F
Dissenting Opinions on Recommendation 3a

Deliberations of the committee resulted in consensus on all but one of the recommendations presented in this report. As noted in the report, unanimous agreement could not be reached on recommendation 3a, which is included in Box F-1.

The majority of the committee fully supports the language of this recommendation. However, three members of the committee disagreed with the views of the majority.

The dissenting opinions of David Beier, J.D., Senior Vice President of Global Government and Corporate Affairs, Amgen; Kathleen Buto, M.P.A., Vice President, Health Policy, Johnson & Johnson; and Myrl Weinberg, C.A.E., President, National Health Council, are presented in this appendix.

BOX F-1

Recommendation 3a

The secretary should work with Congress to establish a capability for assessing the comparative value—including clinical and cost-effectiveness—of medical interventions and procedures, preventive and treatment technologies, and methods of organizing and delivering care. The assessment of comparative value should begin by leveraging department-wide data sources in conjunction with supportive evidence from providers, payers, and health researchers.



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F Dissenting Opinions on Recommendation 3a Deliberations of the committee resulted in consensus on all but one of the recommendations presented in this report. As noted in the report, unanimous agreement could not be reached on recommendation 3a, which is included in Box F-1. The majority of the committee fully supports the language of this recommendation. However, three members of the committee disagreed with the views of the majority. The dissenting opinions of David Beier, J.D., Senior Vice President of Global Government and Corporate Affairs, Amgen; Kathleen Buto, M.P.A., Vice President, Health Policy, Johnson & Johnson; and Myrl Weinberg, C.A.E., President, National Health Council, are presented in this appendix. BOX F-1 Recommendation 3a The secretary should work with Congress to establish a capability for assess- ing the comparative value—including clinical and cost-effectiveness—of medical interventions and procedures, preventive and treatment technologies, and methods of organizing and delivering care. The assessment of comparative value should begin by leveraging department-wide data sources in conjunction with supportive evidence from providers, payers, and health researchers. 175

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176 HHS IN THE 21ST CENTURY Dissenting Opinion of David Beier, J.D., Senior Vice President of Global Government and Corporate Affairs, Amgen The committee’s report recommends that the secretary of the De- partment of Health and Human Services (HHS) undertake the sensible step of evaluating the methods of organizing and delivering care (includ- ing important concepts such as the use of “medical homes”). Specifi- cally, tasking HHS with a thorough analysis of the benefits and risks of implementing significant health system changes is a prudent and reason- able measure to inform potential future action by the U.S. Congress and the administration. However, the report moves immediately beyond the needed analytic assessment phase and issues specific and detailed rec- ommendations on the topics of comparative effectiveness and cost- effectiveness assessments. These majority recommendations are controversial, as recognized by the dissenting views expressed by committee members. Further, the fact that the report, at one point, calls for further analysis and then issues a recommendation to mandate the use of new methods for coverage and reimbursement under Medicare, Medicaid, and other federal health care programs suggests that any recommendations made at this juncture are not fully informed by the necessary research identified by the committee. The report does not explicitly or implicitly endorse any particular health technology assessment (HTA) model. That said, the current policy debate in Washington has been informed by frequent references to the adoption of HTA models from jurisdictions outside the United States, including most prominently the National Institute for Clinical Excellence (NICE) in the United Kingdom. 1 This dissent is a commentary about the risks of adopting those systems. Without acknowledging how compara- tive effectiveness and cost-effectiveness could be misused, there is sub- stantial risk that the terms of the real policy debate could become obscured. Below, I discuss three primary areas of concern with the majority’s recommendations. 1 Other nations have over time also used HTA authorities, including—most notably— Australia and Canada. In addition, Wales and Scotland in the United Kingdom have their own HTA authorities. Other nations in Europe, including Germany, are moving toward full adoption and application of HTA authority to limit access or to make coverage or price determinations.

