Working Paper: NBER ID: w24020
Authors: Ernst R. Berndt; Mark R. Trusheim
Abstract: Precision medicines inherently fragment treatment populations, generating small-population markets, creating high-priced "niche busters" rather than broadly prescribed "blockbusters". It is plausible to expect that small markets will attract limited entry in which a small number of interdependent differentiated product oligopolists will compete, each possessing market power. Multiple precision medicine market situations now resemble game theory constructs such as the prisoners' dilemma and Bertrand competition. The examples often involve drug developer choices created by setting the cut-off value for the companion diagnostics to define the precision medicine market niches and their payoffs. Precision medicine game situations may also involve payers and patients who attempt to change the game to their advantage or whose induced behaviors alter the payoffs for the developers. The variety of games may predictably array themselves across the lifecycle of each precision medicine indication niche and so may become linked into a sequentially evolving meta-game. We hypothesize that certain precision medicine areas such as inflammatory diseases are becoming complex simultaneous multi-games in which distinct precision medicine niches compete. Those players that learn the most rapidly and apply those learnings the most asymmetrically will be advantaged in this ongoing information pharms race.
Keywords: precision medicine; game theory; companion diagnostics; market dynamics; oligopoly
JEL Codes: I11; L13; L65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| choice of companion diagnostic cutoff values (C52) | observed efficacy of treatments (C90) |
| observed efficacy of treatments (C90) | pricing and market share (L11) |
| choice of companion diagnostic cutoff values (C52) | pricing and market share (L11) |
| introduction of precision medicine (I10) | patient adherence and treatment dynamics (C22) |
| improved confidence in treatment efficacy (C22) | market size (L25) |