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The most basic impulse behind CER is the desire to control healthcare costs. The implications for the biopharma industry could be significant
Until recently, “comparative effectiveness” was a term that only surfaced in conversations between health policy experts, academicians and other specialists. No longer. The allocation of $1.1 billion to comparative effectiveness research (CER) in the American Recovery and Reinvestment Act of 2009 (ARRA) represents a paradigm shift. It promises to radically alter the level of government involvement in the way healthcare products and services are developed, delivered and paid for.
CER is any research intended to determine the relative effectiveness of two or more treatments for a specific disease state within a given population. There are multiple kinds of research that can be used, including database reviews (fast, relatively inexpensive) all the way up to head-to-head, randomized, controlled trials (expensive, time-consuming, but the gold standard for clinical research).
Despite all the gestures and statements to other effects, we believe that the basic driver behind CER is the desire to control healthcare costs—an inescapable imperative if CMS’ programs are to be saved from insolvency without dramatic tax increases. The federal government currently spends 4% of GDP on healthcare through CMS; projected to rise to 12% of GDP—even with a reduction in the growth of medical spending, according to the Congressional Budget Office. This is unsustainable. There is a political dimension to this, too. While CER certainly offers a legitimate, if partial, solution to the real problem of cost containment, it also plays off the perception that pharmaceutical and medical device companies have managed to game the system to extract exorbitant profits, artificially raising the cost of healthcare for everyone. There is a widespread misperception that pharmaceutical costs are the primary reason that healthcare is more expensive in the US than elsewhere.
We have made some assumptions and educated projections regarding the timing of eventual impacts, which will affect healthcare providers, the drug and device industries, diagnostics providers and payers differently. We expect that the newly organized Federal Coordinating Council will issue a set of recommendations in early fall; that the Agency for Healthcare Research and Quality (AHRQ) will begin soliciting bids or contracting out research in late fall, and that initial research results will be available by the end of 2010. Actual treatment guidelines could be available as soon as the middle of 2011.
Because of the objection of the AMA and other powerful lobbies to the outright restriction of physician prerogatives in choosing a treatment, there are likely to be exceptions to these guidelines in almost every case. But these exceptions are likely to be allowed only if they represent a “justifiable” deviation from the protocol.
In the long term, we expect that compliance with these guidelines will be nearly complete. What’s more, once these specific treatment patterns become the standard, they will a) be adopted by most private insurers, and b) be adopted by physicians themselves as the default standard of treatment.
As time goes on, the pharmaceutical industry will be heavily impacted by CER. Most fundamentally, the industry needs to realize that this research is primarily a means to the end of reducing CMS’ healthcare expenditures. Given that pharmaceuticals are a very visible portion of those expenditures, they are likely to be among the first targets of CER. Primarily, we expect that this will take the form of comparisons between drugs and classes of drugs, especially where there is controversy regarding the relative benefits of older (generic) drugs and newer, branded ones. Branded pharmaceuticals are still the targets of choice for political purposes, but biologics may be close behind—especially given their often extremely high costs.
ABOUT THE AUTHOR
> Rita Numerof , PhD, is co-founder and president of Numerof & Associates, Inc. (St. Louis, MO; nai-consulting.com), a strategic consulting firm that specializes in healthcare and life sciences, and other dynamically changing industries. She has degrees from Syracuse University and Bryn Mawr College, and is an adjunct faculty member of the Olin School of Business at Washington University in St. Louis.