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Coal In Our Stockings: The Destruction of Medical Innovation

Obamacare's "Comparative Effectiveness Review" process will stifle medical technology innovation.

by
Benjamin Zycher

Bio

December 21, 2011 - 12:00 am
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Nonetheless, the likelihood that CER studies will be used one way or another is very high.  This means that private-sector investors in new technologies will perceive four new or strengthened parameters.  First, there will arise a need to expand private clinical testing to include preliminary CER analysis, as a means of acquiring information about future federal findings and government reactions.  Second, increased pricing pressures can be expected as a result of CER analyses that are inconclusive or adverse.  Third, CER raises the risk of non-approval or limited approval for federally-financed programs, perhaps as a tool with which to force ever-greater price reductions.  Finally, CER is likely to yield a longer regulatory approval process, and thus a shortening of the effective patent period and a delay in expected sales revenues.

Recent research from the Pacific Research Institute examined the likely effects of these CER implications for R&D investment in new and improved pharmaceuticals and devices and equipment.  Using data from the National Science Foundation and other sources, R&D investment would be reduced by about $10 billion per year over the period 2014 through 2025, or about 10-12 percent.  Based upon the scholarly literature on the benefits of medical innovation, this reduction in the advance of medical technology would impose an expected loss of about 5 million life-years annually, with a conservative economic value of $500 billion, an amount substantially greater than the entire U.S. market for pharmaceuticals and devices and equipment.

This adverse effect would be concentrated upon technological advances likely to serve the needs of smaller subgroups within the overall patient population, upon riskier investments among new treatments, and upon drugs and equipment expected to prove relatively less profitable.

In short: An expanded federal CER effort — a top-down process — is likely to prove very unwise as a matter of public policy.  A renewed emphasis upon a bottom-up approach of experimentation by many millions of practitioners and patients would be a more fruitful vehicle for the acquisition of information about the comparative effectiveness of alternative clinical approaches.

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Benjamin Zycher is a senior fellow at the Pacific Research Institute.
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