Incentives and health

The first step is to give up the illusion that the primary purpose of modern medical research is to improve Americans’ health most effectively and efficiently. In our opinion, the primary purpose of commercially funded clinical research is to maximize financial return on investment, not health. John Abramson, Harvard Medical School, quoted by Robert F Kennedy Jr in The Real Anthony Fauci, November 2021

Government funding for health innovation is subsidising drug industry profits while providing little public health benefit, a report from leading health economists says. Most new drugs are not meeting public needs while economic and regulatory incentives have created a “highly inefficient pharmaceutical sector” which spends more on marketing than research and development, and focuses the research it does do on profits, the report explains. Drug companies are incentivised to profit not to improve health, says report, Melanie Newman, summarising this paper published 16 October 2018

Incentives are crucial. If people have incentives to improve the health of the population, then that is what they will work towards. If they have incentives to increase the short-term profits or revenues or funding of the organisations for which they work, public- or private-sector, then all their activities will be in pursuit of that goal. The dysfunctionality of our healthcare systems begins at the top. There may be vague goals in the form of soundbites or mission statements, but there is no link between them and the incentives on offer.

The Social Policy Bond concept, applied to health, would change that. I have described how they would work here, or in a lot more detail here. Essentially, they would give a coalition of investors incentives to look for and exploit the most efficient approaches to dealing with society's long-term health problems - on a continuing basis. Health would be defined broadly, using some index of which one component could be Quality Adjusted Life Years. And the goal would be long term. The coalition of investors would be a new type of organisation; one whose structure and composition could change over time, but who could profit with the long (perhaps 50-year) lifetime of the bonds by buying bonds, doing whatever they can to advance toward the targeted goal, then selling their bonds at a higher price.