No shock, but it surely’s excessive. Chandra, Coile and Mommaerts (2023) write:
The common value of AD [Alzheimer’s Disease] drug improvement is estimated (primarily based on a number of assumptions) to be $5.6 billion, largely attributable to excessive preclinical and part 3 trial prices (Cummings, Reiber, and Kumar 2018). This quantity significantly exceeds R&D prices for different medication, for which the median value of improvement 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 improvement being 13 years.
This JEL paper has plenty of different fascinating 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 might not have the ability to make optimum choices about well being or funds,
- AD may alter one’s desire construction in unforeseeable methods
- Because the etiology of AD is poorly understood and drug improvement has an particularly lengthy timeline, incentives to innovate by non-public pharmaceutical corporations could also be notably misaligned with social incentives
The article additionally notes plenty of AD market failures.
- Fundamental science funding is beneficial for resolving ongoing ambiguity about AD’s and validating surrogate endpoint as this data is a public good that can be utilized by non-public companies to develop particular merchandise. Whereas non-public companies might interact on this analysis, in inevitable could be underprovided for the reason that wouldn’t have the ability to seize all societal worth from such information creation
- Patents typically resolve 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 improvement. The authors write that “…the marketplace for medicines in different nations pales towards that of the USA; Australia’s market is 3 p.c, Canada’s 5 p.c, and Germany’s about 10 p.c of the US market…suggesting a important function for US incentives to induce innovation no matter the place corporations are primarily based.”
The article additionally cites the well-known concern that industrial payers might not have the ability to internalize the advantages of any AD therapy.
…a non-public insurer might 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 residence and residential well being care are costly:
In 2019, nursing residence care averaged $90,000–100,000 per 12 months and formal residence 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 typically ignored. One examine (Hurd et al. 2013) discovered that the casual caregiver burden was $148 billion per 12 months, just like the price of formal caregiving.
There are lots of extra particulars within the paper as properly together with market failures with respect to non-public long-term care insurance coverage, the influence of AD on monetary decisionmaking, and future analysis subjects on the economics of AD. You possibly can learn the entire article right here.