WASHINGTON -- Although President Clinton backed offmandating price controls on the health care industry last week,certain questions relevant to the biotechnology sector remain.
Lisa Raines, Genzyme Corp.'s vice president for governmentrelations, for example, suggested that the door may still beopen for regulating new product prices. And apprehensionlingers over the possibility of a price review board.
To gauge the real cost of new drugs, such a board would haveto look beyond the drugs' price tag, some industry observerssuggested. Although new drugs may seem expensive, theirbenefits could lead to overall savings in lower hospital costsand greater worker productivity.
Data from one of the few comprehensive studies, relativelyspeaking, on the question of cost-effectiveness were mixed. Thestudy, a literature review by Amy Jones-Grizzle and J. LyleBootman of the College of Pharmacy, Center for PharmaceuticalEconomics at the University of Arizona, Tucson, compared threebiotechnology drugs with conventional alternatives.
One drug, Genentech Inc.'s tissue plasminogen activator (t-PA),was a clear loser when compared with the conventionalalternative, streptokinase. Use of t-PA would cost the country$100 million annually to buy a tiny therapeutic advantage, theresearchers found. And this relied on a $700 underestimate ofthe price Genentech ultimately set.
Amgen Inc.'s Erythropoietin (EPO) also adds considerably toU.S. health care costs -- more than $2 billion, George Rathmann,chief executive of Icos Corp., told BioWorld. But there are noalternatives to the benefits the drug brings dialysis patients.
Rathmann believes a valid cost/benefit analyses of EPO shouldaccount for indirect costs such as the increased productivity ofpatients who return to work. Then EPO would prove a winner.
The one clearly money-saving drug was alpha interferon-2bfor hairy cell leukemia, which saved nearly $10,000 per patientover the conventional Chlorambucil.
But studies of cost effectiveness are fraught with complications.
For example, different interventions might produce differentoutcomes, Kent Thompson, principle at Ernst & Young, toldBioWorld. The real goal of treatment is more complex than costcontainment. "You are trying to get the best outcomes at themost reasonable cost."
Ultimately, issues of cost-effectiveness segue into ethicalquestions. Drugs that prolong life for chronically ill patientsmay raise health care costs as patients require ancillarytreatments longer, physician and health care economist WilliamSchwartz told BioWorld.
"How do you value an extension of life?" Gene Reeder, professorin the college of pharmacy at the University of South Carolina,asked rhetorically.
The uncertainty over global savings was underscored byvarying answers from different experts to the question of howbiotechnology would affect overall health care costs.
In general, said Bootman, drugs "are cost-beneficial to society,especially compared to the alternative."
"There are not enough data to make even an educated guess,"said South Carolina's Reeder.
Companies will "try to get what the market will bear, and tooffset R&D costs," Richard Milne, editor of PharmacoEconomicstold BioWorld. And that could prevent biotechnology fromreducing global health care costs.
Some biotechnology companies, including Immunex Corp.,Amgen and Icos, are conducting their own studies, often withhelp from institutions such as Arizona's Center forPharmaceutical Economics and Georgetown University's ClinicalEconomics Program.
The motivation, said Rathmann, "is to break away fromsubjective arguments for pricing, which range all the way from'I spent so much on R&D that you have to allow me to chargean arm and a leg,' to 'I can't show it's cost-effective but it's awonderful product and it's worth it.' "
But the deeper motivation, said Rathmann, is that marketforces are awakening. Large payors, such as healthmaintenance organizations (HMOs), are using their clout tobargain down drug prices.
-- David C. Holzman Washington Editor
(c) 1997 American Health Consultants. All rights reserved.