Patricia Danzon

Patricia Danzon is the Celia Moh Professor at The Wharton School, University of Pennsylvania. Professor Danzon received a B.A. from Oxford University, England, and a Ph.D. in Economics from the University of Chicago. She has held faculty positions at Duke University and the University of Chicago.  

Professor Danzon is an internationally recognized expert in the fields of economics of health care, the biopharmaceutical industry, and insurance.  She is a member of the Institute of Medicine and the National Academy of Social Insurance, and a Research Associate at the National Bureau of Economic Research. She has served as a consultant to many governmental agencies, NGOs and private corporations in the US and internationally. Professor Danzon has served on the Board of Directors of Medarex, Inc., the Policy and Global Affairs Board of the National Academy of Sciences, and the Policy Board of the Office of Health Economics in London.

Professor Danzon has been an Associate Editor of the American Economic Review, the Journal of Health Economics and the International Journal of Health Care Finance and Economics. She has published widely in scholarly journals on a broad range of subjects related to health care, pharmaceuticals, biotechnology, insurance, and the economics of law.  She coedited the Handbook on the Economics of the Biopharmaceutical Industry (2012), for Oxford University Press. Selected publications include: “Exits from Vaccine Markets in the US: The Role of Competition vs. Regulation” (with N. Pereira), International J. of the Economics of Business 2011; “_Setting CostEffectiveness Thresholds As A Means To Achieve Appropriate Drug Prices In Rich And Poor Countries” (with A. Towse and A. Mulcahy)  _Health Affairs 2011; “Drug Pricing and Value in Oncology” (with E. Taylor) The Oncologist 2010; "Productivity in PharmaceuticalBiotechnology R&D: The Role of Experience and Alliances" (with S.Nicholson and N.Pereira) J. of Health Economics 2005; “BiotechPharma Alliances as a Signal of Asset and Firm Quality” (with S. Nicholson and J. McCulloch, J. of Business 2005.

Patricia M. Danzon (2017), Competition and Antitrust Issues in the Pharmaceutical Industry ,.

Patricia M. Danzon (2016), Affordability and Accessibility to Medicines in EMs: Differential pricing is the solution, ISB Insight.

Patricia M. Danzon (2015), Pharmacy Benefit Management: Are Reporting Requirements Pro or Anticompetitive?, International Journal of the Economics of Business, 22 (2), pp. 245261.

Abstract: The marketbased US healthcare system relies on pharmacy benefit managers (PBMs) to control pharmaceutical costs, in contrast to most other countries that regulate drug prices and access. Optimal structuring and regulation of PBM contracts pose significant agency challenges for private and public payers. However, recent reporting requirements for PBMs may be counterproductive and reflect the interests of competitors rather than customers.

Patricia M. Danzon (2014), Pricing and Reimbursement of Biopharmaceuticals and Medical Devices in the USA , In: Anthony J. Culyer (ed.), Encyclopedia of Health Economics, Vol 3. San Diego: Elsevier; 2014. pp. 127135..

Abstract: PDF available upon request. 

Patricia M. Danzon (2014), Biopharmaceutical and Medical Equipment Industries, Economics of , In: Anthony J. Culyer (ed.), Encyclopedia of Health Economics, Vol 1. San Diego: Elsevier; 2014. pp. 7785..

Abstract: PDF available upon request.   

Patricia M. Danzon, Andrew Mulcahy, Adrian Towse (2013), Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition, and Procurement, Health Economics .

Abstract: This paper analyzes determinants of exmanufacturer prices for originator and generic drugs across countries. We focus on drugs to treat HIV/AIDS, TB, and malaria in middle and lowincome countries (MLICs), with robustness checks to other therapeutic categories and the full income range of countries. We examine the effects of per capita income, income dispersion, competition from originator and generic substitutes, and whether the drugs are sold to retail pharmacies versus tendered procurement by nongovernment organizations. The crossnational income elasticity of prices is 0.27 across the full income range of countries but is 0.0–0.10 between MLICs, implying that drugs are least affordable relative to income in the lowest income countries. Withincountry income inequality contributes to relatively high prices in MLICs. Although generics are priced roughly 30% lower than originators on average, the variance is large. Additional generic competitors only weakly affect prices, plausibly because generic quality uncertainty leads to competition on brand rather than price. Tendered procurement that imposes quality standards attracts multinational generic suppliers and significantly reduces prices of originator and generic drugs, compared with their respective prices to retail pharmacies. ©2013 The Authors. Health Economics Published by John Wiley & Sons Ltd.

