Last week, former Pfizer Global R&D head John LaMattina wrote another of his columns for Forbes, this one on the subject of pay-for-performance deals for pharmaceuticals. These deals, in which insurers contract with pharmaceutical companies to pay for drugs based on how well they perform in practice, are becoming more common as the public conversation over drug prices escalates (examples here, here, and here). There are many interesting questions around pay-for-performance deals, but LaMattina closes his column with a focus on one: their impact on the direction of pharmaceutical R&D.
Specifically, LaMattina argues: “Biopharmaceutical companies will closely watch how pay-for-performance evolves. Should payers become overly enthralled with rebates and continue to raise the bar, companies could move their R&D efforts into areas where a drug’s impact can be easily defined and measured. In such an environment, therapeutic areas like depression and obesity could give way to diseases like psoriasis or rare diseases where patient advocacy remains strong. In its efforts to rein in costs, payers might unwittingly force R&D out of areas where new drugs are still needed. That would be unfortunate.”
LaMattina is exactly right in one sense – and highly misleading in another. First, underlying LaMattina’s argument is a critical claim that the way in which drugs are paid for affects the types of drugs that are developed. This is absolutely right. Although it may be perfectly obvious to some, as someone who just wrote a 25,000 word article on this very topic (oh hi, SSRN), I can attest that recognition of this idea is too often absent from the legal literature. We largely focus on prescription drug insurance and payment as a way to encourage access to medications that already exist, but we ignore its effects on the types of drugs that are produced in the first place.