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The Information Pharms Race and Competitive Dynamics of Precision Medicine: Insights from Game Theory

Ernst R. Berndt, Mark R. Trusheim

Chapter in NBER book Economic Dimensions of Personalized and Precision Medicine (2019), Ernst R. Berndt, Dana P. Goldman, and John W. Rowe, editor (p. 87 - 114)
Conference held September 13-14, 2017
Published in April 2019 by University of Chicago Press
© 2019 by the National Bureau of Economic Research

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.

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This chapter first appeared as NBER working paper w24020, The Information Pharms Race and Competitive Dynamics of Precision Medicine: Insights from Game Theory, Ernst R. Berndt, Mark R. Trusheim
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