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Competing with precision: incentives for developing predictive biomarker tests

Author

Listed:
  • Kurt R. Brekke

    (Norwegian School of Economics (NHH), Department of Economics)

  • Dag Morten Dalen

    (BI Norwegian Business School)

  • Odd Rune Straume

    (NIPE/Center for Research in Economics and Management, University of Minho, Portugal; and Department of Economics, University of Bergen, Norway)

Abstract

We study the incentives of drug producers to develop predictive biomarkers, taking into account strategic interaction between drug producers and health plans. For this purpose we develop a two-dimensional spatial framework that allows us to capture the informational role of biomarkers and their effects on price competition and treatment choices. Although biomarkers increase the information available to prescribers, we identify an anticompetitive effect on the prices set by producers of therapeutically substitutable drugs. We also find that better information about each patient´s most therapeutically appropriate drug does not necessarily lead to more efficient treatment outcomes.

Suggested Citation

  • Kurt R. Brekke & Dag Morten Dalen & Odd Rune Straume, 2022. "Competing with precision: incentives for developing predictive biomarker tests," NIPE Working Papers 3/2022, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:3/2022
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    File URL: http://repositorium.sdum.uminho.pt/handle/1822/76660
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    Cited by:

    1. is not listed on IDEAS
    2. Brekke, Kurt R. & Dalen, Dag Morten & Straume, Odd Rune, 2025. "Competition matters: uniform vs. indication-based pricing of pharmaceuticals," Discussion Paper Series in Economics 1/2025, Norwegian School of Economics, Department of Economics.
    3. Brekke, Kurt R. & Dalen, Dag Morten & Straume, Odd Rune, 2025. "Taking the competitor’s pill: When combination therapies enter pharmaceutical markets," Journal of Health Economics, Elsevier, vol. 101(C).

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    Keywords

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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