  Problem definition: Personalized medicine (PM) seeks the best treatment for
each patient among a set of available treatment methods. Since a specific
treatment does not work well on all patients, traditionally, the best treatment
was selected based on the doctor's personal experience and expertise, which is
subject to human errors. In the meantime, stochastic models have been well
developed in the literature for a lot of major diseases. This gives rise to a
simulation-based solution for PM, which uses the simulation tool to evaluate
the performance for pairs of treatment and patient biometric characteristics,
and based on that, selects the best treatment for each patient characteristics.
Methodology/results: In this research, we extend the ranking and selection
(R&S) model in simulation-based decision making to solving PM. The biometric
characteristics of a patient is treated as a context for R&S, and we call it
contextual ranking and selection (CR&S). We consider two formulations of CR&S
with small and large context spaces respectively and develop new techniques for
solving them and identifying the rate-optimal budget allocation rules. Based on
them, two selection algorithms are proposed, which can be shown to be
numerically superior via a set of tests on abstract and real-world examples.
Managerial implications: This research provides a systematic way of conducting
simulation-based decision-making for PM. To improve the overall decision
quality for the possible contexts, more simulation efforts should be devoted to
contexts in which it is difficult to distinguish between the best treatment and
non-best treatments, and our results quantify the optimal tradeoff of the
simulation efforts between the pairs of contexts and treatments.
