Press Release

For more information contact:
Andrea Zuercher (785) 842-2611
Linda Loranger or Carol Schadelbauer (301) 652-1558

IS MEDICAL INNOVATION WORTH THE COST? HOW WILL NEW TREATMENTS IN THE R&D PIPELINE BE PAID FOR?

Health Affairs Special Issue On Innovation Highlights Costs And Benefits Of Breakthrough Medicines And Health Care Technologies

With increased spending on new prescription drugs a growing concern for employers, health insurers, and consumers, several new studies in the policy journal Health Affairs challenge critics of the pharmaceutical industry with evidence that the health benefits of many recent medical innovations may justify the investment.

"We are all keenly aware of increases in prescription drug spending," says Columbia University professor Frank Lichtenberg, author of one of the studies. "But we also need to understand the benefits that newer drugs produce in order to get a true assessment of their value." Lichtenberg's analysis of 1996 data concluded that "the replacement of older by newer drugs results in reductions in mortality, morbidity, and total medical spending."

David Cutler and Mark McClellan - health advisers in the Clinton and second Bush administrations, respectively - found that "the estimated benefit of technological change is much greater than the cost" for conditions including heart disease, depression, and low-weight births. Princeton economist Uwe Reinhardt contends that "relative to other industries the pharmaceutical industry's profits may be on the high side, but in the absolute they constitute only a minute fraction of total national health spending." Health technology expert J.D. Kleinke argues that insurers have used drug costs to justify premium increases without passing on to consumers the savings on other treatment costs that new pharmaceuticals confer.

These four studies are among 18 articles on medical innovation in a special issue of Health Affairs released Sept. 6, which is designed to provide an evidence-based analysis of the problems underlying concern about the price of progress.

"The pharmaceutical industry is a goose that periodically lays golden eggs," one of the journal authors has commented. But "it is an exasperating goose, demanding a standard of living more lavish than those to which most other manufacturing industry geese are accustomed." Tension between the rising cost of innovation and patients' overwhelming demand for new products has resulted in increased polarization and politicization of the issues, which the special issue seeks to break down.

Other selections include the following:

Legal scholar Rebecca Eisenberg's essay explains how the legal mechanisms that control the flow of medical innovations to market - patent law and FDA regulation - have become intertwined and confused. Eisenberg, coauthor of a widely discussed 1998 essay in Science magazine on "The Tragedy of the Anticommons," finds that "beyond forestalling competition and supporting profits, the patent system increasingly threatens to divert profits away from drug-developing firms " On the other hand, she points out that FDA regulation , while designed to protect consumer health and safety, "does much to support the profitability of new drugs."

Stephan Burton and colleagues present a taxonomy of methods for controlling drug costs used by pharmacy benefit managers (PBMs). They evaluate several approaches commonly used by PBMs in terms of their ethical implications, but their findings are rich in practical implications. Increasingly popular tiered-copayment systems, for example, are administratively efficient but "deter use based on cost, not medical need" and do not focus on unnecessary use. Formularies and prior authorization, in contrast, "focus limited resources on the sick and worst off" but are administratively complex. Careful assessment of such trade-offs could produce desirable refinements.

Complementing Uwe Reinhardt's call for a comprehensive national program of cost-benefit analysis for medical innovations, Alan Garber of Stanford University presents a detailed outline of how evidence-based technology assessment works and describes two of the largest existing programs, the Medicare Coverage Advisory Committee and the Blue Cross-Blue Shield Technology Evaluation Center. "Coverage policy is the focal point for conflicts between the desire to speed the adoption of new medical technologies and the need to keep health insurance affordable," Garber writes. Creating evidence-based processes for making coverage decisions appears to be the best available way to balance these conflicting imperatives, and could help improve the quality of care as well.

Other subjects covered in this special issue include the controversy over high-dose chemotherapy and autologous bone marrow transplant therapy for breast cancer; the projected costs of new drugs now in the R&D pipeline; the relationship between drug industry profits and R&D spending; how Americans differ from people in other countries in their interest in and support for new medical technologies; state drug assistance programs for the elderly and disabled; and the growing concentration of drug expenditures among high-cost Medicare patients.

Several authors in the special issue will appear at a Capitol Hill briefing sponsored by Health Affairs and the Alliance for Health Reform on Sept. 7, 11 a.m.-2 p.m., at a location to be announced. Scheduled to appear are Mark McClellan, Robert Blendon, Rebecca Eisenberg, F.M. Scherer, and J.D. Kleinke.

Health Affairs, published by Project HOPE, is a bimonthly, multidisciplinary journal devoted to publishing the leading edge in health policy thought and research. To obtain a copy, contact Jackie Graves at Health Affairs at 301-656-7401, ext. 255, or via e-mail, press@healthaffairs.org. Selected articles from this issue are available free on the journal's Web site, www.healthaffairs.org.


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