Simple economics of vaccination: public policies and incentives.

This paper focuses on the economics of vaccination and, more specifically, analyzes the vaccination decision of individuals using a game-theoretic model combined with an epidemiological SIR model that reproduces the infection dynamics of a generic disease. We characterize the equilibrium individual vaccination rate, and we show that it is below the rate compatible with herd immunity due to the existence of externalities that individuals do not internalize when they decide on vaccination. In addition, we analyze three public policies consisting of informational campaigns to reduce the disutility of vaccination, monetary payments to vaccinated individuals and measures to increase the disutility of non-vaccination. If the public authority uses only one type of policy, herd immunity is not necessarily achieved unless monetary incentives are used. When the public authority is not limited to use only one policy, we find that the optimal public policy should consist only of informational campaigns if they are sufficiently effective, or a combination of informational campaigns and monetary incentives otherwise. Surprisingly, the requirement of vaccine passports or other restrictions on the non-vaccinated are not desirable.

Does diagnostic testing always decrease antibiotics prescriptions?

BACKGROUND: Empiric prescription to treat infectious diseases in community care settings has caused antibiotics to be overprescribed, increasing antimicrobial resistance (AMR). To reduce antibiotics prescription, the use of point-of-care diagnostic testing (POCT) has been suggested. METHODS: We present a stylized static theoretical economic model to analyse whether the use of POCT always decreases antibiotics prescriptions. We consider the interaction of a group of doctors who differ in their level of concern about AMR when prescribing with a firm selling a POCT, and we characterize the price set by the manufacturer and doctors' decision to employ POCT. RESULTS: We found that the number of antibiotics prescriptions is not always lower. This result depends on the distribution of the doctors' concern about AMR as there is a proportion of doctors who use POCT and then prescribe antibiotics while other doctors change their prescribing behaviour after using POCT and stop giving antibiotics to patients who do not benefit from them. When the proportion of patients who need antibiotic treatment is higher than the proportion of doctors who use POCT and stop prescribing unnecessary antibiotics, the number of antibiotics prescriptions is larger. Our analysis also shows that the use of POCT improves health outcomes. CONCLUSIONS: We should be very careful when we assert that POCT reduces antibiotics prescriptions as there are situations in which the opposite effect occurs.

Using point-of-care diagnostic testing for improved antibiotic prescription: an economic model.

BACKGROUND: Antibiotics have been overprescribed to treat infectious diseases and have generated antimicrobial resistances that reduce their effectiveness. Following the rationale behind the new paradigm of personalized medicine, point-of-care diagnostic testing (POCT) has been proposed to improve the quality of antibiotic prescription with the aim of reducing antimicrobial resistances. METHODS: In order to understand whether this recommendation is valid, we create a theoretical economic model to determine under which conditions the expected benefits of using POCT to guide antibiotic prescription are greater than for empiric prescription, where we define the expected benefits as the difference between the economic value of health and the costs of the treatment. We consider the interaction of a group of physicians who express differing levels of uncertainty when prescribing with a firm selling a diagnostic device, and analyse the firm's pricing policy and the physicians' prescribing decisions. We allow the physicians to internalize the external costs of antimicrobial resistances. RESULTS: We find that the use of POCT reduces the number of antibiotic prescriptions. The reduction in antibiotic prescriptions is higher when physicians internalise the costs of antimicrobial resistances. Physicians with relatively high levels of uncertainty use POCT as they are uncertain about the right treatment for a large proportion of patients. Physicians with low levels of uncertainty prefer to prescribe empirically. The segmentation in the population of physicians regarding the uptake of POCT depends on the distribution of levels of uncertainty across physicians. For each test, the firm charges the marginal production costs of the inputs needed to administer the test, and makes its profit from the sales of the testing devices. CONCLUSIONS: From a theoretical perspective, our findings corroborate the fact that POCT improve the quality of antibiotic prescription and reduce the number of prescriptions. Nevertheless, their use is not always recommended as empiric therapy may be preferred when uncertainty is low.

Pre-approval incentives to promote adoption of personalized medicine: a theoretical approach.

BACKGROUND: Currently, personalised medicine is becoming more frequently used and many drug companies are including this strategy to gain market access for very specialized therapies. In this article, in order to understand the relationships between the health authority and the drug company when deciding upon the implementation of personalized medicines, we take a theoretical perspective to model it when the price and reimbursement policy follows a pay-for-performance scheme. During the development of a new drug, the firm must decide whether to generate additional knowledge by investing in additional resources to stratify the target population based on a biomarker or directly apply for marketing authorization for the new treatment without information on the characteristics of patients who could respond to it. In this context, we assume that the pricing policy is set by the health authority, and then we characterize the pricing and investment decisions contingent on the rate of response to the treatment. RESULTS: We find that the price when the firm carries out R&D leading to the personalized treatments is not necessarily higher than the price if the firm does not carry out the R&D investment. When the rate of response to the treatment is too low, then the new drug is not marketed. If the rate of response is too high, personalized medicine is not implemented. For intermediate values of the rate of response, the adoption of personalized medicine may occur if the investment costs are sufficiently low; otherwise, the treatment is given to all patients without additional information on their characteristics. The higher the quality of the genetic test (in terms of its sensitivity and specificity), the wider the interval for the values of the proportional responders for which personalized medicine may be implemented. CONCLUSIONS: Our findings show that pre-approval incentives (prices) to promote the personalized treatments depend on the specific characteristics of the disease and the efficacy of the treatment. The model gives an intuitive idea about what to expect in terms of price incentives when the possibility of personalizing treatments becomes a strategic decision for the stakeholders.

