Live, or Die Free

by on July 16, 2007 at 7:21 am in Economics, Medicine | Permalink

Johnson & Johnson has proposed that Britain’s national health service pay for the cancer drug Velcade, but only for people who benefit from the medicine, which can cost $48,000 a patient. The company would refund any money spent on patients whose tumors do not shrink sufficiently after a trial treatment.

The groundbreaking proposal, along with less radical pricing experiments in this country and overseas, may signal the pharmaceutical industry’s willingness to edge toward a new pay-for-performance paradigm – in which a drug’s price would be based on how well it worked, and might be adjusted up or down as new evidence came in.

More here.  Contingency fees for doctors and pharmaceutical companies are a very good idea (one I have long supported).  For more see Hyman and Silver’s excellent paper.

8 comments

Chris Meisenzahl July 16, 2007 at 7:38 am

Very intriguing idea.

Neel Krishnaswami July 16, 2007 at 11:45 am

This is quite possibly the best blog post title ever.

Daniel Klein July 16, 2007 at 11:55 am

Yes, great blog post title!

save_the_rustbelt July 16, 2007 at 4:43 pm

Pay-for-performance is being studied at several levels in the US healthcare system.

There are difficulties:

1) determining how to measure quality (in less dramatic cases)
2) how to control for patient non-compliance

Charles Silver July 16, 2007 at 11:08 pm

Thanks to Alex for remembering the article David and I wrote. Being less clever than Alex (great title, really!!), we lost the battle over the acronym (P4P beat out RBCA) but we seem to be making headway in the war. To the comments above pointing out difficulties with and limitations on the use of outcome-based compensation, the appropriate response is that there are few panaceas, and outcome-based payment arrangements are not one of them. We only argued that their use should be permitted and that they have untapped potential to improve the delivery of health care in some areas. I continue to think that’s right. Not all clients pay lawyers on contingency, but some do and there is no reason to prevent clients who like contingent fees from using them.

Dick King July 17, 2007 at 2:29 pm

Over a large number of patients you don’t need to control for patient compliance in part because part of the skill of a treating physician is choosing treatments that the patients will follow.

You do, however, have to control for case difficulty.

-dk

鑽石 April 2, 2008 at 9:16 pm

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