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Biomedical Innovation: Health Affairs' February Issue

Bethesda, MD--The February issue of Health Affairs includes a number of studies examining issues pertaining to biomedical innovation. Some of the subjects covered: how declining economic returns for new drugs may affect future investments, the changing landscape of Medicare coverage determinations for medical interventions, the slowly emerging US biosimilar market, and more.
This issue of Health Affairs is supported by the Biotechnology Industry Organization, National Pharmaceutical Council, Pharmaceutical Research and Manufacturers of America, AdvaMed (Advanced Medical Technology Association), and Pfizer.
With declining economic returns, can manufacturers afford to continue investing? 
Ernst R. Berndt of Massachusetts Institute of Technology's Alfred P. Sloan School of Management and coauthors compared present values of average lifetime pharmaceutical revenues to present values of average drug research and development, and lifetime operating costs. Upon examining new prescription drugs launched over four distinct time periods between 1991 and 2009, the authors found that net economic returns reached a peak in the late 1990s and early 2000s. They have since fallen sharply--declining to their lowest levels in two decades as a result of demand-side management and consolidation combined with increasing research and development costs. The authors suggest that if these lower returns continue, pharmaceutical manufacturers may be insufficiently incentivized to maintain the historical rates of investment necessary to sustain US biomedical innovation.
Are the feds being more restrictive about which new interventions Medicare covers? 
James D. Chambers of Tufts Medical Center's Institute for Clinical Research and Health Policy Studies and coauthors found that after adjusting for the strength of evidence and other factors influencing the Centers for Medicare and Medicaid Services' (CMS's) decisions, the bar for determining coverage has risen. They found that from March 2008 to August 2012 medical interventions--such as medical devices, surgeries, and diagnostic imaging technologies--were twenty times less likely to be covered by Medicare than they were from February 1999 to January 2002. The authors acknowledge that while coverage policy is an important tool for promoting the appropriate use of medical interventions, CMS's rising evidence standard also raises questions about patient access to new technologies and industry hurdles for bringing innovations to market.
The potential health and cost benefits of robot-assisted surgery for kidney cancer. 
Amitabh Chandra of Harvard University's John F. Kennedy School of Government and coauthors examined the use of robot-assisted surgery for kidney cancer to determine the long-term value--both health and economic. The authors found that robot-assisted surgery for kidney cancer increased use of partial nephrectomy--the removal of only the diseased tissue--versus a radical nephrectomy, in which the entire kidney is removed. They found that robot-assisted removal of only the diseased kidney tissue versus kidney removal led to improved kidney cancer outcomes, including reduced patient mortality and renal
failure. Additionally, they found that this minimally invasive surgery improved the quality-adjusted life-years gained for patients, while outweighing the associated health care and surgical costs by a ratio of five to one.
The current state of US biosimilar competition and ways to encourage uptake. 
Benjamin P. Falit of the Harvard Radiation Oncology Program and coauthors compared the legislative framework governing generic medications to that regulating biosimilars--follow-on versions of biologics, which are engineered from living organisms. Biologics are the fastest-growing sector of the US pharmaceutical market and have yet to face real competition from biosimilars, in part, because weak statutory incentives--such as the absence of market exclusivity for the first biosimilar approved--create barriers to market entry. The authors also compared the management tools that have successfully encouraged generic adoption to the tools that payers and pharmacy benefit managers are likely to employ for biosimilars. They found that both traditional and novel management strategies will be required, including potential adjustment of provider incentives for physician-administered products.   
Why are venture capitalists leery of early investment in medical innovation? 
Jonathan J. Fleming of NEHI, the Network for Excellence in Health Innovation, analyzed recent trends in early-stage venture capital funding to determine what policy makers can do to foster innovations that bring new treatments to market. He found that venture capital funding in early-stage life science projects has declined precipitously because of increased cost and uncertainty over regulatory and reimbursement policies. The author says that there are several steps that policy makers can take to encourage investments in biomedical innovation including increasing Small Business Innovation Research funding and public support for clinical trials--the experiments necessary to justify larger investments from venture capitalists. Other approaches include creating regulatory pathways to enable early testing of drugs and offering economic incentives for investors. The author says that reducing the time, cost, and uncertainty for early-stage venture capitalists should be a priority and that the health of the nation may depend on it.
Why is the US trailing other nations in incentivizing hospitals to adopt new medical technologies?
John Hernandez of the Health Economics and Outcomes Research department at Abbott and coauthors examined Medicare's hospital new technology add-on payment program, which began in 2001, and compared it to similar systems in Germany, France and Japan. Between 2001 and 2015, CMS approved just nineteen of fifty-three applications for new technology, resulting in $201.7 million in payments in fiscal years 2002-2013-less than half the ten year spending level projected by Congress and only 34 percent of the amount projected by CMS. The US approved considerably fewer innovative technologies than Germany, France or Japan. In addition to broader eligibility criteria, those countries also covered 100 percent of incremental technology costs, thereby removing financial penalties for hospitals to adopt beneficial medical innovations. The authors suggest that if CMS paid for a larger portion of incremental hospital costs and made retrospective adjustments to value-based payment programs to account for new technology payments, US hospitals could better afford the adoption of new and beneficial technologies.
About Health Affairs

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically at The full text of each Health Affairs Web First paper is available free of charge to all website visitors for a one-week period following posting, after which it switches to pay-per-view for nonsubscribers. Web First papers are supported in part by a grant from The Commonwealth Fund. You can also find the journal on Facebook and Twitter. Read daily perspectives on Health Affairs Blog. Download our podcasts, including monthly Narrative Matters essays, on iTunes. Tap into Health Affairs content with the new iPad app.