Covering bad R&D deadens the incentive for firms to do R&D efficiently - it's structurally identical to the implicit guarantees that are proving so problematic in finance.

I'm not saying cover bad R&D - I'm saying cover bad R&D costs for companies that did the good R&D you want to use - because that costs would usually be covered by the profits from good R&D - this is how you structure investing - you make several risky shots so that the one that succeeds pays for the failures - it's a good way to determine "the proper" amount of profit, if you just repay the investment in profitable R&D you will actually lower the investments in the sector.

Anyway the point is moot because R&D costs will probably be paid in the US and other richer markets, India could simply take a free ride. If everyone wanted to do this then you would need to find a way to compensate R&D investments.

Then we get into the case of having to monitor companies to make sure their bad R&D budget isn't being inflated to give them additional profit.

Better to just negotiate cleanly with the company for the drug you want, and sell it all on your own market like the NHS does.

>Better to just negotiate cleanly with the company for the drug you want, and sell it all on your own market like the NHS does.

Well that's what I meant negotiate a "fair" price that would encourage further investment but you don't overpay - the problem is that unless you have competition/substitutes you can't have market pricing so you need to have a good estimate of "fair" price, eg. say a company comes up with 100% effective HIV cure tomorrow - no competition, nothing comes close, a lot of people would pay gold for that but well over investment/production cost and profit is in many multiples of going rate. You would say "fine" obviously there's a high demand - but the reality is that the demand is inelastic and supply is artificially restricted by a government granted monopoly - reverse engineering costs + production cost would allow a lot lower prices, so you aren't benefiting the consumers (the discovery has already been made) or optimally allocating resources (you have recovered investment/production costs, earned standard profit rate and then some) the thing you earn on top of that is deadweight loss from rent seeking so you need to come up with some metrics to avoid that and also set expectations for investors.

If a company takes on debt to finance development, then "the discovery has already been made" isn't the same as "the discovery has already been paid for".

No I'm just saying that you aren't benefiting the consumers after the discovery has been made anymore than a generic copy because copying knowledge is free/it's not a scarce resource once discovered. You might not cover your investments which is why I say you should be compensated for your invention based on the estimated investment cost, plus any other investments made and profit on top of that.

All I'm saying is that if we accept that there is a market failure where you can't recover your investment because you don't have enough advantages on the market (without IP) we should consider compensating the innovator in a way that would stimulate further investment in the area, and when that is the objective you can measure/model what is the minimum profit incentive you need to provide to guarantee acceptable levels of R&D investment.