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177 APPENDIX F 1. Foreign models of centralized government decision making should not be applied to the U.S. health care system without full consideration of the implications and associated risks. Much of the policy debate in Washington has focused on the adop- tion of some of the most controversial aspects of foreign models for HTA. 2 Foreign models for HTA are generally premised on a basic fact that the government must ration care to a budgetary level rather than to the level determined by a physician to be appropriate for an individual patient. In these systems, lower-cost treatment options are promoted, even though they may be less effective than other avail- able, more advanced therapies. In doing so, severe restrictions on ac- cess to the fruits of innovative medicine and medical technology are the natural result. It is inappropriate to endorse the broad application of budget-guided rationing in the U.S. health care system without a thoughtful analysis and evaluation of the implications for those Americans who would be subject to the government decision-making authority’s actions. 3 I note that, although the report does not recom- mend rationing based on cost-effectiveness explicitly, no recommen- dations against such an approach are included. In its discussion of these issues, the report also fails to recognize that there are potentially serious consequences to patients and Amer- 2 A frequently noted example of a foreign government’s model for HTA is the United Kingdom and NICE. If the NICE system were applied in the United States, American cancer patients could be required to experience one of the worst levels of cancer care in the developed world. For example, in 2006, the United Kingdom ranked ninth out of 28 European countries for male cancer mortality (where the first has the lowest mortality) and twenty-second out of 28 for female mortality. The mortality figures could be attribut- able to the slow uptake of new cancer drugs. See U.K. Department of Health. 2007. U.K. cancer reform strategy; Karolinska Institute. 2007. A pan-European comparison regard- ing patient access to cancer drug; Reuters. 2008. U.K.’s NICE says “no” to four kidney cancer drugs. 3 The connection to health budgets is prominent in the report. Specifically, in the dis- cussion of practice patterns, the report relies on an assumption that up to 30 percent of health care spending in the United States could be eliminated if geographic variations in the care intensity were changed to the least intensive levels. This approach, as outlined in a preliminary analysis by the Congressional Budget Office (CBO), assumes that the in- creased costs in more intensive geographic locations are attributable to the use of more costly technology. However, this point has not been proven since important factors were not accounted for by the CBO. Importantly, the issue of regional variation needs to be addressed by assessing population and sociodemographic issues, facility and specialist access differences (e.g., access to specialized providers), and differences in payment systems employed by health care payers. It is an illusory perspective to assume that com- parative effectiveness and cost-effectiveness research will address these issues.

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178 HHS IN THE 21ST CENTURY ica’s cutting-edge health technology industry. If systemwide deci- sions are made to limit access to care that is beneficial for patients, those patients who rely on the developments of innovative health care companies will be left without the most effective treatments for grievous illness, and those companies would cease as an economic engine for the American economy. 4 2. Any recommendation about specific changes to the health care system is premature before the analysis recommended by the committee is complete. As noted above, one of the fundamental concerns with this report is that it calls for changes to the health care system in the absence of a thorough analysis and assessment of potential solutions. In particu- lar, conducting a full assessment of the issues before implementing changes to the health care system is necessary because the fields of comparative effectiveness and cost-effectiveness are not uniformly understood, even among recognized experts in the fields. 5 For this 4 Centralized government decision making that relies on comparative effectiveness and cost-effectiveness may not provide an appropriate environment and necessary incentives to foster innovation. Developers of innovative products could easily predict an unfavor- able cost assessment in areas where competitors are old and inexpensive despite the fact that physicians and patients recognize the need for new solutions and treatments. Simi- larly, product developers might prefer to focus in areas where existing therapies are ex- pensive, since that provides a better chance of recovering investment, even if the unmet need is less than in other therapy areas. Under such a system, patients may not get access to medicines that society would, on balance, regard as sensible uses of resources. 5 We note that the report itself blends the use of comparative effectiveness and cost- effectiveness, although experts in the field recognize them as separate and distinct areas of research. There is no standard, shared definition of comparative effectiveness, owing to the fact that comparative effectiveness is not yet a mature science. In Learning what works best: The nation’s need for evidence on comparative effectiveness in health care, a background paper prepared for the IOM’s Roundtable on Evidence-Based Medicine, the roundtable staff noted that primary comparative effectiveness research involves the direct generation of clinical information on the relative merits or outcomes of one intervention in comparison to one or more others and that secondary comparative effectiveness re- search involves the synthesis of primary studies (usually multiple) to allow conclusions to be drawn. Numerous other definitions have been posited. The nascent nature of compara- tive effectiveness assessments is demonstrated by the fact that, earlier this year, the U.S. Congress mandated a review of comparative effectiveness techniques by the IOM. Cost- effectiveness is generally considered a method for measuring the incremental benefits and incremental costs of competing technologies, resulting in a cost-effectiveness ratio. Cost- effectiveness analysis generally produces a number (i.e., an incremental cost- effectiveness ratio or an incremental quality-adjusted life-year). Therefore, any system based on cost-effectiveness will gravitate toward the use of a numerical value in isolation

