Patricia M. Danzon

Patricia M. Danzon
  • Celia Moh Professor
  • Professor of Health Care Management

Contact Information

  • office Address:

    204 Colonial Penn Center
    3641 Locust Walk
    Philadelphia, PA 19104

Research Interests: biopharmaceuticals, health care, industrial organization, insurance, liability, medical malpractice

Links: CV

Overview

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 co-edited 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 Cost-Effectiveness 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 Pharmaceutical-Biotechnology R&D: The Role of Experience and Alliances” (with S.Nicholson and N.Pereira) J. of Health Economics 2005; “Biotech-Pharma Alliances as a Signal of Asset and Firm Quality” (with S. Nicholson and J. McCulloch, J. of Business 2005.

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Research

  • Patricia M. Danzon (2018), Differential Pricing of Pharmaceuticals: Theory, Evidence and Emerging Issues,.

  • Patricia M. Danzon (2018), Objectives, Budgets, Thresholds, and Opportunity Costs – A Health Economics Approach: An ISPOR Special Task Force Report,.

  • 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. 245-261.

    Abstract: The market-based 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), Biopharmaceutical and Medical Equipment Industries, Economics of, In: Anthony J. Culyer (ed.), Encyclopedia of Health Economics, Vol 1. San Diego: Elsevier; 2014. pp. 77-85..

    Abstract: PDF available upon request.   

  • 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. 127-135..

    Abstract: PDF available upon request. 

  • Patricia M. Danzon (2014), Competition and Antitrust Issues in the Pharmaceutical Industry,.

  • Patricia M. Danzon, Adrian Towse, Jorge Mestre-Ferrandiz (2013), Value-Based Differential Pricing: Efficient Prices for Drugs in a Global Context, Health Economics .

    Abstract: This paper analyzes pharmaceutical pricing between and within countries to achieve second-best static and dynamic efficiency. We distinguish countries with and without universal insurance, because insurance undermines patients’ price sensitivity, potentially leading to prices above second-best efficient levels. In countries with universal insurance, if each payer unilaterally sets an incremental cost-effectiveness ratio (ICER) threshold based on its citizens’ willingness-to-pay for health; manufacturers price to that ICER threshold; and payers limit reimbursement to patients for whom a drug is cost-effective at that price and ICER, then the resulting price levels and use within each country and price differentials across countries are roughly consistent with second-best static and dynamic efficiency. These value-based prices are expected to differ cross-nationally 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 self-pay 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, Andrew Mulcahy, Adrian Towse (2013), Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition, and Procurement, Health Economics .

    Abstract: This paper analyzes determinants of ex-manufacturer prices for originator and generic drugs across countries. We focus on drugs to treat HIV/AIDS, TB, and malaria in middle and low-income 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 non-government organizations. The cross-national 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. Within-country 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, Andrew Mulcahy (2011), Setting Cost-Effectiveness Thresholds As A Means To Achieve Appropriate Drug Prices In Rich And Poor Countries, Health Affairs, 30(8): 1529-38.

    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 low-income 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 cost-effectiveness 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.

Teaching

Past Courses

  • HCMG202 - The Economics and Financing of Health Care Delivery

    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 Health Care 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 countries--Germany, Canada, Japan, and the United Kingdom--and 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 - Management and Economics of Pharmaceutical and Biotech Industries

    This course provides an overview of the management, economic and policy issues facing the pharmaceutical and biotechnology 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; biotech startups and alliances with the pharma industry; pricing and promotion in a complex global marketplace where customers include governments and insurers, as well as physicians, pharmacists and consumers. We use Wharton and industry experts from various disciplines to address these issues.

  • HCMG849 - Financial Management of Health Institutions

    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 value-added 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 publicly-traded 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 risk-sharing 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 Health Care 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 - Management and Economics of Pharmaceutical and Biotech Industries

    This course provides an overview of the management, economic and policy issues facing the pharmaceutical and biotechnology 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 biotech startups; pricing and promotion in a complex global marketplace where customers include governments and insurers, as well as physicians and consumers; intense and evolving M&A, joint ventures, and complex alliances; government regulation of all aspects of business including market access, pricing, promotion, and manufacturing. We use Wharton and industry experts from various disciplines to address these issues.

  • HCMG890 - Advanced Study Project: Management of Health Care Service Businesses

    HCMG 890-001: 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 Health Economics

    900-001 Proseminar in Health Econometrics: This course will cover empirical methods used in economics research with an emphasis on applications in health care and public economics. The methods covered include linear regression, matching, panel data models, instrumental variables, regression discontinuity, bunching,qualitative and limited dependent variable models, count data, quantile regressions, and duration models. The discussion will be a mix of theory and application, with emphasis on the latter. The readings consist of a blend of classic and recent methodological and empirical papers in economics . Course requirements include several problem sets, paper presentations, an econometric analysis project and a final exam. The course is open to doctoral students from departments other than Health Care Management with permission from the instructor. ,900-002 Proseminar in Health Economics: Models and Methods: This course is intended to provide entering doctoral students with information on the variety of health economics models, methods, topics, and publication outlets valued and used by faculty in the HCMG doctoral program and outside of it. The course has two main parts: the first, to acquaint students with theoretical modeling tools used frequently by health economists. This part of the course involves a number of lectures coupled with students presentations of class projects in a workshop environment. The second part of the course will offer presentations from the health economics, management and operations research community at Penn on a research method or strategy they have found helpful and they think is important for all doctoral students to know.

  • HCMG901 - Seminar in Health Care Cost Benefit and Cost Effectiveness Analysis

    The purpose of this doctoral level course is to investigate the theory and practice of cost-benefit and cost-effectiveness analysis as applied to health care. The three techniques to be examined are cost-effectiveness analysis with single dimensional outcomes, cost effectiveness analysis with multiple attributes (especially in the form of Quality Adjusted Life Years), and economic cost-benefit 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.

Awards and Honors

  • 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

In the News

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Activity

Latest Research

Patricia M. Danzon (2018), Differential Pricing of Pharmaceuticals: Theory, Evidence and Emerging Issues,.
All Research

In the News

Is the U.S. Ready for Value-based Pricing of Drugs?

The federal government’s move to switch to value-based pricing of drugs for one category of public health plans could potentially have far-reaching effects, say experts.

Knowledge @ Wharton - 2016/05/18
All News

Awards and Honors

Agency for Health Care Research and Quality, John M. Eisenberg Excellence in Mentorship Award 2012
All Awards