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