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179 APPENDIX F reason, the committee notes the need for greater evaluation and analysis on the best methods to promote efficiency and to determine “comparative value.” In doing so, the committee recognizes that there is distinct merit in analyzing health care delivery systems to de- termine efficiencies. 6 The committee recommends that the approach to this analysis should be holistic in nature and encompass all avail- able interventions, treatments, and delivery systems (i.e., diagnostics, surgeries, medical treatments, drugs, devices, plan benefit designs, and settings of care). Further, the committee recognizes that any as- sessment should focus on all available treatment types in a given clinical area, not just new therapies or interventions. 3. Complex methodological and policy issues surrounding com- parative effectiveness and cost-effectiveness, as used by central- ized government decision-making entities in foreign countries, should be carefully reviewed to determine whether they are rea- sonable, given the social values and the acceptance level of ra- tioning in the United States. Before new mechanisms for comparative effectiveness and cost- effectiveness in the U.S. health care system are implemented and government-sponsored studies are conducted, it is important that an evaluative framework be developed and vetted by leading experts in the field. The framework must include parameters for assessing the societal value of treatments and interventions (e.g., productivity, quality of life) instead of crude cost assessments. 7 as opposed to a comprehensive or holistic qualitative assessment of the best treatment for an individual patient. 6 An analysis by the McKinsey Global Institute found that the additional spending seen in the United States compared to other Western economies is due primarily to operational and intermediation process, not the cost of inputs (e.g., drugs). See McKinsey & Com- pany. 2007. Accounting for the cost of health care in the United States. 7 In fact, there is no consensus regarding the appropriate dollar value per quality- adjusted life-year (QALY) gained upon which to base resource allocation decisions. In the United States, $50,000 per QALY is a frequently cited reference point; however, many investigators have questioned the scientific basis for this reference point and note that it has not been updated (inflationary updates alone would bring the figure closer to $120,000).

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180 HHS IN THE 21ST CENTURY This careful approach is advised because the use of cost- effectiveness to inform health care coverage and reimbursement de- terminations has not been adopted in the United States and has been controversial in other countries for several reasons, including the fol- lowing: • Arbitrary thresholds: Cost-effectiveness requires the use of thresholds that determine whether there is enough value to jus- tify coverage and reimbursement. There is empiric evidence that current thresholds used to determine coverage and reimburse- ment in other countries, and even the implicit value of $50,000 to $100,000 QALYs (quality-adjusted life-years), in the United States are too low and are arbitrary. Other well-accepted meth- ods suggest the thresholds should be two to three times higher. 8 This variability raises serious questions about a method that has such an important impact on patients and innovators. Further, while properly performed economic analyses can contribute one element to a multidimensional assessment of a particular tech- nology, cost-effectiveness analysis in particular relies on arbi- trary threshold levels (e.g., incremental cost-effectiveness ratio < £30,000) to establish whether any particular technology is “worth it.” Experience with other countries suggests that when cost-effectiveness analysis is part of comparative effectiveness assessments, the strong tendency is to rely on these cost- effectiveness ratios and thresholds to make determinations about comparative “value,” which in turn are applied to make coverage and reimbursement decisions at the population rather than the individual patient level. • Timing: Cost-effectiveness analyses conducted using standard methods based on questions (and comparisons) posed by payers are filled with large degrees of clinical and economic uncer- tainty. This is because the evidence base at the time of the evaluation (often at the time of market authorization for one of the products) may not be sufficiently mature to address the rele- vant questions and the different evidence demands from both regulatory bodies (e.g., the U.S. Food and Drug Administration 8 See R. S. Braithwaite et al. 2008. What does the value of modern medicine say about the $50,000 per quality-adjusted life-year decision rule? Medical Care 46(4):349-356; C. Evans. 2004. Use of quality adjusted life years and life years gained as benchmarks in economic evaluations: A critical appraisal. Health Care Management Science 1:43-49.

