Price Indices and the Value of Innovation with Heterogenous Patients

Many countries use uniform cost-effectiveness criteria to determine whether adopt a new medical technology for the entire population. This approach assumes homogeneous preferences expected health benefits and side effects. We examine prescription drugs generate welfare gains when accounting heterogeneous by constructing quality- adjusted price indices colorectal cancer drug treatments. find that while efficacy from newer do not justify high prices population as whole, innovation improves of sicker, late-stage patients. A evaluation criterion would permit these innovations despite subpopulation.