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Forum for Health Economics & Policy

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Quantifying the Value of Personalized Medicines: Evidence from COX-2 Inhibitors

Neeraj Sood
  • Corresponding author
  • The University of Southern California, 3335 South Figueroa Street, University Park Campus, UGW-Unit A, Los Angeles, CA 90089, USA
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Tomas J. Philipson
  • Harris School of Public Policy, The University of Chicago, 1155 E, 60th Street, Chicago, IL 60637, USA
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Peter Huckfeldt
Published Online: 2013-04-09 | DOI: https://doi.org/10.1515/fhep-2013-0005


We develop a conceptual framework for estimating the value of personalized medicines. We show that personalizing medicines generates value from two sources. The first is a market-expansion effect by persons who initiate treatment due to reduced pre-treatment uncertainty about the effectiveness or side effects of treatment. The second is a market-contraction effect due to discontinuation of treatment by persons unresponsive to treatment. We apply the conceptual framework to evaluate the value of a predictive test to assess whether patients are at elevated risk for cardiac complications from COX-2 inhibitors. We find that this predictive test would yield an overall value to patients of about $16 billion per year or $1284 per likely patient.

Keywords: adverse events; diagnostics; innovation; personalized medicines; social value


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About the article

Corresponding author: Neeraj Sood, The University of Southern California, 3335 South Figueroa Street, University Park Campus, UGW-Unit A, Los Angeles, CA 90089, USA, Phone: +213 821 7949; Fax: +213 740 3460, e-mail:

Published Online: 2013-04-09

Published in Print: 2013-01-01

Risk-averse consumers will also benefit from reduction in uncertainty about treatment benefits. Similarly, reduced uncertainty about treatment response might also increase adherence to treatment.

In a sensitivity analysis, we limited the analysis to patients with two or more prescriptions in a year; the overall numbers fell, but the fractions Current and Potential were similar.

Using the MEPS Prescribed Medicines Component, the average price per 200 mg Celebrex pill in 2006 and 2007 was $3.36 and $3.38, respectively. The typical recommended dosage is one 200 mg pill per day. Aggregating over 365 days, this is approximately $1200 in annual spending on Celebrex.

Medicare reimbursement for the test is $49.56 (HCPC code 83880). http://www.cms.hhs.gov/ClinicalLabFeesched/02_clinlab.asp.


2/3 of patients are Current, 1/3 will be at increased risk, thus 2/9 of all patients will discontinue use. 1/3 of patients are Potential, 2/3 will not be at risk, thus 2/9 will initiate use, leading to no change in overall use.

Medicare reimbursement for the test is $49.56 (HCPC code 83880). http://www.cms.hhs.gov/ClinicalLabFeesched/02_clinlab.asp.

Citation Information: Forum for Health Economics and Policy, Volume 16, Issue 1, Pages 101–122, ISSN (Online) 1558-9544, ISSN (Print) 2194-6191, DOI: https://doi.org/10.1515/fhep-2013-0005.

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