Economic Considerations in Medical Biotechnology

Abstract

New products, that are often more expensive than existing treatments, are launched every year to treat various diseases. Patients, providers, and payers desire better outcomes at lower, controllable and more predictable costs. In this chapter, we demonstrate, using examples, how the value of a new product can be attributed to different factors like improved efficacy, safety and cost-saving. Then we describe the various pharmacoeconomic analyses used to identify and evaluate the value of new therapies. We discuss the various costs that are considered in these analyses (direct, indirect, intangible, and opportunity costs), and different types of analyses that are often utilized (cost of illness, cost-minimization, cost-benefit, cost-effectiveness, and cost-utility analyses) along with examples. Payers and providers may use the results of such analyses to make formulary and coverage decisions. Finally, we discuss steps taken by some states in the US to control drug pricing and reimbursement, and the potential of recently launched biosimilars to lower health care costs spent on biological products.