Orphan Drugs and the Role of Government

In this blog post, I thought it would be interesting to use Smith's free market model to highlight a few challenges in research and development of orphan drugs. Page 25 of Economix points out that competition between sellers would set the price of a goods in terms of it's cost to society. Smith's model argues that the role of the government is to provide goods that would benefit the public that would otherwise be unavailable due to lack of incentive to sell on the market and issue patents to support developing industries among other roles. In this post, I would like to write about public goods and the role of the government according to Smith's laissez-faire. 

Smith argues that one of the roles of the government in the market should be to provide public goods. That is goods that would benefit the public. I assume this role of the government is limited by it's generalization and simplification; however, I believe that it is a fundamental question about politics and allocation of funds. Public policies are made by the government to either promote or obstruct a behavior to protect the public's interest. Keep in mind that policies often require funding in order to be promulgated and funds collected by the government is often scarce. The example that I would like to use is Orphan Drug Act which allows the FDA to designate a developing drug therapy as an orphan drug. An orphan drug status has access to several incentives, but the main incentive is tax credits for developer to recover the R&D investment.

Going back Smith's notion about the role of the government in the market. Smith argues that the government should provide public goods and lets assume that healthcare is a public goods. Is it the government's role to invest in the development of these drugs? At first, my opinion was simple...duh. This question doesn't appear to be complex at first glance, but we have to give consideration to allocation of funds, cooperation among foreign governments, and of course, human rights. I am interested in reading y'alls thoughts!