Financing medical breakthroughs or cures is becoming increasingly challenging in the current fiscal environment.
In this paper, we develop the precise conditions needed for a financing mechanism, HealthCoin, to work between a private payer and Medicare, to incentivize the former to invest in breakthrough therapies or cures in the US.
We illustrate the valuation of such a currency for a cure of Type 2 diabetes.
We show that without a HealthCoin, a private payer does not invest in the cure, a small fraction of the patients live up to age 65, Medicare pays for the full price of the cure at age 65 and incurs net loss in returns over the elderly ages, and the manufacturer only sells cures for those who reach age 65. In contrast, a HealthCoin is feasible in this market, incentivizing the private payer to invest in the cure during the non-elderly ages and leading to Pareto improvements for all three stakeholders.
Discussions around the applicability of HealthCoin for breakthrough therapies on the horizon, such as gene therapies for blindness and hemophilia B, and the feasibility of instituting such payments through new legislations or demonstration projects could be of great value.