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181 APPENDIX F [FDA]) and payers. In other words, large evidence gaps are gen- erally present when these analyses are conducted. Even though uncertainty can be explored in these economic analyses, making national determinations of cost-effectiveness that influence both public and private coverage in the face of such uncertainty, im- pacting millions of lives, is highly problematic. • QALY limitations: The common metric used in cost- effectiveness (i.e., the QALY) is an imperfect metric with imper- fect measurement tools that fails to capture important elements of value. Additionally, the QALY as a measure itself treats the value of each additional year of life equally regardless of age or level of disability, which may not be consistent with social val- ues in the United States. 9 For example, the cost-effectiveness of providing expensive cancer treatment for a 35-year-old working mother could be very different from that of a 75-year-old retiree. Basing the assessment on a single average QALY value or a sin- gle threshold could provide payers with justification to limit coverage for all. • Rapidly changing prices and technology: Cost-effectiveness is not well suited to assessing the efficiency of products and mar- kets with dynamic competition involving rapidly changing prices and technological obsolescence. 10 At best, it is a static, point-in- 9 The use of QALYs as a metric in cost-effectiveness analysis has several limitations. First, how to measure quality-adjusted life-years is quite controversial, because there are methodological challenges and suboptimal measurement instruments available. QALYs simply cannot capture many important aspects of value to an individual (e.g., the reassur- ance of a test or treatment option or the benefits of preventing bacterial resistance) and patient preferences. The QALY metric also treats the value of each additional year of life equally regardless of age. Social values may be different and apply greater weight to additional life-years in the younger age groups. Additionally, QALYs may also discrimi- nate against the disabled because they will generate fewer QALYs gained from lifesaving treatments than do the young or healthy since they will not have a full recovery. Cost- effectiveness analysis attempts to maximize QALYs, but this may not be consistent with social values. QALYs may fail to capture actual public preferences for spending health resources. People want to pursue goals in health other than maximizing QALYs. They may want to prioritize patient groups in most need, those without treatment options, or vulnerable populations such as Medicare beneficiaries regardless of whether doing so represents a QALY-maximizing strategy. See P. Ubel and M. Chernew. 2000. Willing- ness to pay for a QALY. Medical Decision Making 3:332-342. 10 There are several aspects of cost-effectiveness analysis that frequently bias the as- sessment against the innovative or new product. One large bias against innovators is that the assessments are performed at a point in time with a single price, generally a high initial price relative to the products “average” lifetime price over the “on-patent” and “off-patent” periods. This creates a large bias when compared against an older product at

