FINALIST

Health loss 7 Since the patients who incur health opportunity costs are typically unidentifiable, the standard approach for estimating the magnitude of the health loss is to divide the incremental cost of the medicine (hereafter denoted as ∆𝐶) by the ‘supply-side threshold’ (typically denoted as 𝑘), which reflects the marginal productivity of spending within the relevant health care system budge. [...] That is, the demand curve plots the price at which: Rearranging equation (1), it follows that the demand curve plots the price at which the ICER of the medicine equals 𝑘: For the hypothetical medicine in Figure 1, the ICER equals at a price of P1 𝑘 , such that the demand curve is also plotted at this price. [...] In Figure 5, the consumer surplus is illustrated by the green area below the demand curve and above the price (P5 ), while the producer surplus is illustrated by the blue area above the supply curve and below the price (P5 ). [...] Since the broad purpose of a public health care system is to improve the health of the public, the return on this investment should be considered in terms of population health (instead of monetary terms), using the payer’s economic model to estimate the health gains and losses in each time period, discounted to a present value. [...] For example, if the manufacturer incurs a greater risk in developing the medicine than the payer incurs in reimbursing the medicine, then a greater proportion of the economic surplus would be allocated to the manufacturer.