Here Comes Cost Effectiveness

In coming years, the industry will confront escalating pricing pressure on many fronts. Private insurers will pass the costs of increased regulation on to pharma by squeezing prices and reimbursements. One predictable response? Hike prices!

—Peter Tollman, BCG

Whether CER will gain traction next year remains to be seen, however. "There may not be the political will to push for it," says Aitken, noting that CER was also a feature of 2006's Medicare Modernization act, to little effect.

While CER boasts bipartisan congressional support, healthcare reform revealed, if nothing else, that no policy is above partisan politics. Government involvement in comparative cost-effectiveness analysis is clearly a frightening, if only dimly understood, prospect for many Americans, and the rhetoric of "death panels" shuts down serious discussion of how much patient choice the system can or should tolerate. The fact that such analysis is increasingly practiced not only by public healthcare systems in other industrialized nations but by private insurers in the US has gone largely unexplored by the media.

"There is going to be tremendous dissent in the marketplace," says Cyndy Nayer, who heads the Center for Health Value Innovation. "Comparative effectiveness is a population health measure, and consumer advocates will say, 'That's not what matters to me." Manufacturers of drugs and medical devices will say, 'Our product can't be measured head-on with that product.' And employers doing plan designs will say, 'You know what? I don't have that kind of expertise.'"

In fact, the Senate healthcare reform bill authorizes the government only to fund CER while blocking it from using the results to inform its healthcare coverage decisions. The Patient-Centered Outcomes Research Institute will be governed by a board including the directors of AHRQ and NIH, three consumer reps, five physician and hospital reps, three private-payer reps, and three pharma reps. Critics say this setup protects the interests of the healthcare industry from cost controls. In the November issue of The New England Journal of Medicine, Harry Selker and Alastair Wood argue that the inclusion of industry could undermine the entire enterprise. "If healthcare reform legislation does not promote CER that is free of the potential taint of commercial and political meddling, the public will have little confidence in the results of such research."

The industry will have to decide how to address public skepticism about its credibility, particularly around its own comparative trials and data. "Does every drugmaker pour its money into one general pharma pot, and nobody knows which company [is paying what], and it may hurt you and help me or vice versa?" asks Charlotte Sibley, senior vice president of business management at Shire. "These questions need to be asked."

In the end, politics may trump the trend toward evidence-based healthcare pricing in 2010. Congressional Republicans are already talking about campaigning to repeal healthcare reform in the midterm elections. Across the pond, the big news may not be entirely different: Germany's Institute for Quality and Efficiency in Healthcare (IQWiG) has been charged by a 2007 healthcare reform law to make cost-effectiveness recommendations based on a new methodology. IQWiG has rejected NICE's controversial cost-benefit unit, the QALY (quality adjusted life year), in favor of a vague "efficiency frontier" concept that has drugmakers scratching their heads. Rumor has it, however, that the new center-right government may scuttle these plans and sack the IQWiG's leader because he is an outspoken critic of Big Pharma.