Future biomedical advances may shift cost structures
5 reported
A recent analysis suggests that future biomedical advances, particularly those involving personalized genome-based treatments, may have higher marginal costs than current pharmaceuticals. Most drugs today involve high upfront costs for discovery and testing but very low marginal costs for production. This cost structure benefits health systems like Britain’s, which pay lower prices and can get a relatively good deal through price discrimination. However, if future treatments are personalized based on individual genome sequencing, they are likely to have relatively high marginal costs. In that scenario, the British approach to health care procurement and pricing would work less well. The analysis notes that well-capitalized, “overspending” systems such as the United States would have an easier time adjusting. The article describes this as a neglected trend that contradicts earlier elite pronouncements about health care economics.
What’s reported
Most pharmaceuticals have high upfront costs and very low marginal costs.
The British health system benefits from this cost structure by paying lower prices through price discrimination.
Future biomedical advances may involve personalized genome-based treatments with relatively high marginal costs.
The British approach to health care procurement and pricing would work less well in that scenario.
Well-capitalized systems like the United States would have an easier time adjusting.
Sources: marginalrevolution.com
