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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
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    References listed on IDEAS

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    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

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    Cited by:

    1. 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.
    2. 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.

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    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

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