Title: “Analyzing the effects of contract and structural design in health care supply chains”
The market introduction of new medical treatments oriented at treating chronic conditions (the largest component of health care spending) is affected by two key sources of uncertainty: demand incidence and efficacy of the treatment. The latter conditions in combination with the growing pressure to control health care spending further complicate the negotiation process between pharmaceutical manufacturers and health-payers (e.g., national governments, large insurance companies, HMO’s), often resulting in the delayed, limited, or inefficient introduction of innovative treatments. This has risen questions over the validity of price-only contracts, driving some manufacturers (particularly in the cardiovascular and oncology sectors) to explore more sophisticated agreements where risks are more efficiently shared.It is within this context that using a mathematical modeling approach, the dissertation aims to contribute to the health care industry and the academic literature by focusing on the following questions:
- In a vertically integrated system, how do access (i.e., which patients are eligible to be prescribed, and reimbursed for, a new drug) and service (i.e., how much capacity is built/how many drugs are purchased, in order to meet patient demand) levels interact as a function of the system’s priorities (i.e., social welfare vs. net utility maximizer) and constraints (i.e., absolute budget limits and cost-effectiveness restrictions)?
- In a manufacturer-health payer system, what changes as the selling price is exogenously (vs. endogenously) set, and the manufacturer is (vs. isn’t) willing to share some of the risks associated with demand and health outcomes?
- How does the decision of segmenting vs. consolidating the design/distribution channel for a drug with multiple therapeutic indications reflect on the service level and the incentives for innovation effort?
- What is the effect of all the above on: pharmaceutical manufacturer’s profits, health-payer’s expenditures, and patient welfare?
Gerardo Pelayo defending his Doctoral Thesis