Health Care Costs and the Arc of Innovation

86 Pages Posted: 29 Jan 2020

See all articles by Neel U. Sukhatme

Neel U. Sukhatme

Georgetown University Law Center; Georgetown McCourt School of Public Policy

M. Gregg Bloche

Georgetown University Law Center

Date Written: March 24, 2019

Abstract

Health care costs continue their inexorable rise, threatening America’s long-term fiscal stability, competitiveness, and standard of living. Over the past half-century, efforts to rein in spending have uniformly failed. In this Article, we explain why, breaking with standard accounts of regulatory and market dysfunction. We point instead to the nexus of economics, mutual empathy, and social expectations that drives medical innovation and locks in low-value technologies. We show how law reflects and rein-forces this nexus — and how and why health-policy-makers avert their gaze.

Next, we propose to circumvent these barriers instead of surmounting them. Rather than targeting today’s excessive spending, we seek to leverage available legal tools to bend the arc of innovation, away from marginally-beneficial technology and toward high-value advances. To this end, we set forth a novel, value-based approach to pricing and patent protection — one that departs sharply from current practice by rewarding innovators in proportion to the therapeutic benefits new tests and treatments yield.

Using cancer therapy as an example, we explain how emerging information technology and large troves of electronic clinical data are opening the way to near-real-time assessment of efficacy. We then show how such assessment can power ongoing adjustment of pricing and patent terms. Finally, we offer a blueprint for how laws governing health care payment and intellectual property can be tailored to realize this value-focused vision. For the reasons we lay out, the transformation of incentives we urge will both slow clinical spending growth and greatly enhance the social value that this spending yields.

Keywords: patent law, affordable care act, pharmaceutical innovation, me-too drugs, medical ethics, torts, oncology, machine learning, electronic medical records, fiscal crisis, value-based patents, cost control, medicare, innovation, health care, obamacare

JEL Classification: O34, H51, I11, I13, I18, K32

Suggested Citation

Sukhatme, Neel U. and Bloche, M. Gregg, Health Care Costs and the Arc of Innovation (March 24, 2019). Minnesota Law Review, 2019, Available at SSRN: https://ssrn.com/abstract=3514238 or http://dx.doi.org/10.2139/ssrn.3514238

Neel U. Sukhatme (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

Georgetown McCourt School of Public Policy ( email )

Old North, Suite 100
37th & O Streets NW
Washington, DC 20057
United States

M. Gregg Bloche

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9123 (Phone)
202-662-9680 (Fax)

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