A flexible prize model is a much simpler design for creating a market for doing public good / charitable things. Seems that terminology being used is complicating matters - whether you call it Impact Certificates, Social Impact Bonds, Pay-For-Success contracts, Advance Market Commitments, Retroactive Public Goods Funding , etc. They are all flavours of conditional contracts . But you want to ensure that the parties cannot change the terms of the deal for receiving outcome payments unilaterally in the future (which IMO is a problem with RPGF).
The part which is the most important is for a funder to put a price on some measurable outcome that they want and have clear and unambiguous criteria for determining whether the outcome is met (e.g. $10k per homeless person housed for at least 1 year). Ideally, this outcome should provide more benefit to the funder than the price paid (e.g. $15k+ cost savings due to reduced policing, boost to economy etc), which makes it an arms-length negotiation and scalable business model. The superintelligence of the market does the rest (e.g. VC investing in companies competing for the payments, and automatically price in what they think are their future cashflows etc). Where it can get more subtle is where you are paying a flexible outcome payment proportional to impact.
The other concern is that if we assume funders will have a limited budget, so need to prevent blow outs. In that case, you can pay a fixed amount distributed between companies "registered" to the fund that achieve the criteria for outcome payments, proportional to the achievement of their impact measure (e.g. each person put in a home provides a number of "points" that determines the company's percentage entitlement for a pre-determined period of time such as 5 years). Market equilibrium is reached with a certain number of company registrations, and the proportion of rewards available proportionally increases as the "points" cease to be eligible for outcome payments after the pre-determined period of time . Social impact is then infinitely scalable with the size of the fund, and the market automatically allocates payments in an efficient way.
So to illustrate this in an example:
A funder decides they will pay $2m p/a in a flexible prize fund, allocated between companies registered to the prize fund proportional to the number of homeless people housed for at least 1 year. Company A houses 30 homeless people for a year (30 points). Company B houses 90 (90 points). For that year, the £2m will be split 25% to Company A and 75% to Company B. They will keep those points for 5 years. Next year, Company A houses another 30 (30+30 = 60 points), and Company B houses another 90 (90 + 90 = 180 points). Same split. In the third year, Companies A and B they do the same, but a newcomer Company C puts in 100 people in a home, so it will be split 90/270/100 between A, B and C. After 5 years, Companies A and B lose 30 points and 90 points respectively as the 5 years is up, which provides more proportionally for everyone else.
If a funder wants to increase the number of homeless people housed, they just increase the annual payment, and a new "market equilibrium" is reached.
This flexible prize model can be applied to any form of public good, as long as we can agree they are robustly measurable and comparable with each other (e.g. QALYs, % reduction in hospitalisations vs usual care, number of kids put in college, lives saved etc).
Credit to Pogge and Hollis for the idea of a flexible prize fund: https://en.wikipedia.org/wiki/Health_Impact_Fund
This concept is similar to the idea of social impact bonds (SIB) / pay-for-success (PFS) contracts / flexible prizes to incentivise impact investors to fund the development of public goods in return for the outcome payments if successful. Crowd Funded Cures is working on implementing this idea to incentivise funding of clinical trials for "unmonopolisable therapies" where patents do not work because you cannot recover your investment by charging a monopoly price e.g. finding new uses for off-patent drugs, supplements, plant medicines & psychedelics, diets and non-drug / lifestyle interventions - see https://crowdfundedcures.medium.com/pay-for-success-contracts-a-new-model-to-develop-new-therapies-from-old-drugs-f69b2189184d
This creates a scalable business model on the basis that the cost savings will exceed the amount of outcome payments. For example, a SIB for homelessness, a local govt pays $10k per homeless person housed for at least a year, which saves the local govt $100k in reduced policing costs and economic harm. In the same way a $50m SIB for obtaining FDA approval for repurposing off-patent fluvoxamine to treat Covid could save governments $1b+ from reduced reliance on patented drugs such as molnupiravir - see https://golab.bsg.ox.ac.uk/community/blogs/innovative-financing-mechanisms-2/
I am a patent attorney and IP/IT legal advisor who is interested in how we can design a more rational system of incentivising the market to develop medical innovations that maximise health impact, by using "financial innovation" or a legal/contractual approach. I wanted to get some feedback from the EA community regarding my social enterprise project, which I hope may be interesting to the members.
