1. Health Economics & Policy 3 rd Edition James W. Henderson Chapter 13 Technology in Medicine

2. The Diffusion of New Technology l The economics of technological change –Cost-increasing technological change –Cost-decreasing technological change l Levels of technology –Non-technology –Halfway technology –High technology l Role of insurance in the diffusion of technology

3. Effect of Technological Change on Cost

4. High-cost Medicine l Heart disease –Angioplasty –CABGS –Heart transplantation l Infertility treatment –IUI –IVF –GIFT

5. Organ Transplantation l History l Current policy l Market for organs –Supply and demand for organs –Property rights l U.S. policy—required request l Britain—contract in provision of organs l Rest of Europe—presumed consent

6. Number of U.S. Transplants

7. Cost of Transplant Surgery, 1990

8. Market for Kidneys, 1998

9. The Pharmaceutical Industry l Structure of the industry –Basic research – supported by NIH labs and grants –Applied research – looking to development of marketable drug –284 new drug approvals from 1990-99, 265 originated from industry, 9 from government, and 10 from academia

10. Risk in Development l DiMasi et al. (2003) examined 538 investigational drugs first tested in humans between 1983-94 –Approved for marketing (84) –Submitted to FDA, but not approved (9) –Submitted to FDA, but abandoned (5) –Human testing terminated < 4 years (227) –Human testing terminated > 4 years (172) –Human testing active 3/31/01 (43)

11. R&D Process in Pharmaceuticals –Preclinical –Clinical l Phase I – health volunteers to study safety profile, including toxicity, absorption, etc. l Phase II – controlled placebo studies looking at efficacy and safety l Phase III – large scale testing looking at effectiveness and safety –Animal testing – long-term toxicity experiments during clinical phase –FDA review

12. Steps in Pharmaceutical R&D

13. Regulating Drug Prices l The economics of drug pricing l Price controls in the U.S. and abroad –Danzon (1996) –Role of generics l Impact of price controls on new drug development

14. Research v. Promotion

15. Summary and Conclusions l Technological imperative l Future of biotechnology