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Implementation of personalized medicine in a context of moral hazard and uncertainty about treatment efficacy

Stéphane Alcenat (), François Maréchal () and Florence Naegelen ()
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Stéphane Alcenat: Univ. Bourgogne Franche-Comté, CRESE EA3190
François Maréchal: Univ. Bourgogne Franche-Comté, CRESE EA3190
Florence Naegelen: Univ. Bourgogne Franche-Comté, CRESE EA3190

International Journal of Health Economics and Management, 2021, vol. 21, issue 1, No 4, 97 pages

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: I11 I18 L51 D86 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10754-020-09290-2

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