Endogenous versus exogenous generic reference pricing for pharmaceuticals.

In this paper we carry out a vertical differentiation duopoly model applied to pharmaceutical markets to analyze how endogenous and exogenous generic reference pricing influence competition between generic and branded drugs producers. Unlike the literature, we characterize for the exogenous case the equilibrium prices for all feasible relevant reference prices. Competition is enhanced after the introduction of a reference pricing system. We also compare both reference pricing systems on welfare grounds, assuming two different objective functions for health authorities: (i) standard social welfare and (ii) gross consumer surplus net of total pharmaceutical expenditures. We show that regardless of the objective function, health authorities will never choose endogenous reference pricing. When health authorities are paternalistic, the exogenous reference price that maximizes standard social welfare is such that the price of the generic drug is the reference price while the price of the branded drug is higher than the reference price. When health authorities are not paternalistic, the optimal exogenous reference price is such that the price of the branded drug is the reference price while the price of the generic drug is lower than the reference price.

Some economics on personalized and predictive medicine.

OBJECTIVE: To contribute to the theoretical literature on personalized medicine, analyzing and integrating in an economic model, the decision a health authority faces when it must decide on the implementation of personalized medicine in a context of uncertainty. METHODS: We carry out a stylized model to analyze the decision health authorities face when they do not have perfect information about the best treatment for a population of patients with a given disease. The health authorities decide whether to use a test to match patients with treatments (personalized medicine) to maximize health outcomes. Our model characterizes the situations under which personalized medicine dominates the alternative option of business-as-usual (treatment without previous test). We apply the model to the KRAS test for colorectal cancer, the PCA3 test for prostate cancer and the PCR test for the X-fragile syndrome, to illustrate how the parameters and variables of the model interact. RESULTS: Implementation of personalized medicine requires, as a necessary condition, having some tests with high discriminatory power. This is not a sufficient condition and expected health outcomes must be taken into account to make a decision. When the specificity and the sensitivity of the test are low, the health authority prefers to apply a treatment to all patients without using the test. When both characteristic of the test are high, the health authorities prefer to personalize the treatments when expected health outcomes are better than those under the standard treatment. When we applied the model to the three aforementioned tests, the results illustrate how decisions are adopted in real world. CONCLUSIONS: Although promising, the use of personalized medicine is still under scrutiny as there are important issues demanding a response. Personalized medicine may have an impact in the drug development processes, and contribute to the efficiency and effectiveness of health care delivery. Nevertheless, more accurate statistical and economic information related to tests results and treatment costs as well as additional medical information on the efficacy of the treatments are needed to adopt decisions that incorporate economic rationality.

Genetic testing in the European Union: does economic evaluation matter?

OBJECTIVE: We review the published economic evaluation studies applied to genetic technologies in the EU to know the main diseases addressed by these studies, the ways the studies were conducted and to assess the efficiency of these new technologies. The final aim of this review was to understand the possibilities of the economic evaluations performed up to date as a tool to contribute to decision making in this area. METHODS: We have reviewed a set of articles found in several databases until March 2010. Literature searches were made in the following databases: PubMed; Euronheed; Centre for Reviews and Dissemination of the University of York-Health Technology Assessment, Database of Abstracts of Reviews of Effects, NHS Economic Evaluation Database; and Scopus. The algorithm was "(screening or diagnosis) and genetic and (cost or economic) and (country EU27)". We included studies if they met the following criteria: (1) a genetic technology was analysed; (2) human DNA must be tested for; (3) the analysis was a real economic evaluation or a cost study, and (4) the articles had to be related to any EU Member State. RESULTS: We initially found 3,559 papers on genetic testing but only 92 articles of economic analysis referred to a wide range of genetic diseases matched the inclusion criteria. The most studied diseases were as follows: cystic fibrosis (12), breast and ovarian cancer (8), hereditary hemochromatosis (6), Down's syndrome (7), colorectal cancer (5), familial hypercholesterolaemia (5), prostate cancer (4), and thrombophilia (4). Genetic tests were mostly used for screening purposes, and cost-effectiveness analysis is the most common type of economic study. The analysed gene technologies are deemed to be efficient for some specific population groups and screening algorithms according to the values of their cost-effectiveness ratios that were below the commonly accepted threshold of 30,000€. CONCLUSIONS: Economic evaluation of genetic technologies matters but the number of published studies is still rather low as to be widely used for most of the decisions in different jurisdictions across the EU. Further, the decision bodies across EU27 are fragmented and the responsibilities are located at different levels of the decision process for what it is difficult to find out whether a given decision on genetic tests was somehow supported by the economic evaluation results.