Personalised medicine and pay for performance: should pharmaceutical firms be fully penalised when treatment fails?


17 June 2018 - In this article, we model the behaviour of a pharmaceutical firm that has marketing authorisation for a new therapy believed to be a candidate for personalised use in a subset of patients, but that lacks information as to why a response is seen only in some patients. 

We characterise the optimal outcome-based reimbursement policy a health authority should follow to encourage the pharmaceutical firm to undertake research and development activities to generate the information needed to effectively stratify patients. 

Consistent with the literature, we find that for a pharmaceutical firm that does not undertake research and development activities, when the treatment fails, the total price of the drug must be returned to the healthcare system (full penalisation).

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Michael Wonder

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Michael Wonder