A Quality-Adjusted Price Index for Colorectal Cancer Drugs

Claudio Lucarelli and Sean Nicholson

No 15174, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The average price of treating a colorectal cancer patient with chemotherapy increased from about $100 in 1993 to $36,000 in 2005, due largely to the approval and widespread use of five new drugs between 1996 and 2004. We examine whether the substantial increase in spending has been worth it. Using discrete choice methods to estimate demand, we construct a price index for colorectal cancer drugs for each quarter between 1993 and 2005 that takes into consideration the quality (i.e., the efficacy and side effects in randomized clinical trials) of each drug on the market and the value that oncologists place on drug quality. A naive price index, which makes no adjustments for the changing attributes of drugs on the market, greatly overstates the true price increase. By contrast, a hedonic price index and two quality-adjusted price indices show that prices have actually remained fairly constant over this 13-year period, with slight increases or decreases depending on a model's assumptions.

JEL-codes: I11 L0 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-hea
Note: EH IO
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Citations: View citations in EconPapers (15)

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