Have you had a friend or family member who was diagnosed with a serious illness that could not be cured? Did their disease progress and their symptoms persist despite multiple doctor and hospital visits, tests and prescriptions? Were you frustrated that a health care system that costs $3.3 trillion per year couldn’t effectively manage or cure the disease?
That was where I found myself in 2016 as I was leading the Pay for Success financing program for the Institute for Child Success, helping cities and states study the feasibility of using PFS financing to expand successful early childhood programs. My brother Eric was diagnosed with a disease called pancreatitis, a degenerative disease with no known cure. I watched him lose weight and suffer from excruciating, debilitating pain.
After figuring out where the pancreas is and what it does, he and I set out to understand why there is no effective treatment for a disease that affects about 150,000 people in the US, including approximately 10,000 children. Here’s what we learned:
- There are not enough resources to take therapies that show promise in the lab, thoroughly test them, and bring them to patients. This gap in funding for early stage therapies even has a name: the “Valley of Death.”
- In the health care system, funding is still based on services provided rather than patient outcomes. Funding for drug development goes to the projects that will generate the most profit rather than the greatest impact on patients’ lives.
- Research efforts are not coordinated around a clearly-defined goal. Individual researchers pursue funding for specific projects, but there is no overall strategy for achieving specific outcomes in a timeframe that benefits patients.
Sound familiar? These are exactly the types of challenges Pay for Success was designed to address. Could Pay for Success financing be applied to cure a disease? After much consultation with colleagues from the PFS world and experts in health and disease, I became convinced that it can. So convinced that I founded Mission: Cure to make it happen, for my brother and for others.
Here is how it will work:
Those entities bearing the cost of a disease (chronic pancreatitis, for example, costs healthcare payers about $4 billion/year)—or venture philanthropists interested in risk-free philanthropy—will pledge to pay for agreed-upon improvements in patient outcomes over, for example, 10 years. Armed with this pledge, an intermediary like Mission: Cure will raise a pool of funds from impact investors and then work with patients, scientists and drug developers to invest in a range of cost-effective, cutting-edge strategies to achieve those outcomes for a specific group of patients. If successful, investors will have had a clear social impact and will also receive a financial return based on a combination of outcome payments and, potentially, also market returns if the new therapies can be commercialized.
An effort to cure diseases is different from the existing Pay for Success projects in two important ways:
- While the existing PFS projects are implementing interventions that have already been shown to improve outcomes, we are funding the development of effective therapies.
- While the rate of return for existing PFS projects are limited to what government or other outcome payers will pay (generally 4-11 percent per annum), investors’ return would come from two sources: patient outcome payments and the market. This means that the risk inherent in developing therapies is balanced by a possibility of higher returns.
Combining returns from outcome payers with returns from commercialization of pharmaceuticals can address a challenge we have faced in the Pay for Success field—that outcome payments are capped and are often not proportionate to the risk. Adding payments based on patient outcomes to existing market incentives for pharmaceutical investments also addresses several limitations of our current drug development system. It incentivizes therapies based on how likely they are to make patients better, not on how profitable they are likely to be. It incentivizes strategies that reduce healthcare costs. And it prioritizes and creates accountability for making patients feel better and live longer.
In addition to helping my brother and others suffering from debilitating illnesses, I believe that incentivizing and managing to patient outcomes will result in healthier communities. In my next post, I will talk about how Mission: Cure developed a strategy and is selecting specific investments to cure a disease.