US aims to break drug industry's hold on pricing
08 March 2007

Andy Coghlan



In the land of the free market, the idea of the government influencing the choice and cost of medicines is heresy. But that's exactly what's in store for the US, as it tries to rein in its healthcare costs, which threaten to cripple the economy if left unchecked.

Other countries have already taken steps to deal with such problems. The UK set up the National Institute for Health and Clinical Excellence (NICE) in 1999 to decide which drugs the country's National Health Service could use (see "UK's gatekeeper has the final say"). Similar organisations operate in Australia and Canada, and all claim to be working successfully, allowing governments to just say no to ineffective drugs and haggle with pharmaceutical companies when prices are too high.

Now, at long last, the US is considering a similar proposal in the shape of a proposed Comparative Effectiveness Board (CEB), which would review the evidence on how well drugs work and whether they are cost-effective. If necessary, the CEB would carry out its own clinical trials. The idea is to break the pharmaceutical industry's stranglehold on drug prices and stop it peddling marginally effective medicines. The drug industry is already expressing its displeasure at the idea of a government body judging a drug's value for money.

Support for such a body is growing in both the public and private healthcare arenas. "There are cultural differences about how the role of government is viewed, and most Americans tend to be on the side of 'less government'," says Steve Pearson, of Harvard Medical School and a key proponent of the CEB. "But that's starting to change, as people have problems affording healthcare, and something has to give."

Although drugs accounted for only about 12 per cent of what the US spent on healthcare in 2003, the cost of drugs has been escalating. Figures released by the Department of Health & Human Services (DHHS) on 31 January show that spending on drugs soared sevenfold from $96 per person in 1980 to $709 in 2003, well ahead of the next highest spender, France, which came in at $572 per person in 2003.

The push to contain the cost of drugs has been gathering momentum since the Democrats took control of Congress after the mid-term elections in November. "Traditionally, the Democrats are more keen to think about the issue than Republicans, so there's more tailwind now," says Pearson. "The real driving force is the unsustainable increase in costs. If we know what works better, we can stop wasting money on what doesn't work."

Most Americans get private health insurance from their employers, or pay for it themselves. But almost a third of the US's 300 million citizens depend on two massive federally funded programmes: Medicaid for 52 million of America's poorest citizens; and Medicare for 43 million Americans who are either over 65 or disabled.

It is the collective bargaining power of these two programmes that the Democrats want to bring to bear on the pharmaceutical industry. Despite opposition from President George Bush and the health secretary, Mike Leavitt, the Democrats are keen to reverse a 2003 law introduced by the Republicans that prevents the government haggling with the drug companies over prices. The Democrats' stand has strong support among the elderly.

“The Democrats are keen to reverse a 2003 law that prevents the government haggling with drug companies over prices”"It's incredible that the secretary of state for health is prohibited from leveraging the bargaining power of 43 million citizens," says Drew Nannis of the American Association of Retired Persons. An AARP poll last month of 1000 Americans aged over 18 showed that 86 per cent of younger people back the right of government to negotiate prices.

The CEB would strengthen the hand of healthcare providers in such negotiations by providing them with dispassionate and reliable information on drugs. This would enable them to reject sub-standard or marginally effective drugs in favour of medicines which provide concrete benefits.

Embryonic plans for a CEB were hatched in Washington DC last November, where members of academia, industry and government swapped ideas. Delegates agreed that the CEB should prioritise which treatments to investigate and review existing evidence on how well drugs work. Where there are gaps in knowledge, it should commission and fund clinical trials, or do them itself. Delegates also agreed that the CEB should rate medicines for cost-effectiveness. But they didn't want the CEB to recommend treatments. "Some people think a CEB should provide information on whether something works better or not, but let the market decide whether to fund it," says Pearson.

“The board would prioritise which treatments to investigate and review existing evidence on how well drugs work”This is more cautious than the UK's NICE and its counterparts in Canada and Australia, whose decisions on which treatments to offer must be followed by their country's healthcare systems.

Not surprisingly, the drug industry is against the idea of a federally funded gatekeeper that might meddle in their negotiations with healthcare providers. A year ago, the Pharmaceutical Research and Manufacturers of America, which represents US drug companies, warned that 400,000 people with Alzheimer's would be denied new drugs, as would 9 million suffering from osteoporosis, if a gatekeeper decided on access to medicines. "These patients would face significant hurdles in gaining access to these medicines if a cost-effectiveness standard similar to Australia's was applied to deny reimbursement for these therapies in the US," the report concluded.

Pearson says that the report was simply designed to "spook" US consumers. "It's a scare document," he says. "I think the whole report is rubbish. It makes it seem as if you would be denied access [to drugs] entirely."

Gail Wilensky of Project HOPE, a charity in Millwood, Virginia, which aims to provide healthcare to those in need, says that the CEB's drugs ratings need not necessarily stop insurance companies from funding drugs. They could decide to reimburse anything from 0 to 100 per cent of the costs of a treatment, depending on the CEB's rating.

There's broad agreement that the CEB, however it is set up, should be insulated from political and commercial influence. Some want it to start from scratch with a budget of $4 to $6 billion, from federal funds and healthcare providers who will rely on CEB's advice and conclusions. Others think it should be based within existing organisations such as the trusted Institute of Medicine, which represents US physicians, or the DHHS's own Agency for Healthcare Research and Quality, which already does some research on clinical effectiveness.

Whatever its final shape, the CEB now seems a serious idea in a country desperate to contain costs. "We'll know its fate in the next three to six months," says Pearson. "It will come relatively soon, or Congress may create a commission to recommend on options within a year. This thing will not go away."