Over a decade ago The New England Journal of Medicine proposed that all articles published on new therapies should close with a cost/benefit analysis comparing its benefits and costs against the best selling alternative therapy. This initiative was squashed by the pharmaceutical industry that also used lobbying to prevent the Federal Drug Administration from requiring performance tests against the best-selling alternative rather than no treatment at all (a placebo). Today, it looks like the industry is finally caving to pressure to require such testing, and that this testing must form the basis for performance and quality claims in the marketing of the new drug. The following information is the result of a test of PreventInfect, a drug developed to help prevent infections in cancer patients whose immune systems have been weakened by chemotherapy: PreventInfect Metrics Probability of getting an infection without any treatment (po) 0.4 Probability of getting an infection with current best treatment (pcb) 0.2 Probability of getting an infection with PreventInfect treatment (pPI) 0.1 Average cost of treatment of infection without any treatment ($Io) $15,000 Average cost of treatment of infection with current best treatment ($Icb) $12,000 Average cost of treatment of infection with PreventInfect treatment ($IPI) $5,000 Cost of current best treatment ($Tcb) $1,200 Cost of PreventInfect treatment ($TPI) $2,000

1. What is PreventInfects quality added compared to no treatment? The average expected cost of care per patient with no treatment is $15,000 times the probability of getting the infection which is 0.4 and the answer is $6,000 plus the cost of no treatment which is zero! The average expected cost of care per patient with PreventInfect treatment is $5,000 times the probability of getting an infection with the treatment which is 0.1 and the answer is $500 plus the per patient cost of the PreventInfect treatment which is $2,000 so the average expected cost of care per patient with PreventInfect treatment total answer is $2,500. Substituting in the metrics above: = Cost without any treatment Cost using PreventInfect, in equation format = ($Io* po) - ( $TPI + $IPI*pPI ) = $15,000*0.4 - $2,000 + $5,000*0.1 = $6,000 - $2,500 = $3,500

2. What are the cost savings in using PreventInfect compared to current best treatment? = Cost with current best treatment Cost using PreventInfect = ( $Tcb + $Icb * pcb) - ( $TPI + $IPI *pPI )

3. Using quality added pricing, what is the highest price PreventInfect could charge, the price that any higher and there would be no substantial value (that is in this case no substantial cost saving) in the hospital switching away from the next best alternative? What you are really deciding is what customer value proposition (in this case cost saving compared to the next best alternative) do you think is enough to get the hospital to switch?

4. Does excluding the cost to the hospital of being sued for infecting a cancer patient who then dies understate or overstate the benefits and quality-added of PreventInfect?

5. Should the pain and suffering of patients who get an infection be considered when selling the use of PreventInfect to the patients family?

6. Should the pain and suffering of patients who get an infection be considered when selling the use of PreventInfect to the hospital? If you say no then this implies you believe the hospitals are not as customer caring as they claim to be in all their advertising. If you say yes then this implies you believe the hospitals do genuinely care about their customers pain and suffering. So would you?