Monday, January 07, 2008

The Stakes Increase on Comparative Effectiveness

When the Congressional Budget Office released its long-awaited report on comparative effectiveness last month, its overall conclusions were pretty much what were expected, based on director Peter Orszag’s public previews.

A comprehensive, national effort on comparative effectiveness will eventually save the US health system money, CBO determined. But for the next 10 years or so, more money will be spent implementing the program than will come out the back end in savings. And, as Orszag stressed in public comments leading up to the release of the report, success will be largely enhanced if the results are tied to financial incentives.

The RPM Report has written extensively about the potential for a national effort on comparative effectiveness—you can read our stories here and here. So is this bad news or good news for the pharmaceutical industry? Well, that largely depends on who you talk to, and, dare we say, what products are in the pipeline.

Merck is one of the more outspoken supporters of comparative effectiveness, dating back at least a year to an editor’s note from CEO Richard Clark (pictured here) in The American Journal of Managed Care. In fact, Clark is so on board that Merck redefined its approach to R&D and marketing based on a “value proposition.” Importantly, he wrote, “it is no longer enough to say that a drug has a new mechanism of action.”

Clark echoed that sentiment with investors during last week’s Morgan Stanley CEO’s Unplugged conference, selling comparative effectiveness (or “health economics,” as he put it) as a way to address FDA’s higher approval standards for new products.

Merck acknowledges its endorsement of comparative effectiveness isn’t winning any popularity contests among its peers. Indeed, other pharma companies have been somewhat less receptive. During a recent Kaiser Permanente Health Policy Forum, Sanofi-Aventis public policy director Jean-Paul Gagnon argued that the lifespan of a comparative effectiveness review is only three to five months. Beyond that, he argued, any findings should be considered suspect, given the changing science. That’s not exactly a ringing endorsement for comparative effectiveness. (In fact, using that philosophy, you might ask whether it’s even worth it.)

But maybe comparative effectiveness is easier for Merck to push as a priority right now, given the flush state of its pipeline. With the failed development of Arcoxia safely behind it, Merck can point to products like the type 2 diabetes drug Januvia (thought to have fewer side effects than existing products) and Gardasil (the first approved HPV vaccine) as “breakthrough” products worthy of winning a comparative effectiveness test.

Merck is smart to be ahead of the curve. The CBO report endorsing comparative effectiveness is an important political step in creating a national effort. But Clark is right: comparative effectiveness will be the wave of the future regardless of whether Congress creates a national agency, for one simple reason: FDA’s approval standards will demand it.

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