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182 HHS IN THE 21ST CENTURY time assessment of average costs for many technologies subject to rapid or substantial change. If cost-effectiveness is used to limit access to some products, it may actually keep costs higher for other, covered products. For medical devices, the rapid itera- tion of technology and the potential for increased effectiveness when measured over a longer term make cost-effectiveness as- sessments difficult to perform. • Different cost perspectives: The perspective of an economic analysis is not always a societal perspective. For example, cost- effectiveness may differ depending on the kind of insurance or public program providing the financing. A fully integrated, pre- paid health plan with a stable enrollee base might treat a costly prescription drug treatment as cost-effective in avoiding poten- tially more expensive care, while a Medicare stand-alone pre- scription drug plan or an insurer facing rapid turnover in enrollees might view the cost-effectiveness very differently. This can lead to the denial of good treatments for those patients who have a clinical need for them, simply because they may appear less cost-effective for the “average” patient. • Evolving field: The fields of comparative effectiveness and cost- effectiveness are not uniformly understood, even among recog- nized experts in the fields. The committee appropriately notes the need for greater evaluation and analysis of the best methods to promote efficiency and to determine “comparative value.” This analysis should be holistic and multidimensional in nature and should encompass all available interventions, treatments, and delivery systems (i.e., diagnostics, surgeries, medical treat- its “commodity” or generic price or the lowest price over its lifetime. In fact, society accrues great value from the new technology in the off-patent period, but because only the initial high price is used in the assessment, the technology may not be seen as cost- effective relative to the threshold set when compared to a generic drug. If the average cost were assumed (based on benchmarks or projections), a very different conclusion might be reached about the value of the innovation. Sometimes generic comparators are (understandably) chosen, with commodity prices, making it unlikely that an incremental innovation proves cost-effective at a price that will ensure an adequate return on invest- ment for the manufacturer. If a return on investment is unlikely, incentives for investment in research and development in that area may disappear and manufacturers will not focus on that disease area, or will focus on small modifications despite the presence of an un- met medical need. See also T. J. Philipson and A. B. Jena. 2006. Who benefits from new medical technologies? Estimates of consumer and producer surpluses for HIV/AIDS drugs. Forum for Health Economics & Policy 9(2); A. B. Jena and T. J. Philipson. 2007. Cost-effectiveness as a price control. Health Affairs 26(3):696-703.

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183 APPENDIX F ments, drugs, devices, plan benefit designs, settings of care). The fact that the committee calls for further analysis suggests an un- derstanding that comparative effectiveness and cost-effective- ness methods are not ready for broad application, especially for coverage and reimbursement under federal health care programs. • Separation of costs from comparative effectiveness: Aware of the tendency to rely on a simplistic numeric threshold to make de- terminations about comparative “value,” some U.S. policy mak- ers advocating for a comparative effectiveness center have urged that comparative effectiveness assessment be kept entirely sepa- rate from economic analysis. 11 • Rationing: In the United States, health care rationing based purely on economic analyses, as is done in other countries, does not appear to be consistent with prevalent social values and, thus, is unlikely to be supported. 12 The report lacks any recommenda- tions against such an approach. Dissenting Opinion of Kathleen Buto, M.P.A., Vice President, Health Policy, Johnson & Johnson In the chapter “Increase Efficiency and Effectiveness of the U.S. Health Care System,” the committee recommends: 3a. The secretary should work with Congress to establish a ca- pability for assessing the comparative value—including clinical and cost-effectiveness—of preventive and treatment technologies, procedures, and methods of organizing and de- livering care. The assessment of comparative value should begin by leveraging department-wide data sources in con- junction with supportive evidence from providers, payers, and health researchers. [bold added for emphasis] I support having the secretary work with Congress to establish a ca- pability to assess comparative effectiveness on the range of preventive and treatment approaches as described but strongly disagree that the ca- 11 See G. R. Wilensky. 2008. Cost-effectiveness information: Yes, it’s important, but keep it separate, please! Annals of Internal Medicine 148(12):967-968. 12 See P. J. Neumann. 2004. Why don’t Americans use cost-effectiveness analysis? American Journal of Managed Care 10(5):308-312.

