Dynamic Efficiency and Pricing of Innovations with Insurance: The Case for Gene Therapies

Anirban Basu

No 32480, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I demonstrate that to achieve dynamic efficiency, the optimal share of total surplus that a social payer should transfer to an innovating industry for a current asset depends on the marginal product of investment and the share of profits invested by the industry on the current asset and not on returns from future innovations. This insight arises from using a dynamic multi-period model of optimal transfers rather than a static two-period model with one optimal transfer, as used in the literature. I delve into the implications for alternative pricing of healthcare innovations - value-based prices using cost-effectiveness analysis, monopoly prices under the social demand curve, and monopoly profit preserving prices under insurance – for surplus appropriation by the innovating industry. I also explore how alternative financing mechanisms used by social payers and the demand uncertainty that innovators face impact this appropriation share. I illustrate these concepts with a substantive example of pricing gene therapy for sickle cell disease in the United States

JEL-codes: I11 I13 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-com, nep-hea and nep-mac
Note: EH
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32480.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32480

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32480
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().