Towse and Garrison provide a clear picture of the economics of using drugs with companion diagnostics (precision medicine) in the Journal of Cancer Policy. Three main issues arise:
A. Reducing or avoiding the adverse effects associated with treatment (including the medical and nonmedical costs of man-aging them).But there are also psychological gains (difficult to estimate) related to the value of knowing:
B. Reducing or avoiding time delays in selecting the most appropriate intervention
C. Enabling a treatment effective only in a small fraction of the population to be made available or more widely available.
1. Reduction in uncertainty reflecting the idea that a companion diagnostic, by increasing the certainty of a patient’s response to a medicine—would be more valuable to individual patients and hence they (or their payer) would be willing to pay more for the combination. Furthermore, as noted above, at the population level, greater certainty could lead to greater uptake and improved compliance.The authors back value based pricing for drugs and companion diagnostics, just at the same time that The New York Times casts some shadows over this option.
2. The value of hope is the notion that in some circumstancesindividuals become risk-seekers in the sense that they would be willing to pay more for access to a technology with a long tail indicating that some patients have a much longer survival time than current therapy, even though the average life expectancy may be no greater, or even less, than standard therapy.
3. Real option value for which the best example is that if a treatment can extend life, this opens up possibilities for individ-uals to benefit from future advances in medicine. Hence, they(or their payer) should be willing to pay more than simply theamount they would pay for a gain in life expectancy alone, ascalculated under conventional methods, because it provides the option of benefiting from further treatments.
4. Insurance value is related to the idea that insurance tocover innovations provides peace of mind, not just by protectingagainst catastrophic financial loss but also by protecting fromcatastrophic health loss. The focus is usually only on financial protection, in the form on an Extended Cost-effectiveness Analysis. Lakdawalla et al. point out that greater value comesfrom the reassurance value of knowing of the existence of a treatment, or even of incentives to develop such a treatment.
5. Scientific spillovers arise because the benefit of scientificadvances cannot be entirely appropriated by those making them. Improving knowledge creates opportunities for additional innovation by others. For example, proving that a particular agentworks on a hypothesized pathway in a particular cancer means that the general understanding of that cancer is enhanced and thus further research can explore other pathways in the same cancer. This creates a commons problem with potential underinvestment, implying that patients may wish to reward developerswith higher prices to encourage knowledge generation.
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