TY  - JOUR
AU  - Pauly, Mark V
TI  - Cost Sharing in Insurance Coverage for Precision Medicine
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 24095
PY  - 2017
Y2  - December 2017
DO  - 10.3386/w24095
UR  - http://www.nber.org/papers/w24095
L1  - http://www.nber.org/papers/w24095.pdf
N1  - Author contact info:
Mark Pauly
Health Care Management Department
The Wharton School
University of Pennsylvania
208 Colonial Penn Center
3641 Locust Walk
Philadelphia, PA  19104-6218
E-Mail: pauly@wharton.upenn.edu
M1  - published as Mark V. Pauly. "Cost Sharing in Insurance Coverage for Precision Medicine," in Ernst R. Berndt, Dana P. Goldman, and John W. Rowe, editor, "Economic Dimensions of Personalized and Precision Medicine" University of Chicago Press (2019)

M3  - presented at "Economic Dimensions of Personalized and Precision Medicine", September 13-14, 2017
AB  - This paper describes current pattern of insurance coverage for precision medicines and, especially, companion diagnostics and explores what coverage would improve efficiency.  We find that currently coverage is common for tests and treatments with clinical acceptance used at high volumes but is haphazard across both private insurers and Medicare for precision medicines in general.  Analysis of the case of homogenous patient preferences finds that discovery and use of the test that converts an ordinary drug into a precision drug can either increase or decrease total spending, and might call for full or no coverage of test and treatments.  Heterogeneity in marginal benefits from testing and treatment can call for partial coverage.  Finally, varying threshold levels for diagnostic test results can lead to a demand curve to test and treatment that calls for partial cost sharing.  Numerical examples and case studies of several test-treatment combinations illustrate these points.
ER  -