The antagonism of push and pull strategies, and the current funding campaigns to fight orphan diseases

We argue that an increase in investments in R&D for innovative treatments to eradicate neglected diseases in developing countries leads to a rational decrease in investments in available treatment technologies. In a formal model where the government of a developing country seeks to optimally allocate public resources, we show that the higher the odds of appearance of an innovative treatment, as occurring when investments in R&D increase, the lower the optimal provision of current treatments and other health expenditures. We also show that this phenomenon is aggravated when the opportunity cost of investments in current treatments increases. This implies that welfare in developing countries deteriorates as innovative treatments are more likely to become available. We also describe an insurance scheme that remedies these issues, and that leads to Pareto-optimal allocations regardless of the investment level in R&D for innovative treatments.

Research highlights
► We argue that an increase in investments in Push and Pull Mechanisms leads to a rational decrease in investments in available treatment technologies to eradicate diseases in developing countries.
► We show that the higher the odds of appearance of an innovative treatment, as occurring when investments in those mechanisms increase, the lower the optimal provision of current treatments and other health expenditures.
► This phenomenon is aggravated when the opportunity cost of investments in current treatments increases.
► We describe an insurance scheme that remedies those issues, and that leads to Pareto-optimal allocations regardless of the investment level in Push/Pull mechanisms.