Result-Based Pricing for Medical Diagnostics
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Solution Overview
Problem
Current pricing methods for medical diagnostics fail to incentivize manufacturers to set prices that balance economic value between diagnostic and therapeutic treatments, leading to high diagnostic costs that make broad screening uneconomical, even with highly accurate tests, due to differing usage profiles and conflicting interests between diagnostic and drug manufacturers.
Innovation Solution
A method of pricing medical diagnostics based on the results of the tests, where the price is set or adjusted according to the indication of the diagnostic results, allowing for a low initial cost and subsequent higher cost if the test is beneficial, enabling drug manufacturers to share revenue with diagnostic manufacturers, thereby encouraging broader testing and use of diagnostics.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of energy
If the diagnostic test is priced very high to maximize profit for the diagnostic manufacturer, then the diagnostic manufacturer's profit is improved, but the accessibility and usage of the diagnostic test deteriorates
Solution Approach 1:
The patent applies parameter changes by transitioning from a fixed high price to a variable pricing structure where the price is adjusted based on test results. The diagnostic test price changes from a static high value to a dynamic value that reflects the actual economic benefit generated, allowing accessibility to improve while diagnostic manufacturers still capture value when tests are beneficial.
Solution Approach 2:
The pricing mechanism becomes dynamic rather than static. The price of the diagnostic test is no longer fixed but varies based on the outcome and economic value realized. This dynamic pricing allows the system to adapt to different scenarios, improving accessibility when tests yield low value while maintaining profitability when tests generate high economic benefit.
2Ease of operation
If the diagnostic test is priced low to encourage broad screening, then the accessibility and usage of the diagnostic test is improved, but the economic viability and profit of the diagnostic manufacturer deteriorates
Solution Approach 1:
The patent implements feedback mechanisms where the economic value generated by the diagnostic test feeds back into the pricing structure. The diagnostic manufacturer receives compensation based on the actual value created, creating a feedback loop that sustains profitability even with low initial prices, thereby maintaining both accessibility and economic viability.
Solution Approach 2:
The diagnostic manufacturer sets a low preliminary price to encourage broad screening and usage. The full economic value is then captured through subsequent mechanisms such as revenue sharing or result-based pricing, allowing the manufacturer to maintain accessibility while ensuring economic viability through preliminary low pricing followed by value-based compensation.
3Device complexity
If the diagnostic test price is fixed regardless of results, then the pricing simplicity is improved, but the alignment of economic incentives between diagnostic and therapeutic manufacturers deteriorates
Solution Approach 1:
The pricing structure transitions from static to dynamic, where the price adapts based on test results and economic value. This dynamic approach aligns incentives between diagnostic and therapeutic manufacturers by ensuring the diagnostic manufacturer profits when the test leads to beneficial therapeutic outcomes, creating versatility in the pricing model.
Solution Approach 2:
The patent changes the pricing parameter from a fixed value to a variable value that depends on test outcomes and economic benefit. This parameter change enables the pricing structure to adapt to different scenarios, improving incentive alignment while managing complexity through defined pricing rules based on measurable outcomes.
Data Source
AI summary
In one embodiment, a method of pricing a diagnostic test includes receiving data associated with the diagnostic test and setting a price of the diagnostic test. The data associated with the diagnostic test includes an indication of one of a first result of the diagnostic test and a second result of the diagnostic test. The price of the diagnostic test is set based on the indication included in the data associated with the diagnostic test. In another embodiment, a method of pricing a diagnostic test includes receiving data associated with the diagnostic test and charging a first price or a second price for the diagnostic test. The data associated with the diagnostic test includes an indication of one of a first result of the diagnostic test and a second result of the diagnostic test. The first price is charged if the indication is of the first result. The second price is charged if the indication is of the second result. The second price is greater than the first price.