Measuring the patient health, societal and economic benefits of US pediatric therapeutics legislation.

Through at least the mid-1990s, children were often referred to as 'therapeutic orphans' for whom many treatments were administered without the benefit of appropriate studies to guide drug labeling for dosing and other critical therapeutic decisions. At that time, there were no incentives for manufacturers to pursue such work, nor regulatory requirements to compel these studies. Congress addressed this by including an important provision titled the Best Pharmaceuticals for Children Act (BPCA) in the 1997 Food and Drug Administration Modernization and Accountability Act. This was complemented by another key piece of legislation, the Pediatric Research Equity Act (PREA) in 2003. The former Act and its successors created an incentive for firms to study on-patent drugs in pediatric populations by extending the market exclusivity of a medicine by 6 months. The latter was a requirement that provided the US FDA with the authority to require studies of drugs in children if an adult indication also occurs in children. In the current paper, we consider the effects of both pieces of legislation in terms of the health, societal, and economic benefits they have likely imparted and will continue to provide in the future. We conclude that the gains have been substantial - both in terms of safer and more effective use of medicines in children and in terms of new research that has been incentivized by the BPCA exclusivity provision. We estimate the gross economic benefits from the latter alone to be approximately $US360 billion.

Comparative effectiveness regulations and pharmaceutical innovation.

As healthcare reform evolves and takes shape, comparative effectiveness research (CER) appears to be one of the central topics on the national healthcare agenda. Over the past couple of years, comparative effectiveness has been explicitly incorporated in more than ten bills. For example, the passage of the American Recovery and Reinvestment Act of 2009 authorized $US1.1 billion for CER. Comparative effectiveness, when costs are formally considered, offers the hope of efficient resource allocation within US healthcare markets. However, the future operationalization and implementation of comparative effectiveness is uncertain, and there exist potentially negative, and unintended, consequences under certain scenarios. One example, and the focus of this article, is pharmaceutical innovation. Incentives for pharmaceutical R&D could be affected if drug development costs increase as a result of firms having to bear, directly or indirectly, the costs of running larger, randomized, head-to-head comparative effectiveness trials. While this may or may not be the case with current and future comparative effectiveness legislation and its subsequent implementation, the potential consequences for pharmaceutical innovation warrant recognition. This is the purpose of the article. To achieve this goal, we develop several models of clinical trial design, drug development costs and R&D investment. By example, we shed light on the causal links between the models and the ways in which industry R&D investment can be affected.

Financial effects of pharmaceutical price regulation on R&D spending by EU versus US firms.

EU countries closely regulate pharmaceutical prices, whereas the US does not. This paper shows how price constraints affect the profitability, stock returns and R&D spending of EU and US firms. Compared with EU firms, US firms are more profitable, earn higher stock returns and spend more on R&D. We tested the relationship between price regulation and R&D spending, and estimated the costs of tight EU price regulation. Although results show that EU consumers enjoyed much lower pharmaceutical price inflation, we estimated that price controls cost EU firms 46 fewer new medicines and 1680 fewer research jobs during our 19-year sample period. Had the US used controls similar to those used in the EU, we estimate it would have led to 117 fewer new medicines and 4368 fewer research jobs in the US.

Determinants of gender differences in health among the elderly in Latin America.

This paper identifies the main gender differences in health and socio-economic characteristics of the elderly in four Latin American cities. Using locally weighted regressions as well as a flexible model specification that treats age non-parametrically, we investigate whether these unadjusted gender gaps in health are due to gender differences in the distribution of age and other explanatory variables. Interestingly, for all cities, the analyses show a gender gap in health in favour of males at each age. The gaps are larger when one uses functional impairment in mobility and personal self-care as indicators of an individual's health instead of self-reported health. Furthermore, controlling for demographic characteristics, baseline health and the availability of family support do little to change the disadvantage for women in measured health outcomes. Controlling for socio-economic variables does, however, reduce most of the gender differences in health.

Drug development costs when financial risk is measured using the Fama-French three-factor model.

