Quantifying the Value of Personalized Medicines

Evidence from COX-2 Inhibitors

Published in: Forum for Health Economics and Policy, v. 16, no. 1, Apr. 2013, p. 1-22

Posted on RAND.org on January 01, 2013

by Neeraj Sood, Tomas Philipson, Peter J. Huckfeldt

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We develop a conceptual framework for estimating the value of personalized medicines. We show that personalizing medicines generates value from two sources. The first is a market-expansion effect by persons who initiate treatment due to reduced pre-treatment uncertainty about the effectiveness or side effects of treatment. The second is a market-contraction effect due to discontinuation of treatment by persons unresponsive to treatment. We apply the conceptual framework to evaluate the value of a predictive test to assess whether patients are at elevated risk for cardiac complications from COX-2 inhibitors. We find that this predictive test would yield an overall value to patients of about $16 billion per year or $1284 per likely patient.

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