Patricia M. Danzon, Adrian Towse, Jorge MestreFerrandiz (2013), ValueBased Differential Pricing: Efficient Prices for Drugs in a Global Context, Health Economics .

Abstract: This paper analyzes pharmaceutical pricing between and within countries to achieve secondbest static and dynamic efficiency. We distinguish countries with and without universal insurance, because insurance undermines patients’ price sensitivity, potentially leading to prices above secondbest efficient levels. In countries with universal insurance, if each payer unilaterally sets an incremental costeffectiveness ratio (ICER) threshold based on its citizens’ willingnesstopay for health; manufacturers price to that ICER threshold; and payers limit reimbursement to patients for whom a drug is costeffective at that price and ICER, then the resulting price levels and use within each country and price differentials across countries are roughly consistent with secondbest static and dynamic efficiency. These valuebased prices are expected to differ crossnationally with per capita income and be broadly consistent with Ramsey optimal prices. Countries without comprehensive insurance avoid its distorting effects on prices but also lack financial protection and affordability for the poor. Improving pricing efficiency in these selfpay countries includes improving regulation and consumer information about product quality and enabling firms to price discriminate within and between countries. © 2013 The Authors. Health Economics published by John Wiley & Sons Ltd.

Patricia M. Danzon, Adrian Towse, Andrew Mulcahy (2011), Setting CostEffectiveness Thresholds As A Means To Achieve Appropriate Drug Prices In Rich And Poor Countries, Health Affairs, 30(8): 152938.

Abstract: Finding better mechanisms to enable differential pricing that reflects different degrees of willingness to pay across countries with different income levels is an important challenge for drug manufacturers and policy makers. Drug prices must be high enough to meet manufacturers’ needs—covering costs and ensuring adequate investment in research and development, as well as producing a profit—but low enough to allow consumers access to medicines that they need. Examining drug pricing, we found that in rich countries, insurance coverage can make consumers insensitive to price, which means that manufacturers’ prices are largely unrestrained unless payers intervene. In middle and lowincome countries, where most consumers pay for drugs out of pocket, we found that the poorest countries face the highest prices, relative to their mean per capita income. We recommend that countries and payers set their own costeffectiveness thresholds to reflect how much they are willing to pay for “health gain”—in other words, for a measured improvement in the health of a person or a population. Adopting this approach broadly should lead to appropriate price differences across and within countries, benefiting consumers and manufacturers alike.

Patricia M. Danzon and Michael F. Furukawa (2011), CrossNational Evidence on Generic Pharmaceuticals: Pharmacy vs. PhysicianDriven Markets, NBER Working Paper Series.

Abstract: This paper examines the role of regulation and competition in generic markets. Generics offer large potential savings to payers and consumers of pharmaceuticals. Whether the potential savings are realized depends on the extent of generic entry and uptake and the level of generic prices. In the U.S., the regulatory,legal and incentive structures encourage prompt entry, aggressive price competition and patient switching to generics. Key features are that pharmacists are authorized and incentivized to switch patients to cheap generics. By contrast, in many other high and middle income countries, generics traditionally competed on brand rather than price because physicians rather than pharmacies are the decisionmakers. Physiciandriven generic markets tend to have higher generic prices and may have lower generic uptake,depending on regulations and incentives. Using IMS data to analyze generic markets in the U.S., Canada, France, Germany, U.K., Italy, Spain,Japan, Australia, Mexico, Chile, Brazil over the period 19982009, we estimate a threeequation model for number of generic entrants, generic prices and generic volume shares. We find little effect of originator defense strategies, significant differences between unbranded and unbranded generics, variation across countries in volume response to prices. Policy changes adopted to stimulate generic uptake and reduce generic prices have been successful in some E.U. countries.