In a widely cited article, DiMasi, Hansen, and Grabowski (2003) estimate the average pre-tax cost of bringing a new molecular entity to market. Their base case estimate, excluding post-marketing studies, was $802 million (in $US 2000). Strikingly, almost half of this cost (or $399 million) is the cost of capital (COC) used to fund clinical development expenses to the point of FDA marketing approval. The authors used an 11% real COC computed using the capital asset pricing model (CAPM). But the CAPM is a single factor risk model, and multi-factor risk models are the current state of the art in finance. Using the Fama-French three factor model we find that the cost of drug development to be higher than the earlier estimate.

Institutional profile. UNC Institute for Pharmacogenomics and Individualized Therapy: interdisciplinary research for individual care.

The Institute for Pharmacogenomics and Individualized Therapy (IPIT) at the University of North Carolina at Chapel Hill (NC, USA) is a collaborative, multidisciplinary unit that brings together faculty from different disciplines and crosses the traditional departmental/school structure to perform pharmacogenomics research. IPIT investigators work together towards the goal of developing therapies to enable the delivery of individualized medical care. The NIH-supported Comprehensive Research on Expressed Alleles in Therapeutic Evaluation (CREATE) group leads the field in the evaluation of pathways regulating drug activity, and also provides a foundation for future IPIT research. IPIT members perform bench research, clinical cohort analysis and prospective clinical intervention studies, research on the integration of pharmacogenomic therapy into practice and research to foster global health pharmacogenomics application through the Pharmacogenetics for Every Nation Initiative. IPIT Investigators are actively incorporating a pharmacogenomics curriculum into existing teaching programs at all levels.

Financial risk of the biotech industry versus the pharmaceutical industry.

The biotech industry now accounts for a substantial and growing proportion of total R&D spending on new medicines. However, compared with the pharmaceutical industry, the biotech industry is financially fragile. This article illustrates the financial fragility of the biotech and pharmaceutical industries in the US and the implications of this fragility for the effects that government regulation could have on biotech firms. Graphical analysis and statistical tests were used to show how the biotech industry differs from the pharmaceutical industry. The two industries' characteristics were measured and compared, along with various measures of firms' financial risk and sensitivity to government regulation. Data from firms' financial statements provided accounting-based measures and firms' stock returns applied to a multifactor asset pricing model provided financial market measures. The biotech industry was by far the most research-intensive industry in the US, averaging 38% R&D intensity (ratio of R&D spending to total firm assets) over the past 25 years, compared with an average of 25% for the pharmaceutical industry and 3% for all other industries. Biotech firms exhibited lower and more volatile profits and higher market-related and size-related risk, and they suffered more negative stock returns in response to threatened government price regulation. Biotech firms' financial risks increase their costs of capital and make them more sensitive to government regulations that affect their financial prospects. As biotech products grow to represent a larger share of new medicines, general stock market conditions and government regulations could have a greater impact on the level of innovation of new medicines.

Economic evaluation and cost-effectiveness thresholds: signals to firms and implications for R & D investment and innovation.

In this article we describe how reimbursement cost-effectiveness thresholds, per unit of health benefit, whether set explicitly or observed implicitly via historical reimbursement decisions, serve as a signal to firms about the commercial viability of their R&D projects (including candidate products for in-licensing). Traditional finance methods for R&D project valuations, such as net present value analyses (NPV), incorporate information from these payer reimbursement signals to help determine which R&D projects should be continued and which should be terminated (in the case of the latter because they yield an NPV < 0). Because the influence these signals have for firm R&D investment decisions is so significant, we argue that it is important for reimbursement thresholds to reflect the economic value of the unit of health benefit being considered for reimbursement. Thresholds set too low (below the economic value of the health benefit) will result in R&D investment levels that are too low relative to the economic value of R&D (on the margin). Similarly, thresholds set too high (above the economic value of the health benefit) will result in inefficiently high levels of R&D spending. The US in particular, which represents approximately half of the global pharmaceutical market (based on sales), and which seems poised to begin undertaking cost effectiveness in a systematic way, needs to exert caution in setting policies that explicitly or implicitly establish cost-effectiveness reimbursement thresholds for healthcare products and technologies, such as pharmaceuticals.

