Comparative effectiveness research legislation likely to raise drug pricing issues

Key Points

Health policy experts have been debating how to obtain more reliable, unbiased information about which drugs and medical procedures are most effective. Last month, Senate Finance Committee chairman Max Baucus (D–Mont) and Senate Budget Committee chairman Kent Conrad (D–ND) introduced legislation spelling out many of the specifics for a program that would address this issue.

The Comparative Effectiveness Research Act of 2008 would establish an independent entity to conduct research on the effectiveness of different healthcare treatments and services. Many of the provisions in the bill reflect a desire to balance public oversight of such analysis with the need for independence and minimal political influence over the research agenda. Although it may be possible for the bill to be included in broader legislation moving through Congress this year, the aim of introducing the legislation now is to provide a starting point for serious deliberations on the proposal in 2009.

The bill would establish the Health Care Comparative Effectiveness Research Institute as a private, nonprofit, nongovernmental entity. This entity would contract with government agencies, such as the Agency for Healthcare Research and Quality (AHRQ) and the National Institutes of Health (NIH), as well as private research organizations to conduct systematic reviews, observational studies, and randomized controlled clinical trials to obtain evidence regarding the clinical effectiveness of therapies and treatments.

The Institute would be managed by a large Board of Governors that would include government officials and representatives of private payors, pharmaceutical companies, patients, physicians, and public health agencies. An expert methodology committee would oversee the development of standards and methods for conducting scientifically sound comparative research.

The legislation sidesteps one thorny issue by specifying that the Institute will not issue specific practice or policy recommendations or coverage guidelines. However, many physicians have expressed concerns about how comparative effectiveness analysis will be used by payors and insurers.

CONSIDERING COSTS

The legislation also specifies that the Institute will not consider cost and health plan design factors in its assessments. However, the bill leaves an opening for Congress to revise the policy to include such analysis in the future.

This possibility worries pharmaceutical companies and medical device makers, who fear that future cost comparisons will limit patient access to new products. Insurers and payors believe that comparative effectiveness research should include costs in order to be useful to the healthcare system.

One available model is the United Kingdom's National Institute for Clinical Excellence (NICE), which assesses medical technology for the country's National Health Service (NHS). NICE made headlines recently by denying coverage of several therapies for advanced or metastatic kidney cancer. This announcement drew protests from patients with cancer, physicians, and the cancer research community. The decision also increased pressure on pharmaceutical companies to lower prices or provide additional information to counter the noncoverage decision.

Although NICE agreed that the drugs do extend life, often by up to 6 months, the agency determined that the large amount of money involved could be better spent elsewhere. Treatment with these drugs-sunitinib (Pfizer), bevacizumab (Roche), sorafenib (Bayer), and temsirolimus (Wyeth)-costs approximately $40,000 to $70,000 per year. That translates into $142,000 to $340,000 per quality-adjusted life year (QALY) per patient, approximately twice what the drug manufacturers claimed, according to Peter Littlejohns, the clinical and public health director for NICE. Although NICE does not have a firm spending ceiling, the Institute generally sets a threshold of $50,000 per year of good QALY gained to consider a new drug for NHS use.

The drug manufacturers have an opportunity to present data to counter this preliminary NICE assessment, or they can reduce prices to meet the Institute's criteria for coverage. Roche and Pfizer had outlined proposals to lower the cost of their renal cancer therapies, but NICE said those plans were not sufficient to make the treatments cost effective. Patient groups are arguing that cost-effectiveness calculations should vary according to the severity of disease and availability of alternative treatments.

NICE officials have pointed out that negative recommendations are rare for the Institute and more than 70% of its decisions support coverage, at least for some indications. The UK healthcare system is required to cover medications and treatments recommended by NICE; conversely, noncoverage recommendations make it unlikely that local healthcare systems will pay for therapy.

Although many policy analysts point to the NICE process as a model for US comparative effectiveness analysis, there is skepticism about the fit. Although NICE has an independent status, it is clearly government funded and authorized. Even though many of the Institute's decisions are controversial, the NICE program has strong public support in the United Kingdom, and hospitals and physicians generally follow the Institute's recommendations.

The National Pharmaceutical Council has produced a report on NICE and its relevance for the United States, available from http://www.npcnow.org/.

DRUG PRICES UNDER ATTACK

While the debate over comparative effectiveness research moves forward, members of Congress are highlighting evidence of too-high drug prices; much of this evidence involves orphan drugs. At a hearing before Congress' Joint Economic Committee (JEC) in July, committee chairman Charles Schumer (D–NY) and Sen Amy Klobuchar (D–Minn) called for the Government Accountability Office (GAO) to examine the issues behind increasing prices for a number of rare disease treatments. They also have asked the Federal Trade Commission to examine whether certain manufacturer pricing policies might indicate anticompetitive conduct. Schumer further suggested that legislation to authorize follow-on biologics could provide some relief from monopoly pricing.

Researchers at Minnesota's PRIME Institute testified at the hearing that prices for leading drugs were increasing twice as quickly as inflation, and that "extraordinary" price increases-more than 100% at a single point of time-were occurring more frequently. One ready target is Abbott, which was sued for a 4-fold increase in its protease inhibitor ritonavir in 2003.

In July, the congressional JEC cited Ovation Pharmaceuticals for imposing steep price increases on several small-market drugs after purchasing them from Merck in 2005. In response to similar questioning about its pricing policies, Questcor Pharmaceuticals acknowledged that it boosted the price of its corticotropin gel, used to treat infantile spasms, from approximately $2,000 to nearly $30,000, saying that it took this action to stave off bankruptcy and maintain product distribution. Questcor and Ovation cited the need for higher returns to support further research and point to patient assistance programs and other efforts to ensure consumer access to critically needed products.

"This seems to be simple price-gouging to me," Klobuchar stated, noting that the increases hurt the entire healthcare system, as well as the hospitals and patients that have to pay exorbitant rates.

The larger issue is whether these drugs would be available at all if pharmaceutical companies could not earn sufficient profits in the US market to support production and distribution to often tiny patient populations. Advocates for orphan drugs worry that legislation or regulations governing drug prices could have an adverse effect on research to develop new drugs and medical products for small markets. Such action "would be inherently wrong and would result in a very vocal reaction from the patient community," stated Diane Dorman of the National Organization for Rare Disorders (NORD). NORD hopes to help "craft a balanced solution" on the pricing of orphan drugs and biologics, Dorman added.

Ms Wechsler is a Washington-based reporter specializing in federal and state healthcare issues.