New Technologies and Costs

Abstract

Recent improvements in population health have been possible thanks to advances in sanitation and health technology. Several treatments, procedures and diagnostic devices have revolutionized modern epidemiological patterns, turning once deadly diseases into curable or preventable conditions, expanded the existing cures to more patients and diseases, and simplified procedures applied to both medical and organizational practices. From diuretics, beta blockers, vaccines, ultrasounds, tomography, HIV antiretrovirals, organ transplants and implants, laser surgery and angioplasty to human genome project, the health technologies have changed all aspects of healthcare for patients, providers, and states, bearing positive impact on social welfare. The health innovation process has however become an important driver of health expenditure growth across all countries. Not only has the technological progress generated additional financial burden, but it also expanded the volume of services provided. Even with lower unit costs, this expanded volume frequently generates higher total expenditure (Cutler & Huckman 2003; Weisbrod 1991). The future of technology costs and their impact on healthcare spending is always less certain, especially in view of the arrival of utterly new technologies, such as precision medicine and genome sequencing. While the ultimate DNA sequencing may help identifying best fit of therapies for individual genotype, incrementing its effectiveness and reducing drug waste, their characteristics are likely to be associated with high costs, with very narrow potential target population and, inversely high development costs. Also health information technology poses innovative approaches to healthcare, which will certainly revolutionize healthcare delivery. According to Kvedar et al. (2014), mobile health has the potential to widen access to high-quality and cost-efficient health services. In the recent decades business models of pharmaceutical manufacturers have changed, putting an end to blockbuster medicines and welcoming biologic drugs. Also increasingly introduced generic and biosimilar drugs drive up price competition, preventing development of treatments representing only marginal refinements with respect to the already existing therapies. In this respect, the challenge for the policymakers is to discourage over-adoption of ineffective, unnecessary and inappropriate technologies. This task has been long carried out through regulation, which according to standard economic theory is the only response to market failures and socially undesirable outcomes of healthcare markets left on their own. The potential welfare loss must be confronted with the costs of regulatory activities. Overall, so far health technology evolution has delivered important value for patients and societies, nevertheless it will continue to pose important challenges for the already stringent public finances.

Keywords: Health technology, Health expenditure, Costs, Regulation, Innovative medicines

JEL Classification: I, I1, I10, I11, I12, I13, I18