Social welfare and adolescent vaccination programs in the United States: the economic opportunities for a systematic expansion.

In this article, the authors review current literature to analyze the cost-effectiveness of seven vaccines now available for adolescents and one that is in development. An analysis is also performed regarding the cutoff price that deems a vaccine "cost-effective." Often, $50,000 is the limit below which a drug is viewed as cost-effective. Our article contends that $160,000 could be a new limit below which the cost-effectiveness of a vaccine is better reflected. Based on standard economic valuations of life years in the United States and the preponderance of evidence from the cost-effectiveness literature, there is a compelling case for expanding adolescent vaccine programs, guidelines, and educational initiatives in the United States; there exist considerable economic benefits in excess of costs from policies that may achieve this objective.

The future costs, risks and rewards of drug development: the economics of pharmacogenomics.

This article discusses the evolving field of pharmacogenomics, which is the science of using genomic markers to predict drug response, and how it may impact the future costs, risks and returns to pharmaceutical research and development (R&D). We uncover a number of factors and issues that are likely to influence the expected returns and, hence, the incentive to invest in new pharmaceutical R&D in tandem with the development of pharmacogenomics. Specifically, we identify how pharmacogenomics may lower the cost of drug development by shortening drug development times. Thus, pharmacogenomics may lead to an increase in a drug's effective patent life, and may also increase the demand and adoption rate for new products. For these and other reasons, pharmacogenomics may one day enhance expected future returns to R&D, leading to higher levels of R&D investment and an increased pace of pharmaceutical innovation. Our conclusions must be read with much caution, however, as there is considerable uncertainty as to how the area will evolve, both clinically and economically. The time horizon necessary for the science to develop and be adopted into clinical practice is not clear. Nevertheless, we think the issues and factors outlined in this article shed light on possible future economic outcomes and changes in the industry's structure, conduct and performance. Hopefully, this will provide researchers with avenues to pursue regarding a better understanding of the economics of pharmacogenomics.

Race and health disparities among seniors in urban areas in Brazil.

Objective. This article examines racial health disparities among the elderly in Sao Paulo, Brazil. It also explores whether these disparities differ among income groups. Methods. The study follows the conceptual framework developed by LaVeist (1994). A multistage analysis and Oaxaca-Blinder decomposition are used to explore the sources of racial disparities in health. Results. White seniors report better health than Black seniors. This is the case even after controlling for baseline health conditions and several demographic, socioeconomic, and family support characteristics. Discussion. This article suggests that the two most important factors driving racial disparities in health among seniors are historical differences in rural living conditions and current income. Present economic conditions are more relevant to racial disparities among poor than among rich seniors. Racial differences in health not attributable to observable characteristics are more important when comparing individuals in the upper half of the income distribution.

Pharmaceutical risk-sharing agreements.

Increased spending on pharmaceuticals continues to foster debate over healthcare policy. The increasing costs of bringing products to the market, as well as increased utilization of pharmaceuticals contribute to increased pharmaceutical expenditure; however, appropriate pharmaceutical use can, in certain cases, reduce overall healthcare costs. Nevertheless, the perception of high drug prices still puts pressure on pharmaceutical companies to build confidence in the proposition that their products are worth the additional expense. One potential approach to building this confidence, and maintaining investment incentives, is for the pharmaceutical company to share the risk of a situation in which there is uncertainty about whether the product is effective for the consumer and payer. Such risk-sharing arrangements for pharmaceuticals, like warranties, can be used to signal high quality when product quality is not fully observable. While there may be difficulties in devising such schemes for every product, such risk-sharing plans may become a staple feature of the market in the future.

Future of drug development: the economics of pharmacogenomics.

This report models how the evolving field of pharmacogenomics, the science of using genomic markers to predict drug response, may impact drug development times, attrition rates and costs. While there still remains an abundance of uncertainty around how pharmacogenomics will impact the future landscape of pharmaceutical and biological R&D, we identify several likely outcomes. We conclude pharmacogenomics (as defined in this context) has the potential to significantly reduce both expected drug development costs via higher probabilities of technical success, shorter clinical development times and smaller clinical trials. Our conclusions are, of course, accompanied by numerous caveats.