotechnology have revolutionised modern medicine. With new treatments, humans have made significant progress in areas that past generation wouldn’t even think possible. In the age of big data and artificial intelligence, innovation is an increasingly important agent for driving transformative societal change as well as economic growth.

However, technological advances are also significantly driving inequity: while delivering huge health and economic dividends to some, they have failed the basic health needs of many others and contributed to widening gaps in wealth and in health across the world. fundamentally, the current health innovation model is fraught with problems with respect to direction, rate, access and finance and is unable to respond to the some of the most pressing societal and health challenges, such as ageing population, antimicrobial resistance and climate change:


The system fails to direct its innovative efforts towards the greatest public health needs. It drives research and development (R&D) priority-setting in the direction of greatest profit, rather than public health priorities or true medical benefit. Health innovation is overly pharmaceutically focussed, its agenda increasingly dominated by new blockbuster drugs and technology, ignoring cost-effective but fundamentally important measures such as life style, prevention, novel implementation and delivery models, or even just new ways to administer existing therapeutic options. In turn the superiority of pharmaceutical solutions is amplified by funding streams from all actors.


The system fails to maximise the rate of innovation given available resources. In the context of declining R&D productivity, intellectual property rights system does not encourage open, collaborative research; instead, working in secrecy and isolation. In addition to enabling the proliferation of medicines that represent little or no clinical advance compared to already existing options, the patent system is also hindering the dissemination and diffusion of new science by privatising tools and processes that are upstream in the research process.


The system fails to ensure public access to innovative treatments at affordable prices , which are largely the result of publicly funded research. On the one hand, monopoly granted by patents couple with demand inelasticity for health as a derived good means that the private industry are price setters, and the society is the price taker. On the other hand, the co-create nature of value in health innovation and the critical role of the public in value creation and market shaping is not reflected in the current system’s narrow conceptualisation of value; instead, the centrality of state-led investment for early and basic science in the current innovation ecosystem is framed merely as a market-fixing and de-risking device for private financing for downstream development and commercialisation. At a deeper level, public value becomes obscured by the prevailing narrative of value, where value is derived from market mechanism through price.


These failures are also facilitated and at the same time exacerbated by increasing financialisation and short-termism in the system. As successful financial vehicles in the capital market, pharmaceutical companies often prioritise financial manoeuvres at the expense of R&D activities. Rather than investing in R&D in-house, big pharma increasingly devote funds to share buyback to increase the value per share and boost dividend pay-outs, and for merger and acquisition of external efforts to capture existing pipelines and blockbuster drugs and boost revenue outlook. These actions in turn reinforce the already active financial speculation on health innovation, which eventually translate into prohibitively high prices of drugs—the only lever of revenue growth in the real economy.

At the core of this gap is a fundamental dissonance between public value in the context of health and what value has come to embody in a health innovation agenda dominated by biomedicine. This project will therefore aim to redefine value in health innovation by conducting theoretical and empirical analyses of its evolution from economic, historical, sociological and political perspectives, and propose a new mission-oriented framework that will guide the design and implementation of health innovation system to deliver public value.

Current projects

Rethinking the economics of medical innovation

We are launching a new project (2017-2022) with the Open Society Foundations to explore mission-oriented innovation models and the role of the public sector in biomedical research, led by Professor Mariana Mazzucato.

This project has led to the publication of an IIPP report entitled The people's prescription: Re-imagining health innovation to deliver public value, which argues that a major overhaul of the health innovation system is needed to deliver public value. The report was launched in October 2018.

Research publications


For further information, please contact IIPP Research Fellow in Health Innovation and Policy Engagement Henry Li 
Email: henry.li@ucl.ac.uk