New: Pay-for-Performance for Drugs and Incentives for Innovation

Interest is growing in schemes that involve “paying for pills by results”, that is, “paying for performance” rather than merely “paying for pills”. Despite its intuitive appeal, this approach is is highly controversial and is disliked by many health care providers, policy makers, and pharmaceutical companies.

Interest is growing in schemes that involve “paying for pills by results”, that is, “paying for performance” rather than merely “paying for pills”.  Despite its intuitive appeal, this approach is is highly controversial and is disliked by many health care providers, policy makers, and pharmaceutical companies.

In this paper, the authors define pay-for-performance and the related terms used in discussions about these schemes; set out a framework for understanding and interpreting them; explore existing schemes, providing examples; discuss the benefits and weaknesses of such schemes; and consider their value as an incentive for innovation.

Download Towse, A., Garrison, L. and Puig-Peiró, R. The use of pay-for-performance for drugs: Can it improve incentives for innovation? Occasional Paper. 12/01. London: Office of Health Economics.