Comparative Effectiveness Regulations and Pharmaceutical Innovation
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POLICY AND IMPLEMENTATION
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Comparative Effectiveness Regulations and Pharmaceutical Innovation John A. Vernon,1,2,3 Joseph H. Golec4 and J. Stedman Stevens1 1 Department of Health Policy and Management, The University of North Carolina at Chapel Hill, Chapel Hill, North Carolina, USA 2 Institute for Pharmacogenomics and Individualized Therapy, The University of North Carolina at Chapel Hill, Chapel Hill, North Carolina, USA 3 National Bureau of Economic Research (NBER), New York, New York, USA 4 Department of Finance, The University of Connecticut, Storrs, Connecticut, USA
Abstract
As healthcare reform evolves and takes shape, comparative effectiveness research (CER) appears to be one of the central topics on the national healthcare agenda. Over the past couple of years, comparative effectiveness has been explicitly incorporated in more than ten bills. For example, the passage of the American Recovery and Reinvestment Act of 2009 authorized $US1.1 billion for CER. Comparative effectiveness, when costs are formally considered, offers the hope of efficient resource allocation within US healthcare markets. However, the future operationalization and implementation of comparative effectiveness is uncertain, and there exist potentially negative, and unintended, consequences under certain scenarios. One example, and the focus of this article, is pharmaceutical innovation. Incentives for pharmaceutical R&D could be affected if drug development costs increase as a result of firms having to bear, directly or indirectly, the costs of running larger, randomized, head-to-head comparative effectiveness trials. While this may or may not be the case with current and future comparative effectiveness legislation and its subsequent implementation, the potential consequences for pharmaceutical innovation warrant recognition. This is the purpose of the article. To achieve this goal, we develop several models of clinical trial design, drug development costs and R&D investment. By example, we shed light on the causal links between the models and the ways in which industry R&D investment can be affected.
Recently, there have been numerous policy and legislative efforts undertaken to more systematically integrate comparative effectiveness studies of pharmaceuticals into healthcare delivery in the US. Current and future guidelines and regulations may potentially impact on clinical trial design for pharmaceuticals, which presently is primarily concerned with demonstrating that a new drug is safe
and effective relative to placebo (and not a similarly indicated comparator). However, recent political momentum – driven largely by concerns over escalating healthcare costs – to more systematically integrate comparative effectiveness research (CER) within healthcare reform has picked up considerably. For example, Title VIII of the American Recovery and Reinvestment Act of 2009[1] has
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authorized $US1.1 billion for CER. Weinstein and Skinner[2] pointed out that, despite there being no
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