Health economics in the genomic age

Health economics has experienced a substantial rise within the healthcare industry over the past few years. Several disciplines have developed new techniques to evaluate the economic impact of pharmaceuticals in clinical care. Clinicians, pharmacists, economists, epidemiologists, and operations researchers have contributed to this field. Given the economic reality that resources are limited and needs and expectations are not infinite, medical economists try to find solutions on how these resources can be allocated optimally, to maximize the production of health or what society perceives as health. Health economists differentiate allocation efficiency and production efficiency. From the perspective of a health insurance plan allocation efficiency is reached when those drug classes or clinical programs are covered that will produce most health per expenditure. This requires a common monetary metric of health gains across the broad spectrum of diseases, conditions, and health outcomes. Once it is decided to cover a specific treatment or clinical program, economists try to identify the most cost-effective product within a class of comparable choices using cost-effectiveness and cost-utility analyses. Both allocation and production efficiency are two critically important concepts for the economic success of biotech products. This article will provide a rationale why health economics is critically important for the future of healthcare and explains fundamental economic tools for evaluating products and services with special emphasis on gene-derived technologies.