HM820 - Class 5 (Producers Decisions) Flashcards
What is Dynamic Efficiency
Incentivizing pharmaceutical innovation - basically dangling a carrot in front of pharma that there are profits down the road.
Examples: Patents, grants, advanced market commitments
What is static efficiency
Making sure there are low prices for patients today. Prices staying low.
What is third-degree price discrimination:
different prices by GROUP
What would a pharmaceutical company prefer to develop: a treatment or a preventive?
Treatment
Can pharma companies price discriminate based on risk of contracting a disease?
No!
When can pharma companies price discriminate?
Setting different prices by purchaser (country or PBM).
But prices cannot vary by disease, indication, genetic risk, etc.
Advanced Market Commitments
Agreement to purchase drugs ahead of time. A Dynamic Efficiency strategy
They are are an alternative to patents as a way to incentivize R&D.
Why are they needed? Michael Kremer describes a commitment problem: low-income countries cannot credibly commit to honoring certain patents.
What is the goal for Patent Buyouts
Boost static efficiency without harming dynamic efficiency.
A Mechanism for Encouraging Innovation
What are surrogate endpoints often used to accomplish in clinical trials
A way that FDA can facilitate faster drug approval for certain diseases?
A more immediate outcome in clinical trials. The FDA can sometimes approve drugs based not on mortality but on some surrogate endpoint
What is the Incremental Cost
Effectiveness equation
The difference in costs divided by the difference in effectiveness.
Ca - Cb / Ea - Eb = $ per QALY
The bottom is Qualy’s and the top is drug costs.
Why does the Kremer-Snyder model suggest that pharmaceutical companies prefer treatments over preventives? (Quiz Question)
Higher profit margins on preventives
Easier marketing strategies
Difficulty in price discrimination
Lower production costs
Faster FDA approval
Difficulty in price discrimination
All else equal, which of the following R&D projects would probably be most profitable? (Quiz Question)
A vaccine that would save millions of lives in very low-income countries
A drug that would prevent cancer from occurring
A drug that would treat early-stage cancer
A new antibiotic
A drug that would extend the lives of those suffering from late-stage cancer and about to die.
A drug that would extend the lives of those suffering from late-stage cancer and about to die.