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184 HHS IN THE 21ST CENTURY pability should include cost-effectiveness. The crux of the disagree- ment is whether a federally established capability (or potential en- tity) should conduct cost-effectiveness assessments that will have an impact nationwide on benefits and coverage. I acknowledge that pa- tients, physicians, and payers will use the outcomes research to make their own assessments of value. I disagree with having this done at a na- tionwide level for the following reasons: • Cost-effectiveness differs depending on both the type of patient and the kind of insurance or public program providing the fi- nancing: For example, the cost-effectiveness of providing ex- pensive cancer treatment for a 35-year-old working mother could be very different from that of a 75-year-old retiree. Basing the assessment on averages could provide payers with justification to limit coverage for all. A fully integrated, prepaid health plan with a stable enrollee base might treat costly prescription drug treatment as cost-effective in avoiding potentially more expen- sive care, while a Medicare stand-alone prescription plan or an insurer facing rapid turnover in enrollees might view the cost- effectiveness very differently. This can lead to the denial of good treatments for those patients who have a clinical need for them, simply because they may appear less cost-effective for the “av- erage” patient. • Cost-effectiveness analysis will not address underlying drivers of costs: Comparative effectiveness research will undoubtedly im- prove the evidence base and lead to better use of health re- sources, but it will not have a major impact on costs, as the Congressional Budget Office (CBO), RAND, and others have found. 13 One misconception is that pharmaceuticals and medical devices, one focus of interest in applying cost-effectiveness, 13 P. Orszag. September 5, 2007. Letter to the Honorable Pete Stark. Washington, DC. In the letter to Chairman Stark estimating the impact of enacting a comparative effective- ness entity, Orszag states, “CBO estimates that the information produced by enacting section 904 would reduce total spending for health care services. Specifically total spend- ing—by public and private purchasers—would be reduced by about $.5 billion over the 2008–2012 period and by about $6 billion over the 2008–2017 period. Direct spending by the federal government—mostly for Medicare, Medicaid, and the Federal Employees Health Benefits program—would be reduced by $.1 billion over the 2008–2012 period and $1.3 billion over the 2008–2017 period.” A RAND COMPARE analysis reaches a similar conclusion, that comparative effectiveness research will not result in significant savings in the near term. See http://www.randcompare.org.

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185 APPENDIX F make up a relatively large percentage of health care costs, when in fact the percentages are quite small. 14 In focusing on including cost-effectiveness as part of comparative effectiveness, the committee’s recommendations do not address some of the major drivers of cost including the fact that 75 percent of costs are driven by chronic disease and the role of the fee-for-service pay- ment system in Medicare, where doing more generates more re- imbursement. The committee does recommend outcomes-based reimbursement, which is a good thing—but this alone will not significantly change either the management of chronic disease or the incentives that reward doing more. • Although the committee does not require payers to adopt cover- age or reimbursement based on these assessments, they will do so: My concern is that cost-effectiveness based on averages will trump consideration of individual clinical value, despite the dif- ferences in patients noted above. Insurers are looking for ways to limit high-cost treatments and are more likely to limit access to treatments that do not meet preset, arbitrary cost-effectiveness thresholds, regardless of clinical value to some patients if there is a national assessment to fall back on. In other countries, cost- effectiveness analysis has been a basis for approving or denying access to a treatment for everyone. If cost-effectiveness analysis is used to limit coverage of certain treatments, patients will have to pay the full costs of these treatments if they need them. • Methods for assessing cost-effectiveness are imperfect and con- troversial: In other countries—the United Kingdom, Australia, Germany, and Canada, cost-effectiveness is assessed using dif- ferent methods; however, the challenges in all are how to define a comprehensive assessment of effectiveness and how to ensure 14 For prescription drugs, the Centers for Medicare and Medicaid Services estimates spending in 2006 was about 11 percent of total health care spending. A. Caitlin, C. Cowan, M. Hartman, S. Heffler, and the National Health Expenditure Accounts Team. January/February 2008. National health spending in 2006: A year of change for prescrip- tion drugs. Health Affairs 27:14-29. Recently, CBO issued a report on the impact of tech- nological change on the growth in health care spending, attributing about half the growth to “changes in medical care made possible by advances in technology.” CBO is able to “count” as contributors to growth in costs such factors as growth in personal income, aging of the population, and rising personal income. Everything else is counted as “tech- nological change,” including changes in physicians’ practices, price increases in tech- nologies and treatments, and other hard-to-quantify cost increases. Congressional Budget Office. January 2008. Technological change and the growth of health care spending. Washington, DC: CBO.

