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.

Measuring and publishing hospital data on achieved health outcomes is becoming routine in many health care systems. League tables of hospital quality – based on post-surgical survival rates, for example - are used to highlight variation in performance across providers. These measures, however, reveal little about the health of the vast majority of patients and may fail to detect important variations in quality.

Over the past four years, OHE has been involved in research intended to examine more thoroughly the economic value of medical research in the UK. Understanding and maximising the value includes consideration of both direct and indirect returns when deciding research policies. Taking account of spillovers is essential.