Implementation of personalized medicine in a context of moral hazard and uncertainty about treatment efficacy
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Implementation of personalized medicine in a context of moral hazard and uncertainty about treatment efficacy Stéphane Alcenat1 · François Maréchal1 · Florence Naegelen1 Received: 5 November 2019 / Accepted: 31 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
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. Keywords Genetic information · Healthcare · Moral hazard · Optimal contracts · Personalized medicine · Pharmacoeconomics JEL classification I11 · I18 · L51 · D86
Introduction The completion of the human genome project in 2003 to identify the whole human gene sequence and the potential application of predictive genetic information in medical decisions have raised much interest and are promising in terms of improving patients’ health. One of the main applications of predictive genetic information in medical decision-making We are very grateful to two anonymous referees and to the editor for helpful comments. The usual disclaimer applies. * François Maréchal francois.marechal@univ‑fcomte.fr Stéphane Alcenat [email protected]‑fcomte.fr Florence Naegelen florence.naegelen@univ‑fcomte.fr 1
Univ. Bourgogne Franche-Comté, CRESE EA3190, 25000 Besançon, France
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is the ability to identify patients who may be more responsive and/or exposed to the side effects of certain drugs before they are administered. This new medical approach is referred to as personalized medicine (hereafter PM), which uses a biomarker for selecting optimal therapies based on a patient’s genetic information. It requires new innovative treatments which may be very expensive and may expose patients to serious side effects in the absence of genetic testing. Oncology is one main field of application of PM. For example, there are diagnostic tests based on genetics (Oncotype DX and MammaPrint) that distinguish women with breast cancer in terms of risks categories for which there are specific treatments. Breast-cancer sufferers with an overexpression of HER2 may receive chemotherapy plus herceptin (tratuzumab) instead of chemotherapy alone, thus reducing the recurrence tumors (Hornberger et al. 2005). There are also several drugs available to treat colorectal cancer whose ef
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