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186 HHS IN THE 21ST CENTURY that the decision includes all relevant factors, not just the cost- effectiveness ratio. The quality-adjusted life-year (QALY) is the most often used metric of effectiveness, which includes both survival and quality of life on the same measurement plane. This can have the effect of emphasizing life-years added, when some treatments may be more focused on reducing side effects, im- proving quality of life, or increasing productivity, as examples. Recently, recommendations of the National Institute for Health and Clinical Evidence (NICE), which some cite as a model for comparative effectiveness in the United States, to prevent access to medical technologies that are standards of care outside the United Kingdom—have been criticized by patient groups as de- nying access to treatments for which there are limited or no al- ternatives and failing to consider the full impact of treatments on patients, caregivers, and society in general. • Cost-effectiveness is not well suited to assessing the efficiency of products or markets with dynamic competition involving rapidly changing prices and technological obsolescence: At best, it is a static assessment of average costs for many technologies subject to rapid change. If cost-effectiveness is used to limit access to some products, it may actually keep costs higher for covered products. For medical devices, the rapid iteration of technology, and the potential for increased effectiveness when measured over a longer term, make cost-effectiveness assessments difficult to do. • Having cost-effectiveness analysis done at a national level will reduce incentives for innovation: If the result of comparative ef- fectiveness analysis is to limit benefits to “the most effective, lowest-cost option,” this may become “the effective-enough, lowest-cost option.” This is likely to shift industry investment to less risky, incremental innovation, rather than encourage compa- nies to take the considerable financial risk of producing break- through treatments. In the United States, we have the potential to develop a comparative effectiveness capability that increases in- centives for breakthrough innovation and is better targeted to in- dividuals, while making it less attractive to develop incremental innovation. Cost-effectiveness assessments provided at a na- tional level may signal the opposite.

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187 APPENDIX F In closing, I believe that additional recommendations focused on key drivers of costs, such as improved management of chronic disease and changes in the current fee-for-service reimbursement system, would put in better perspective the role of comparative effectiveness research in improving the effectiveness and efficiency of the health care system. The charge to the Institute of Medicine (IOM) from Congressmen Waxman and Davis was to undertake a study of “whether HHS is ideally organized to meet the public health and health care cost challenges that the nation faces” and to focus on the missions and organization of the individual agencies. I believe a more appropriate recommendation for improving HHS’s leadership in advancing comparative effectiveness re- search might be to focus first on what HHS can do almost immediately: The secretary should drive improvements in health care in the United States by leveraging the compre- hensive data collected by the Centers for Medicare and Medicaid Services, the Food and Drug Admini- stration, the National Institutes of Health, the Agency for Healthcare Research and Quality, and the Cen- ters for Disease Control and Prevention to assess real-world comparative effectiveness of medical in- terventions and procedures, preventive and treat- ment technologies, and methods of organizing and delivering care. This HHS initiative would complement consideration of legislation to establish a comparative effectiveness entity. The current recommenda- tion to pair cost-effectiveness with a national comparative effectiveness capability is a polarizing issue that could undermine broad consensus in favor of a concerted national effort to support this research. Dissenting Opinion of Myrl Weinberg, C.A.E., President, National Health Council In the chapter “Increase Efficiency and Effectiveness of the U.S. Health Care System,” the committee recommends: 3a. The secretary should work with Congress to establish a ca- pability for assessing the comparative value—including clinical and cost-effectiveness—of preventive and treatment

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188 HHS IN THE 21ST CENTURY technologies, procedures, and methods of organizing and de- livering care. The assessment of comparative value should begin by leveraging department-wide data sources in con- junction with supportive evidence from providers, payers, and health researchers. [bold added for emphasis] I support having the secretary work with Congress to establish a ca- pability to assess comparative effectiveness of the range of preventive and treatment approaches as described. However, I do not agree with including cost-effectiveness in the recommendation. The crux of my disagreement is that cost-effectiveness, which addresses the issue of collective health care costs, does not adequately protect the needs of individual patients to enhance their physical and mental health status. While cost-effectiveness studies have a societal value, equally important is how this information is used to benefit the individual. Ac- cording to the IOM’s Roundtable on Evidence-Based Medicine, “Value in health care is expressed as the physical health and sense of well-being achieved relative to the cost. This means getting the right care at the right time to the right patient for the right price.” Such value cannot be ac- complished if the social gain of managing health care costs is achieved at the expense of individual physical and mental health. I am concerned that cost-effectiveness data based on averages will trump consideration of individual clinical value. Used this way, clinical effectiveness analyses could be used to limit coverage of treatments vital to particular individuals’ “physical health and sense of well-being.” In support of my dissenting opinion I offer the following observations. • Cost-effectiveness differs depending on both the type of patient and the kind of insurance or public program providing the fi- nancing: For example, the cost-effectiveness of providing ex- pensive cancer treatment for a 35-year-old working mother could be very different from that of a 75-year-old retiree. Basing the assessment on averages could provide payers with justification to limit coverage for all. A fully integrated, prepaid health plan with a stable enrollee base might treat costly prescription drug treatment as cost-effective in avoiding potentially more expen- sive care, while a Medicare stand-alone prescription plan or an insurer facing rapid turnover in enrollees might view the cost- effectiveness very differently. This can lead to the denial of good treatments for those patients who have a clinical need for them,

