Market failure in the pharmaceutical industry and how it can be overcome: The CureShare mechanism

Allowing patients to take part in the initial investment for the development of cures for their illnesses can, under certain conditions, lead to the development of drugs that would have otherwise not been developed and to a dramatic welfare increase. We theoretically analyze these conditions. The suggested patient investment mechanism, which we call CureShare, does not involve any philanthropy or government subsidies. It is simply a way to overcome market failure. Based on empirical data, we estimate that applying this mechanism may save thousands of lives annually and may dramatically improve the quality of many others.