Regulated Pricing Decisions and Diagnostic Test Choices in Personalized Medicine: Navigating the Implications Within Legal Frameworks
Zibin Cui,1,* Xiangdong Liu,2,* Zehua Feng,3 Zhengzong Huang4 1School of Management, Guangdong University of Technology, Guangzhou, People’s Republic of China; 2Faculty of Humanities and Social Sciences, Macao Polytechnic University, Macao, People’s Republic of China; 3School of Law,...
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Dove Medical Press
2024-11-01
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| Series: | Risk Management and Healthcare Policy |
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| author | Cui Z Liu X Feng Z Huang Z |
| author_facet | Cui Z Liu X Feng Z Huang Z |
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| description | Zibin Cui,1,* Xiangdong Liu,2,* Zehua Feng,3 Zhengzong Huang4 1School of Management, Guangdong University of Technology, Guangzhou, People’s Republic of China; 2Faculty of Humanities and Social Sciences, Macao Polytechnic University, Macao, People’s Republic of China; 3School of Law, Guangdong University of Technology, Guangzhou, People’s Republic of China; 4College of Humanities and Social Science, Shenzhen Technology University, Shenzhen, People’s Republic of China*These authors contributed equally to this workCorrespondence: Zehua Feng; Zhengzong Huang, Email zehuafeng@gdut.edu.cn; huangzhengzong@sztu.edu.cnBackground: The emerging risk of personalized medicine is driving drug manufacturers to seek collaborations with advanced diagnostic firms, aiming to improve detection and treatment outcomes. However, the government’s regulated pricing in personalized medicine affects manufacturers’ strategic decisions, particularly regarding the selection of diagnostic partners. In this context, this study investigates whether the government should regulate the price of personalized medicine and how the government’s regulated pricing decisions affect drug manufacturers’ diagnostic test choices.Methods: A stylized analytical model was developed, employing game-theoretic analysis. Numerical studies are also conducted to validate our results.Results: The study reveals that in the absence of the government’s regulated pricing, drug manufacturers benefit from partnering with high-level diagnostic firms, enhancing consumer surplus and social welfare. However, when the government regulates pricing, the choice of partnering with a high-level diagnostic firm depends on specific conditions, such as low patient sensitivity to treatment failure and a low unit cost coefficient of diagnostic effort. The government’s decision to regulate prices is influenced by three key parameters: patients’ sensitivity to treatment failure, the unit cost coefficient of the diagnostic test effort, and the proportion of the price of specialized drugs in the regulated pricing.Conclusions: The findings underscore the importance of legal frameworks in the personalized medicine industry. The absence of the government’s regulated pricing incentivizes collaborations with high-level diagnostic firms, enhancing consumer surplus and social welfare. However, government intervention in pricing makes such decisions contingent on specific conditions, requiring nuanced regulatory policies that balance the interests of patients, manufacturers, and diagnostic firms.Keywords: personalized medicine, partnership, government, regulated pricing, game theory |
| format | Article |
| id | doaj-art-86cc2d98b6cc4fc587c806bb8a881998 |
| institution | Kabale University |
| issn | 1179-1594 |
| language | English |
| publishDate | 2024-11-01 |
| publisher | Dove Medical Press |
| record_format | Article |
| series | Risk Management and Healthcare Policy |
| spelling | doaj-art-86cc2d98b6cc4fc587c806bb8a8819982024-11-10T17:18:38ZengDove Medical PressRisk Management and Healthcare Policy1179-15942024-11-01Volume 172763277697149Regulated Pricing Decisions and Diagnostic Test Choices in Personalized Medicine: Navigating the Implications Within Legal FrameworksCui ZLiu XFeng ZHuang ZZibin Cui,1,* Xiangdong Liu,2,* Zehua Feng,3 Zhengzong Huang4 1School of Management, Guangdong University of Technology, Guangzhou, People’s Republic of China; 2Faculty of Humanities and Social Sciences, Macao Polytechnic University, Macao, People’s Republic of China; 3School of Law, Guangdong University of Technology, Guangzhou, People’s Republic of China; 4College of Humanities and Social Science, Shenzhen Technology University, Shenzhen, People’s Republic of China*These authors contributed equally to this workCorrespondence: Zehua Feng; Zhengzong Huang, Email zehuafeng@gdut.edu.cn; huangzhengzong@sztu.edu.cnBackground: The emerging risk of personalized medicine is driving drug manufacturers to seek collaborations with advanced diagnostic firms, aiming to improve detection and treatment outcomes. However, the government’s regulated pricing in personalized medicine affects manufacturers’ strategic decisions, particularly regarding the selection of diagnostic partners. In this context, this study investigates whether the government should regulate the price of personalized medicine and how the government’s regulated pricing decisions affect drug manufacturers’ diagnostic test choices.Methods: A stylized analytical model was developed, employing game-theoretic analysis. Numerical studies are also conducted to validate our results.Results: The study reveals that in the absence of the government’s regulated pricing, drug manufacturers benefit from partnering with high-level diagnostic firms, enhancing consumer surplus and social welfare. However, when the government regulates pricing, the choice of partnering with a high-level diagnostic firm depends on specific conditions, such as low patient sensitivity to treatment failure and a low unit cost coefficient of diagnostic effort. The government’s decision to regulate prices is influenced by three key parameters: patients’ sensitivity to treatment failure, the unit cost coefficient of the diagnostic test effort, and the proportion of the price of specialized drugs in the regulated pricing.Conclusions: The findings underscore the importance of legal frameworks in the personalized medicine industry. The absence of the government’s regulated pricing incentivizes collaborations with high-level diagnostic firms, enhancing consumer surplus and social welfare. However, government intervention in pricing makes such decisions contingent on specific conditions, requiring nuanced regulatory policies that balance the interests of patients, manufacturers, and diagnostic firms.Keywords: personalized medicine, partnership, government, regulated pricing, game theoryhttps://www.dovepress.com/regulated-pricing-decisions-and-diagnostic-test-choices-in-personalize-peer-reviewed-fulltext-article-RMHPpersonalized medicinepartnershipgovernmentregulated pricinggame theory |
| spellingShingle | Cui Z Liu X Feng Z Huang Z Regulated Pricing Decisions and Diagnostic Test Choices in Personalized Medicine: Navigating the Implications Within Legal Frameworks Risk Management and Healthcare Policy personalized medicine partnership government regulated pricing game theory |
| title | Regulated Pricing Decisions and Diagnostic Test Choices in Personalized Medicine: Navigating the Implications Within Legal Frameworks |
| title_full | Regulated Pricing Decisions and Diagnostic Test Choices in Personalized Medicine: Navigating the Implications Within Legal Frameworks |
| title_fullStr | Regulated Pricing Decisions and Diagnostic Test Choices in Personalized Medicine: Navigating the Implications Within Legal Frameworks |
| title_full_unstemmed | Regulated Pricing Decisions and Diagnostic Test Choices in Personalized Medicine: Navigating the Implications Within Legal Frameworks |
| title_short | Regulated Pricing Decisions and Diagnostic Test Choices in Personalized Medicine: Navigating the Implications Within Legal Frameworks |
| title_sort | regulated pricing decisions and diagnostic test choices in personalized medicine navigating the implications within legal frameworks |
| topic | personalized medicine partnership government regulated pricing game theory |
| url | https://www.dovepress.com/regulated-pricing-decisions-and-diagnostic-test-choices-in-personalize-peer-reviewed-fulltext-article-RMHP |
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