This project is based on the principles of EA and my frustration with the lack of clinical trial evidence in support of many therapies that could be viable treatments or cures but lack private incentives to pay for large clinical trials (Phase II+) that would convince the broader medical community of their safety and efficacy (including new uses for off-patent/generic drugs, diets, and lifestyle interventions). I've called these "unmonopolisable therapies" because it is not possible (or uneconomic) to enforce a monopoly price using patents, which is currently the only way that that the private pharmaceutical industry can recover the costs of pre-clinical development and clinical trials. The result is these unmonopolisable therapies often lack clinical trial evidence in support, unrelated to their health impact potential, because grant funding is rarely available for large clinical trials (with some notable exceptions).
The following Medium article is a brief summary of the charitable/social enterprise project and what we are trying to achieve, namely, a matching and facilitation service to establish "pay for success" contracts (e.g. prizes and social impact bonds) for healthcare payers to pay impact investors for successful clinical trials that repurpose generic drugs or other unmonopolisable therapies. We have proposed raising a US$10-50m Covid Prize Fund and/or Social Impact Bond as a pilot because the obvious economic and health burden for payers/govts, which may encourage them to back this "new" approach: https://medium.com/@savvak/can-we-develop-new-affordable-medicines-without-patents-1032399cd428. This project is based on the topic of my LLM thesis which analysed how the current patent system fails to incentivise development of new uses for generic drugs and other "unmonopolisable therapies (see https://ir.canterbury.ac.nz/bitstream/handle/10092/9826/thesis_fulltext.pdf?sequence=1&isAllowed=y).
As far as I am aware, there are only a few non-profit organisations that are trying a similar "financial innovation" approach of using "pay for success contracts" to incentivise impact investors to reduce healthcare costs for healthcare payers by repurposing generic drugs (Cures within Reach in the US (https://cureswithinreach.org/reflections-on-the-approach-and-challenges-of-developing-social-impact-bonds-to-fund-drug-repurposing-clinical-trials-a-conversation-with-dr-rick-thompson), Mission: Cure in the US (https://mission-cure.org/), and Findacure in the UK (https://www.findacure.org.uk/the-rare-disease-drug-repurposing-social-impact-bond/). Nobody is focussed on using pay for success contracts to repurpose generic drugs to treat Covid-19. The main benefit of pay for success vs grant funding is that you are involving the private industry to crowdsource medical innovation which currently lacks market incentives. This would theoretically be more efficient than grants (or at least worth a try as there is also no risk for healthcare payers with the risk of failed clinical trials taken on by impact investors). This could potentially convince healthcare payers to back a much larger Prize Fund or Social Impact Bond than they would otherwise be willing to in return for "de-risking" these Phase II+ clinical trials. This also helps get over the "valley of death" between pre-clinical and applied clinical research. Our main bottleneck is developing a financial model to convince payers to back a pay for success contract and make "outcome payments" for successful clinical trials. We are looking for healthcare economists or anyone that has worked on developing financial models to justify funding by healthcare payers. Once we can convince a healthcare payer (or perhaps UHNWI) to put a price on successful Phase II+ clinical trials on the basis of health savings, setting up a fund of impact investors to repurpose generic drugs (and fund clinical trials for other unmonopolisable therapies) will be relatively easy.
I have recently relaunched my NZ-based charity, the Medical Prize Charitable Trust which has tax-free status (see crowdfundedcures.org). The intention is to incorporate a wholly-owned social enterprise and seek grant funding/investment and scale based on charging management/consulting fees for the matching and facilitation service. I am mostly indifferent as to where this vehicle will be incorporated, but would prefer UK or NZ as I have more experience in those jurisdictions.