IDEAS home Printed from https://ideas.repec.org/a/kap/ijhcfe/v21y2021i1d10.1007_s10754-020-09290-2.html
   My bibliography  Save this article

Implementation of personalized medicine in a context of moral hazard and uncertainty about treatment efficacy

Author

Listed:
  • Stéphane Alcenat

    (Univ. Bourgogne Franche-Comté, CRESE EA3190)

  • François Maréchal

    (Univ. Bourgogne Franche-Comté, CRESE EA3190)

  • Florence Naegelen

    (Univ. Bourgogne Franche-Comté, CRESE EA3190)

Abstract

This paper analyzes the decision of a health authority to implement personalized medicine. We consider a model in which the health authority has three possibilities. It can apply either the same treatment (a standard or a new treatment) to the whole population or implement personalized medicine, i.e., use genetic information to offer the most suitable treatment to each patient. We first characterize the drug reimbursement contract of a firm producing a new treatment with a companion genetic test when the firm can undertake an effort to improve drug quality. Then, we determine the conditions under which personalized medicine should be implemented when this effort is observable and when it is not. Finally, we show how the unobservability of effort affects the conditions under which the health authority implements personalized medicine.

Suggested Citation

  • Stéphane Alcenat & François Maréchal & Florence Naegelen, 2021. "Implementation of personalized medicine in a context of moral hazard and uncertainty about treatment efficacy," International Journal of Health Economics and Management, Springer, vol. 21(1), pages 81-97, March.
    • Handle: RePEc:kap:ijhcfe:v:21:y:2021:i:1:d:10.1007_s10754-020-09290-2
    DOI: 10.1007/s10754-020-09290-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10754-020-09290-2
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10754-020-09290-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Patricia Danzon & Adrian Towse & Jorge Mestre‐Ferrandiz, 2015. "Value‐Based Differential Pricing: Efficient Prices for Drugs in a Global Context," Health Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 294-301, March.
    2. Maximilian Hatz & Katharina Schremser & Wolf Rogowski, 2014. "Is Individualized Medicine More Cost-Effective? A Systematic Review," PharmacoEconomics, Springer, vol. 32(5), pages 443-455, May.
    3. Pedro Pita Barros, 2011. "The simple economics of risk‐sharing agreements between the NHS and the pharmaceutical industry," Health Economics, John Wiley & Sons, Ltd., vol. 20(4), pages 461-470, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 22nd March 2021
      by Chris Sampson in The Academic Health Economists' Blog on 2021-03-22 12:00:01

