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Category Archives: D82

Incentive Programs for Neglected Diseases

By Pranav Ganapathy   

We propose and evaluate an auction mechanism for the priority review voucher program. The 2007 voucher program rewards drug developers for regulatory approval of novel treatments for neglected tropical diseases. Previous papers have proposed auctioning vouchers for the priority review voucher program but have offered neither a mathematical model nor a framework. We present a mechanism design problem with one pharmaceutical company producing one drug for a neglected tropical disease. The mechanism that maximizes the regulator’s expected surplus is a take-it-or-leave-it offer, with three different offers based on low, intermediate, and high neglected disease burdens. We demonstrate how mechanism design can be applied to settings in which the buyer pays for public access to a product with regulatory speed. Finally, this paper may be useful to policymakers seeking to improve access to voucher drugs through modifications of the program.

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Advisors: Professor David Ridley, Professor Giuseppe Lopomo, Professor Michelle Connolly| JEL Codes: I1, D44, D82

Deterring Ineffcient Gambling in Risk-Taking Agents

By Ryan Westphal

This paper proposes a model describing the incentive issues faced by prin-
cipals and agents when the agent has limited liability and is capable of un-
dertaking unidentifiable, inefficient risky behavior. We propose a contract
structure by which the principal deters risk by deferring payment to the
agent until she reaches an absorbing steady-state in which promised equity
alone deters inefficient behavior. The paper discusses the effect of exogenous
parameters on the tradeoffs facing the principal as well as the implications
they have on the efficient choice of contract. We also outline extensions to
the model in which the principal has access to a costly monitoring technology
to identify inefficient risk taking. The theoretical results have implications
for real-world employment contracts and practices in financial firms such as
investment banks and private equity funds.

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Advisor: Curtis Taylor | JEL Codes: D82, D86, G32, L14 | Tagged: Contract Theory, Moral Hazard., Optimal Contracts, Risk Management

Incentives and Characteristics that Explain Generic Prescribing Practices

By Rahul Nayak

This study uses the National Ambulatory Medical Care Survey (2006-2010) and Health Tracking Physician Survey (2008) to study the incentives and characteristics that explain physician generic prescribing habits. The findings can be characterized into four main categories: (1) financial/economic, (2) informational, (3) patient- dependent and (4) drug idiosyncratic effects. Physicians in practices owned by HMOs or practices that had at least one managed care contract are significantly more likely to prescribe generic medicines. Furthermore, physicians who have drug industry influence are less likely to prescribe generic medicines. This study also finds consistent evidence that generic prescribing is reduced for patients with pri- vate insurance compared to self-pay patients. Drug-specific characteristics play an important role for whether a drug is prescribed as a generic or brand-name – in- cluding not only market characteristics, such as monopoly duration length, public familiarity with the generic and the quality of the generic, but also non-clinical drug characteristics, such as the length of the generic name compared the length of the brand-name. In particular, the public’s familiarity with the generic has a large effect on the generic prescribing rate for a given drug. There are few differences between the generic prescribing habits of primary care physicians and specialists after controlling for the drugs prescribed.

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Advisor: Frank Sloan | JEL Codes: D82, D83, I11, I13, I18 | Tagged: Drug Market Charac- teristics, Efficient Prescribing, Electronic Prescribing, Generic Prescribing, HTPS, Industry Influence, NAMCS, Patient Preferences, Physician Incentives, Principle- Agent Problem

Extending the Possibilities of Kidney Exchange with Compatible Pairs

By Karna Mital

Kidney exchange enables incompatible pairs to exchange kidneys so each recipient can receive a transplant. Compatible pairs have not yet been incorporated in any kidney exchange program. The present study incorporates compatible pairs in cycles-only mechanism, and focuses on the HLA match aspect of match quality. When 27.7% of compatible pairs participate, between 50-67% more incompatible pairs can be matched than would be in a pool of only incompatible pairs (at the national level, 1000-1330 more transplants per year), and com- patible pairs see an average improvement in match quality of 2/3 of one HLA match.

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Advisor: Atila Abdulkadiroglu | JEL Codes: D82 | Tagged: Altruistically un-balanced Exchange, Compatible Pairs, HLA Match., Kidney Exchange, Live Donor Kidney Transplantation, Match Quality

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