Patricia M. Danzon and Nuno Pereira (2011), Vaccine Supply: Effects of Regulation and Competition, International Journal of the Economics of Business, 18(2).

Abstract: ABSTRACT In US vaccine markets, competing producers with high fixed, sunk costs face relatively concentrated demand. The resulting price and quality competition leads to the exit of all but one or very few producers per vaccine. Our empirical analysis of exits from US vaccine markets supports the hypothesis that high fixed costs and both price and quality competition contribute to vaccine exits. We find no evidence that government purchasing has significant effects, possibly because government purchase tends to increase volume but lower price, with offsetting effects. Evidence from the flu vaccine market confirms that government purchasing is not a necessary condition for exits and the existence of few suppliers per vaccine in the US.

Past Courses

HCMG202 ECON & FINCINGHLTHCR DL

The course provides an application of economic models to demand, supply, and their interaction in the medical economy. Influences on demand, especially health status, insurance coverage, and income will be analyzed. Physician decisions on the pricing and form of their own services, and on the advice they offer about other services, will be considered. Competition in medical care markets, especially for hospital services, will be studied. Special emphasis will be placed on government as demander of medical care services. Changes in Medicare and regulation of managed care are among the public policy issues to be addressed.

HCMG204 COMPARATIVE HC SYSTEMS

This course examines the structure of health care systems in different countries, focusing on financing, reimbursement, delivery systems and adoption of new technologies. We study the relative roles of private sector and public sector insurance and providers, and the effect of system design on cost, quality, efficiency and equity of medical services. Some issues we address are normative: Which systems and which public/private sector mixes are better at achieving efficiency and equity? Other issues are positive: How do these different systems deal with tough choices, such as decisions about new technologies? Our main focus is on the systems in four large, prototypical OECD countriesGermany, Canada, Japan, and the United Kingdomand then look at other countries with interesting systems including Italy, Chile, Singapore, Brazil, China and India. We draw lessons for the U.S. from foreign experience and vice versa.

HCMG215 MGMT&ECONOFPHARMA,BIOTEC

This course provides an overview of the management, economic and policy issues facing the pharmaceutical, biotechnology, and medical device industries. The course perspective is global, but with emphasis on the U.S. as the largest and and most profitable market. Critical issues we will examine include: R&D intensive cost structure and rapid technological change; biotechnology and genomics startups and alliances with the pharma industry; a complex global marketplace in which prices are regulated in most countries and customers include governments and insurers, as well as physicians, pharmacists and consumers; intense and evolving M&A, including mergers, joint ventures, and complex alliances; government regulation of every business function, including R&D, pricing and promotion; and global products and multinational firms. We use Wharton and industry experts from various disciplines to address these issues.

HCMG849 FIN MGMT HEALTH INST

This course focuses on health care organizations' financial decisions in the changing health care landscape. Upon completion of the course, students will be able to utilize a range of financial tools and techniques for making valueadded financial decisions in a variety of important contexts in the health care sector. The course involves case analyses and lectures, including presentations by practitioners with extensive real world experience. The course is organized around cases dealing with publiclytraded health care company valuation, valuation and return on investment of biopharmaceutical and medical technology development projects, valuation and deal structure for startup and early stage health care organizations, health plan pricing and finance, and health care provider risksharing arrangements. Each case is accompanied by background on tools, methods, institutions, and markets. Students seeking careers in health care finance and financial decision making. Students with more background will extend and enhance their analytical skills in a variety of important areas.

