BioWorld International Correspondent

TORONTO - Policy makers and consumers are increasingly questioning whether new drugs are worth the cost, but the narrow perspective of a "silo budgeting" approach means the savings from fewer hospital or doctor visits and quality of life issues are not captured well in the debate.

"Drug costs are well accounted for but the benefits aren't," Fred Telling, vice president of corporate and strategic management at Pfizer Inc., of New York, told attendees of the Biotechnology Industry Organization's International Biotechnology Convention & Exhibition.

"Policy makers charged with looking at rising costs should see that the amount and quality of care has risen more than the costs," he said.

However, there is an increasing body of research that demonstrates that innovations in medical technology have benefits that more than pay for themselves in terms of reduced illness, avoided surgery and hospitalization, and increased productivity.

Robert Topel, professor of economics at the University of Chicago, has developed a formula for measuring what people will pay for life-extending innovations.

"We are not measuring the contribution of medical research to gross domestic product, or the contribution to productivity, but trying to measure what it means to individuals," he said.

Applying the formula results in a finding that the benefits of medical research totaled $73 trillion between 1976 and 1998, or $2.6 billion per year.

"In other words, improvements in life expectancy contribute as much to overall welfare as improvements in the economy," Topel said.

Similarly, the formulation shows that a 10 percent reduction in cancer deaths would be worth $44 billion per annum.

"Investments in medical research are small by comparison, at $35 billion in 1995, or 3.5 percent of direct health expenditure," Topel said. "A $200 billion war on cancer would be worth it, if it reduced deaths by just 10 percent."

Topel said the economic value of disease reduction increases significantly over time. "The bottom line is that improvements in health and longevity have had an enormous economic value," he said.

The costs of mental health care are increasing rapidly but Ernst Berndt, an economist at MIT School of Management, said his research shows that new drugs have improved outcomes and decreased the cost of treating major depression. The arrival of selective serotonin reuptake inhibitors has shifted treatment away from psychotherapy alone to a mixed regimen of therapy and drug treatment, hence reducing costs.

"This may be counter to the statistics, but the statistics don't capture the shift from psychotherapy to combined treatment," Berndt said.

He said studies in other diseases, including heart attacks and cataract treatment, give good indications that innovation does not necessarily lead to higher costs, but can lead to lower costs while delivering better health outcomes.

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