health economics & policy 2 nd edition james w. henderson chapter 12 technology in medicine...
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Health Economics & Health Economics & PolicyPolicy22ndnd Edition Edition
James W. HendersonJames W. Henderson
Chapter 12Chapter 12
Technology in MedicineTechnology in Medicine
Copyright 2002, South-Western, a division of Thomson Learning, James W. Henderson, Health Economics and Policy, 2e
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The Diffusion of New The Diffusion of New TechnologyTechnology
The economics of technological changeThe economics of technological change– Cost-increasing technological changeCost-increasing technological change– Cost-decreasing technological changeCost-decreasing technological change
Levels of technologyLevels of technology– Non-technologyNon-technology– Halfway technologyHalfway technology– High technologyHigh technology
Role of insurance in the diffusion of Role of insurance in the diffusion of technologytechnology
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High-cost MedicineHigh-cost Medicine
Heart diseaseHeart disease– AngioplastyAngioplasty– CABGSCABGS– Heart transplantationHeart transplantation
Infertility treatmentInfertility treatment– IUIIUI– IVFIVF– GIFTGIFT
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Organ TransplantationOrgan Transplantation
HistoryHistory Current policyCurrent policy Market for organsMarket for organs
– Supply and demand for organsSupply and demand for organs– Property rightsProperty rights
U.S. policy—required requestU.S. policy—required request Britain—contract in provision of organsBritain—contract in provision of organs Rest of Europe—presumed consentRest of Europe—presumed consent
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Number of U.S. Number of U.S. TransplantsTransplants
Year Kidney Pancreas Kidney/Pancreas
Liver Heart Lung Heart/Lung
1981 4,883 - - 26 62 0 51985 7,695 - - 602 719 2 301990 9,358 60 459 2,631 2,095 203 521995 10,954 103 915 3,819 2,344 870 691996 11,228 157 857 3,918 2,319 812 381997 11,536 193 845 4,005 2,266 925 631998 12,229 230 968 4,456 2,309 860 471999 12,400 358 933 4,586 2,160 873 48
Waiting List1 46,489 725 2,225 14,710 4,121 3,491 2321995 AverageBilled Price2 $92,700 $66,6005 - $280,200 $222,700 $265,100 $264,4003
Patientsurvival rate4
1-year (%) 3-year 5-year
95.3-97.75
88.9-94.681.8-91.0
95.588.784.2
93.888.082.7
87.879.274.2
85.876.969.8
76.058.144.2
59.751.441.7
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Cost of Transplant Cost of Transplant Surgery, 1990Surgery, 1990
Organ NumberTransplanted
Estimated
Cost1
(millions)
EstimatedAverage Cost
pertransplant
Number onWaiting List
EstimatedCost if DonorOrgans were
Available2
TotalEstimated
Cost(millions)
Kidney 9,433 $ 283.0 $ 30,000 17,689 $ 530.7 $ 813.7Heart 1,998 219.8 110,000 1,761 193.7 413.5Liver 2,534 582.8 230,000 1,082 248.9 831.7Heart/Lung 52 10.4 200,000 254 50.8 61.2Pancreas 529 21.2 40,000 432 17.3 38.5Lung 187 41.8 218,000 264 59.0 100.8
Total 14,733 $1,159.0 - 21,464 $1,100.4 $2,259.4Source: Organ Transplants, House Hearings, 1991.1. Number transplanted times average cost of the transplant procedure.2. Number on waiting list times average cost of the transplant procedure.
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The Pharmaceutical The Pharmaceutical IndustryIndustry
Structure of the industryStructure of the industry– Basic researchBasic research– Applied researchApplied research
R&D process in pharmaceuticalsR&D process in pharmaceuticals– PreclinicalPreclinical– 3 phases of human testing3 phases of human testing– FDA reviewFDA review– Animal testingAnimal testing
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Steps in Steps in Pharmaceutical R&DPharmaceutical R&D
Testing PhaseMeanPhase
Length(Years)
Pre-clinical 6.5Phase I 1.5Phase II 2.0Phase III 3.5FDA Review 1.5Animal Testing 3.0*Total Testing 15.0
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Regulating Drug PricesRegulating Drug Prices
The economics of drug pricingThe economics of drug pricing Price controls in the U.S. and Price controls in the U.S. and
abroadabroad– Danzon (1996)Danzon (1996)– Role of genericsRole of generics
Impact of price controls on new Impact of price controls on new drug developmentdrug development
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Summary and Summary and ConclusionsConclusions
Technological imperativeTechnological imperative Future of biotechnologyFuture of biotechnology