HCMG859 COMPARATIVE HC SYSTEMS

This course examines the structure of health care systems in different countries, focusing on financing, reimbursement, delivery systems and adoption of new technologies. We study the relative roles of private sector and public sector insurance and providers, and the effect of system design on cost, quality, efficiency and equity of medical services. Some issues we address are normative: Which systems and which public/private sector mixes are better at achieving efficiency and equity? Other issues are positive: How do these different systems deal with the tough choices, such as decisions about new technologies? Our focus first on the systems in four large, prototypical OECD countries Germany, Canada, Japan, and the United Kingdom and then look at other developed and emerging countries with interesting systems including Italy, Chile, Singapore, Brazil, China and India. We will draw lessons for the U.S. from foreign experience and vice versa.

HCMG863 MGMT&ECONOFPHARM&MEDTECH

This course provides an overview of the management, economic and policy issues facing the pharmaceutical, biotechnology and medical device industries. The course perspective is global, but with emphasis on the U.S. as the largest and most profitable market. Critical issues we will examine include: R&D intensive cost structure with regulation and rapid technological change; strategic challenges of biotechnology startups; a complex global marketplace in which prices are regulated in most countries and customers include governments and insurers, as well as physicians, and consumers; intense and evolving M&A, joint ventures, and complex alliances; thriving generics industry in the US and globally. We use Wharton and industry experts from various disciplines to address these issues.

HCMG890 ADVANCED STUDY PROJECT

HCMG 890001: This course examines issues related to the Services Sector of thehealth care industry. For those interested in management, investing, or bankingto the health care industry, the services sector will likely be the largest and most dynamic sector within all of health care. We will study key management issues related to a number of different health care services businesses with a focus on common challenges related to reimbursement, regulatory, margin, growth, and competitive issues. We will look at a number of different businesses and subsectors that may have been unfamiliar to students prior to taking the course. We will make extensive use of outside speakers, many of whom will be true industry leaders within different sectors of the health care services industry. Speakers will address the current management issues they face in running their businesses as well as discuss the career decisions and leadership styles that enables them to reach the top of their profession. Students will be asked to develop a plan to both buyout and manage a specific health care services business of their choosing and will present their final plans to a panel of leading Health Care Private Equity investors who will evaluate their analysis. Prerequisites: HCMG 841. Health Care Management MBA majors only ,Senior healthcare executives and policy leaders will be engaged as guest speakers.

HCMG900 PROSEMINAR IN HSR

This seminar will explore empirical methods in health care research with an emphasis on applications in health care economics and finance. The methods covered include estimation with panel data, program evaluation models, qualitative and limited dependent variable models, stochastic frontier models, estimation with count data, and duration models. The readings consist of a blend of classic and recent empirical studies, including articles on the demand for health care and health insurance, tests for moral hazard and adverse selection, and estimation of provider cost functions. Students are required to conduct an econometric analysis of some issue within the health care field. With the permission of the instructor, the seminar is open to doctoral students from departments other than Health Care Systems.

HCMG901 SEM:HLTH CARE COST BEN

The purpose of this doctoral level course is to investigate the theory and practice of costbenefit and costeffectiveness analysis as applied to health care. The three techniques to be examined are costeffectiveness analysis with single dimensional outcomes, cost effectiveness analysis with multiple attributes (especially in the form of Quality Adjusted Life Years), and economic costbenefit analysis. Valuation of mortality and morbidity relative to other goods will be emphasized. Students will be expected to develop written critiques of articles in the literature, and to design a new application of one of the techniques as a term project.

Agency for Health Care Research and Quality, John M. Eisenberg Excellence in Mentorship Award, 2012 American Risk and Insurance Association, Award for Outstanding Article, for “Alternative Liability Regimes for Medical Injuries: Evidence from Simulation Analysis,” August, 1995 American Association of Risk and Insurance, Award for Outstanding Article, for “Compensation for Occupational Disease: Evaluating the Options,” Journal of Risk and Insurance, June, 1987 American Risk and Insurance Association, Elizur Wright Award, for Medical Malpractice: Theory, Evidence and Public Policy, June, 1987

