In: Economics
What is the economic value or value-in-use of Angiomax to a hospital? Be specific in your analysis and assumptions. Elaborate on all the steps in your analysis.
.Please calculate the total economic value (TEV) to hospitals of the Angiomax product. Indetermining economic value state your assumptions clearly. It is possible that you mayarrive at a range of values based upon segment considerations.According to the function: TEV = Cost of the Next-Best Alternative + Value of PerformanceDifferential, we have to evaluate two parts. Angiomax is considered as the potential substitute asHeparin, so we take the cost of Heparin, which is $2/dose, as the cost of the next-best alternative.For the value of performance differential, Angiomax helps hospitals avoid costs of arisingcomplications in an angioplasty for $8,000, including heart attack, need for a repeat angioplasty,major bleeding. Angiomax also helps avoid a death cost for additional $8,000. It is said thatabout 70% of angioplasty patients would require a single Angiomax dose, with the other 30%requiring two or three Angiomax doses. So, we calculate the average Angiomax dose a patientrequires for the angioplasty is 70%×1+30%×2.5=1.45/dose.According to Table B and Table C in the case, we find that there is a performance differencebetween Phase III Results for “High-Risk” Patients Undergoing an Angioplasty and Phase IIIResults for “Very High-Risk” Patients Undergoing an Angioplasty. And in the group of “veryhigh-risk” patients the benefits of Angioplasty were more pronounced. Assume these two tablescould represent all the angioplasty patients, we can separate patients undergoing an angioplastyinto two segments. The first segment is the “High-risk” patients undergoing an angioplasty, andthe second segment is the “Very High-risk” patients undergoing an angioplasty.Now we first consider the situation for the “High-risk” patients undergoing an angioplasty.According to Table B, we could calculate the percentage differences between using Heparin totreat a “High-Risk” Patient for 7 days and using Angiomax to treat such a patient. The results are which is useful to them.