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Optimal funding policy for R and D projects aimed at cost reduction: The case of a new drug in psychiatry
Institution:1. Department of Industrial Engineering and Management, Ben-Gurion University of the Negev, Beer Sheva, Israel;2. Faculty of Management, The Leon Recanati Graduate School of Business Administration, Tel Aviv University, Tel Aviv, Israel;1. Health Protection, UK Health Security Agency North West, Cunard Building, Water Street, Liverpool L3 1DS, UK;2. College of Life and Environmental Science, University of Exeter, UK;3. Health Protection, UK Health Security Agency North West, Cunard Building, Liverpool L3 1DS, UK;4. Global Public Health, School of Health and Wellbeing, University of Glasgow, Clarice Pears Building, Byers Road, Glasgow G12 8TA, UK;5. Communicable Disease Control, Public Health Scotland, UK;6. Clinical Research Department, London School of Hygiene and Tropical Medicine, Keppel St, London, UK;1. National Centre for Infectious Diseases, Singapore;2. Duke-NUS Graduate Medical School, National University of Singapore, Singapore;3. Department of Infectious Diseases, Singapore General Hospital, Singapore;4. Saw Swee Hock School of Public Health, National University of Singapore, Singapore;5. Ministry of Health, Singapore;6. Yong Loo Lin School of Medicine, National University of Singapore, Singapore;7. Department of Infectious Diseases, Tan Tock Seng Hospital, Singapore;1. Instituto Nacional de Saúde (INS), Maputo Province, Mozambique;2. Centre for International Health (CIH), LMU Munich, Munich, Germany;3. Division of Infectious Diseases and Tropical Medicine, University Hospital, LMU Munich, Munich, Germany;4. Institute of Medical Education, LMU University Hospital, LMU Munich, Munich, Germany;5. German Center for Infection Research (DZIF), Munich, Germany;6. Friends in Global Health, Maputo, Mozambique
Abstract:Governments' role in supporting research developments is well established. In this paper we describe a model for finding the optimal funding path for R and D projects aimed at cost reduction. A numerical illustration for a case of pharmaceutical research for a new drug to reduce the cost of treating patients in an irreversible chronic condition (schizophrenia) is presented. This is done by using the mathematical results obtained for the special case—the stationary exponential case. The sensitivity analysis method is utilized to study the optimal spending path and the project's discounted expected value. We also present a possible alternative subjective consistent estimation procedure for finding the optimal funding path for such projects.
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