The United States healthcare system is highly fragmented. This fragmentation creates opportunities for multiple actors to make healthcare decisions that would be made better by a single actor, such as when patients receive care from many uncoordinated providers, or when patients move on and off of different insurance plans over time. Too often, fragmentation functions to drive up costs, lower health care quality, and negatively impact patient care. In response, scholars and policymakers have proposed legal reforms either to mitigate the harms of fragmentation or to eliminate the fragmentation entirely.

Yet scholars have not recognized the impact of healthcare fragmentation on incentives for innovation into new healthcare technologies, specifically pharmaceuticals. This Article takes up that question. Essentially, there is a direct relationship between healthcare fragmentation and patients’ ability to access new technologies, as many forms of fragmentation harm patient care precisely by discouraging patients from accessing innovative new therapies. When patients are systematically discouraged from accessing those types of technologies, pharmaceutical companies’ incentives to invest in their development are reduced. As a result, healthcare fragmentation poses novel harms for innovation incentives, beyond the harms to patient care already identified in the literature.

Viewing healthcare fragmentation through this innovation lens reveals not only new costs of our existing fragmented system, but also new forms of fragmentation which are relevant to the innovation framework. This Article articulates three forms of fragmentation and explains why each form has harmful impacts on innovation incentives. Scholars’ existing proposals to mitigate the problem of fragmentation are unlikely to fully address these innovation incentives problems, however. Using an innovation framework enables this Article to identify new potential reforms to address these innovation-related fragmentation biases, including seemingly unrelated proposals like Medicare for All.