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No shock, but it surely’s excessive. Chandra, Coile and Mommaerts (2023) write:
The common price of AD [Alzheimer’s Disease] drug improvement is estimated (based mostly on a number of assumptions) to be $5.6 billion, largely as a result of excessive preclinical and part 3 trial prices (Cummings, Reiber, and Kumar 2018). This quantity enormously exceeds R&D prices for different medicine, for which the median price of improvement is estimated to be $2.5 billion (DiMasi, Grabowski, and Hansen 2016). One purpose for the excessive price is the lengthy trial time wanted to see outcomes, the typical size of AD drug improvement being 13 years.
This JEL paper has plenty of different attention-grabbing factors surrounding the economics of AD. For occasion, why is Alzheimer’s Disease notably related for economists? The article notes:
- Patients who’re cognitively challenged sufferers could not be capable of make optimum selections about well being or funds,
- AD may alter one’s desire construction in unforeseeable methods
- As the etiology of AD is poorly understood and drug improvement has an particularly lengthy timeline, incentives to innovate by personal pharmaceutical firms could also be notably misaligned with social incentives
The article additionally notes plenty of AD market failures.
- Basic science funding is helpful for resolving ongoing ambiguity about AD’s and validating surrogate endpoint as this information is a public good that can be utilized by personal companies to develop particular merchandise. While personal companies might have interaction on this analysis, in inevitable can be underprovided for the reason that wouldn’t be capable of seize all societal worth from such data creation
- Patents usually clear up the second market failure that R&D prices are very excessive whereas drug manufacturing prices are a lot decrease. Patients present the “pull” incentives wanted to justify long-term R&D investments
- Another concern is that the US market performs a dispropriationate position in incentivizing AD drug improvement. The authors write that “…the market for medicines in other nations pales against that of the United States; Australia’s market is 3 percent, Canada’s 5 percent, and Germany’s about 10 percent of the US market…suggesting a critical role for US incentives to induce innovation regardless of where companies are based.”
The article additionally cites the well-known concern that industrial payers could not be capable of internalize the advantages of any AD therapy.
…a non-public insurer could not need to cowl an costly however efficient early-stage intervention for AD (e.g., diagnostic testing or a preventive medication) as a result of the later-stage financial savings accrue to Medicare or Medicaid.
Another concern is that nursing dwelling and residential well being care are costly:
In 2019, nursing dwelling care averaged $90,000–100,000 per 12 months and formal dwelling care price round $23 per hour, or roughly $53,000 yearly for 44 hours per week
Caregiver prices for casual, at-home care space additionally giant however these prices are born by the caregivers themselves relatively than governments or industrial payers and thus typically ignored. One examine (Hurd et al. 2013) discovered that the casual caregiver burden was $148 billion per 12 months, much like the price of formal caregiving.
There are many extra particulars within the paper as effectively together with market failures with respect to non-public long-term care insurance coverage, the affect of AD on monetary decisionmaking, and future analysis subjects on the economics of AD. You can learn the entire article right here.