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bardey, David & De Donder , Philippe & Zaporozhets , Vera, 2024. "Economic Incentives to Develop and to Use Diagnostic Tests a Literature Review," Documentos CEDE 21024, Universidad de los Andes, Facultad de Economía, CEDE.
    2. De Donder, Philippe & Bardey, David & Zaporozhets, Vera, 2024. "Economic Incentives to Develop and to Use Diagnostic Tests - A Literature Review," TSE Working Papers 24-1507, Toulouse School of Economics (TSE).
    3. Michel Mougeot & Florence Naegelen, 2022. "Incentives to implement personalized medicine under second‐best pricing," Health Economics, John Wiley & Sons, Ltd., vol. 31(11), pages 2411-2424, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Levaggi, Rosella, 2014. "Pricing schemes for new drugs: A welfare analysis," Social Science & Medicine, Elsevier, vol. 102(C), pages 69-73.
    2. Rosella Levaggi & Michele Moretto & Paolo Pertile, 2017. "The Dynamics of Pharmaceutical Regulation and R&D Investments," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(1), pages 121-141, February.
    3. Jobjörnsson, Sebastian & Forster, Martin & Pertile, Paolo & Burman, Carl-Fredrik, 2016. "Late-stage pharmaceutical R&D and pricing policies under two-stage regulation," Journal of Health Economics, Elsevier, vol. 50(C), pages 298-311.
    4. Hui Zhang & Tao Huang & Tao Yan, 2022. "A quantitative analysis of risk-sharing agreements with patient support programs for improving medication adherence," Health Care Management Science, Springer, vol. 25(2), pages 253-274, June.
    5. Yasuhiro Hagiwara & Takeru Shiroiwa, 2022. "Estimating Value-Based Price and Quantifying Uncertainty around It in Health Technology Assessment: Frequentist and Bayesian Approaches," Medical Decision Making, , vol. 42(5), pages 672-683, July.
    6. Simona Gamba & Paolo Pertile & Sabine Vogler, 2020. "The impact of managed entry agreements on pharmaceutical prices," Health Economics, John Wiley & Sons, Ltd., vol. 29(S1), pages 47-62, October.
    7. Suzanne Hill & Leslie Olson, 2014. "NICE, Social Values, and Balancing Objectivity and Equity," PharmacoEconomics, Springer, vol. 32(11), pages 1039-1041, November.
    8. Fernando Antonanzas & Carmelo Juárez-Castelló & Reyes Lorente & Roberto Rodríguez-Ibeas, 2019. "The Use of Risk-Sharing Contracts in Healthcare: Theoretical and Empirical Assessments," PharmacoEconomics, Springer, vol. 37(12), pages 1469-1483, December.
    9. Michael Drummond & Adrian Towse, 2019. "Is rate of return pricing a useful approach when value-based pricing is not appropriate?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(7), pages 945-948, September.
    10. Jose Martinez-Raga & Francisco Gonzalez-Saiz & Julian Oñate & Itziar Oyagüez & Eliazar Sabater & Miguel Casado, 2012. "Budgetary impact analysis of buprenorphine-naloxone combination (Suboxone ® ) in Spain," Health Economics Review, Springer, vol. 2(1), pages 1-9, December.
    11. Reza Mahjoub & Fredrik Ødegaard & Gregory S. Zaric, 2018. "Evaluation of a pharmaceutical risk‐sharing agreement when patients are screened for the probability of success," Health Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 15-25, January.
    12. Fernando Antoñanzas & Roberto Rodríguez-Ibeas & Carmelo A. Juárez-Castelló, 2018. "Personalized Medicine and Pay for Performance: Should Pharmaceutical Firms be Fully Penalized when Treatment Fails?," PharmacoEconomics, Springer, vol. 36(7), pages 733-743, July.
    13. Robert Terkola & Fernando Antoñanzas & Maarten Postma, 2017. "Economic evaluation of personalized medicine: a call for real-world data," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(9), pages 1065-1067, December.
    14. Ferrario, Alessandra & Kanavos, Panos, 2015. "Dealing with uncertainty and high prices of new medicines: A comparative analysis of the use of managed entry agreements in Belgium, England, the Netherlands and Sweden," Social Science & Medicine, Elsevier, vol. 124(C), pages 39-47.
    15. Elodie Adida, 2021. "Outcome-Based Pricing for New Pharmaceuticals via Rebates," Management Science, INFORMS, vol. 67(2), pages 892-913, February.
    16. A. Carletto & A. Cicchetti & S. Coretti & V. Moramarco & M. Ruggeri, 2019. "Money back guarantee? A cost–benefit framework of performance-based agreements (PBAs) for the reimbursement of pharmaceuticals," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(1), pages 89-101, March.
    17. Bardey, David & De Donder , Philippe & Zaporozhets , Vera, 2024. "The Health Technology Assessment Approach of The Economic Value of Diagnostic Test: A Literature Review," Documentos CEDE 21041, Universidad de los Andes, Facultad de Economía, CEDE.
    18. Barlow, Euan & Morton, Alec & Megiddo, Itamar & Colson, Abigail, 2022. "Optimal subscription models to pay for antibiotics," Social Science & Medicine, Elsevier, vol. 298(C).
    19. Gregory S. Zaric, 2016. "Cost Implications of Value-Based Pricing for Companion Diagnostic Tests in Precision Medicine," PharmacoEconomics, Springer, vol. 34(7), pages 635-644, July.
    20. Culyer, Anthony J., 2016. "Cost-effectiveness thresholds in health care: a bookshelf guide to their meaning and use," Health Economics, Policy and Law, Cambridge University Press, vol. 11(4), pages 415-432, October.

    More about this item

    Keywords

    Genetic information; Healthcare; Moral hazard; Optimal contracts; Personalized medicine; Pharmacoeconomics;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:ijhcfe:v:21:y:2021:i:1:d:10.1007_s10754-020-09290-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.