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189 APPENDIX F simply because they may appear less cost-effective for the “av- erage” patient. • Cost-effectiveness analysis will not address underlying drivers of costs: Comparative effectiveness research will undoubtedly im- prove the evidence base and lead to better use of health re- sources, but it will not have a major impact on costs, as the Congressional Budget Office (CBO), RAND, and others have found. 15 One misconception is that pharmaceuticals and medical devices, one focus of interest in applying cost-effectiveness, make up a relatively large percentage of health care costs, when in fact the percentages are quite small. 16 In focusing on including cost-effectiveness as part of comparative effectiveness, the committee’s recommendations do not address some of the major drivers of cost including the fact that 75 percent of costs are driven by chronic disease and the role of the fee-for-service payment system in Medicare, where doing more generates more reimbursement. The committee does recommend outcomes- based reimbursement, which is a good thing—but this alone will not significantly change either the management of chronic dis- ease or the incentives that reward doing more. 15 P. Orszag, September 5, 2007. Letter to the Honorable Pete Stark. Washington, DC. In the letter to Chairman Stark estimating the impact of enacting a comparative effective- ness entity, Orszag states, “CBO estimates that the information produced by enacting section 904 would reduce total spending for health care services. Specifically total spend- ing—by public and private purchasers—would be reduced by about $.5 billion over the 2008–2012 period and by about $6 billion over the 2008–2017 period. Direct spending by the federal government—mostly for Medicare, Medicaid, and the Federal Employees Health Benefits program—would be reduced by $.1 billion over the 2008–2012 period and $1.3 billion over the 2008–2017 period.” A RAND COMPARE analysis reaches a similar conclusion, that comparative effectiveness research will not result in significant savings in the near term. See www.randcompare.org. 16 For prescription drugs, the Centers for Medicare and Medicaid Services estimates spending in 2006 was about 11 percent of total health care spending. A. Caitlin, C. Cowan, M. Hartman, S. Heffler, and the National Health Expenditure Accounts Team. January/February 2008. National health spending in 2006: A year of change for prescrip- tion drugs. Health Affairs 27:14-29. Recently, CBO issued a report on the impact of tech- nological change on the growth in health care spending, attributing about half the growth to “changes in medical care made possible by advances in technology.” CBO is able to “count” as contributors to growth in costs such factors as growth in personal income, aging of the population, and rising personal income. Everything else is counted as “tech- nological change,” including changes in physicians’ practices, price increases in tech- nologies and treatments, and other hard-to-quantify cost increases. Congressional Budget Office. January 2008. Technological change and the growth of health care spending. Washington, DC: CBO.

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190 HHS IN THE 21ST CENTURY In closing, the charge to the committee from Congressmen Waxman and Davis was to undertake a study of “whether HHS is ideally organ- ized to meet the public health and health care cost challenges that the nation faces” and to focus on the missions and organization of the indi- vidual agencies. Kathy Buto (see dissenting opinion of K. Buto) and I believe that a more appropriate recommendation on improving compara- tive effectiveness capability might be the following: The secretary should drive improvements in health care in the United States by leveraging the compre- hensive data collected by Centers for Medicare and Medicaid Services, the Food and Drug Administra- tion, the National Institutes of Health, the Agency for Healthcare Research and Quality, and the Centers for Disease Control and Prevention to assess real- world comparative effectiveness of medical interven- tions and procedures, preventive and treatment tech- nologies, and methods of organizing and delivering care.