Knowledge @ Wharton

• Is the U.S. Ready for Valuebased Pricing of Drugs?, Knowledge @ Wharton 05/18/2016
• Why Cuba Stands Tall in Health Care Metrics, Knowledge @ Wharton 11/25/2015
• Technology Increasingly Key to Better Patient Outcomes, Knowledge @ Wharton 12/16/2014
• ‘Trying to Recapture the Magic’: The Strategy Behind the Pharma M&A Rush, Knowledge @ Wharton 05/28/2014
• Sovaldi: Who’s to Blame for the $1,000 a Day Cure?, Knowledge @ Wharton 04/16/2014
• Biotech IPOs: What Entrepreneurs Can Learn from a Banner Year, Knowledge @ Wharton 01/22/2014
• Access or Profits? Drug Patent Rulings in India Fuel the Debate, Knowledge @ Wharton 04/10/2013
• Patent Controversy Resumes as Indian Supreme Court Rejects Novartis’ Glivec Claim, Knowledge @ Wharton 04/02/2013
• Accountability in Health Care — Collaboration and Analytics Are Key, Knowledge @ Wharton 01/16/2013
• Health Rates to Rise, but the Expected Impact Is Unclear, Knowledge @ Wharton 01/11/2013
• Fixing Health Care: The Next Big Challenge, Knowledge @ Wharton 06/29/2012
• Sparring Over Sorafenib: How Will Natco’s Move against Bayer Affect Pharma Licensing?, Knowledge @ Wharton 04/19/2012
• Mystery Diagnosis: An Era of Uncertainty for the Health Care Sector, Knowledge @ Wharton 09/14/2011
• A Groundlevel View of India’s New Opportunities and Challenges, Knowledge @ Wharton 08/26/2010
• A ‘Bigger Foothold’: What Does the AbbottPiramal Deal Mean for Indian Pharma?, Knowledge @ Wharton 06/03/2010
• Pharma Is at Pains to Replace Blockbusters: Has It Found the Cure?, Knowledge @ Wharton 02/03/2010
• Take Two Advil and … What Ills Can the PfizerWyeth Merger Cure?, Knowledge @ Wharton 02/04/2009
• Avoiding the Tough Issues: The Candidates on Health Care and Entitlements, Knowledge @ Wharton 10/15/2008
• Connecting the Dots between Innovation and Leadership, Knowledge @ Wharton 10/04/2006
• Novartis’s Alex Gorsky: Ensuring that Patients Get Access to the Medicines They Need, Knowledge @ Wharton 09/27/2006
• After Decades of Malaise, the Vaccine Industry Is Getting an Injection, Knowledge @ Wharton 11/02/2005
• Death of a Drug: The Aftermath of Merck’s Recall, Knowledge @ Wharton 10/20/2004
• Can Aventis Fight Off Its Hostile Suitor?, Knowledge @ Wharton 02/25/2004
• Insurance Industry Conference Looks at Terrorism, Drug Coverage, Malpractice Insurance and M&As, Knowledge @ Wharton 01/28/2004
• Analyzing Brandname and Generic Drug Costs in the U.S. and Eight Other Countries, Knowledge @ Wharton 11/19/2003
• Selling LifeSaving Drugs to Poorer Countries: At What Cost?, Knowledge @ Wharton 11/06/2002
• BristolMyers Squibb Illustrates Woes of Ailing Pharmaceutical Industry, Knowledge @ Wharton 07/17/2002
• The Benefits Are Mutual in New Wave of Biotech/Pharma Alliances, Knowledge @ Wharton 03/13/2002
• In Battle to Lower Employers’ Health Care Costs, Will Employees Become ‘General Contractors’?, Knowledge @ Wharton 02/13/2002
• What’s Behind U.S. Drug Companies’ Response to the AIDS Crisis Abroad?, Knowledge @ Wharton 04/11/2001
• Decoding the Human Genome: How Will it Impact Business?, Knowledge @ Wharton 07/05/2000
• Drug Prices: Let the Competition Begin, Knowledge @ Wharton 04/26/2000
• Will the GlaxoSmithKline Merger Be Good Therapy?, Knowledge @ Wharton 01/20/2000
• Do Drug Companies Make Seniors Overpay?, Knowledge @ Wharton 06/08/1999