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The Impact of Comparative Effectiveness Research on Health and Health Care Spending

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  • Anirban Basu
  • Tomas J. Philipson

Abstract

Public technology assessments in general and Comparative Effectiveness Research (CER) in particular have been justified by offsetting benefits of improving patient health and reducing health care spending. However, little conceptual and empirical understanding exists concerning the quantitative impact of public technology assessments such as CER. This is needed to assess whether CER has benefits that outweighs its investment costs. This paper provides a systematic framework to analyze the impact of CER on health outcomes and medical care spending. We interpret CER to infuse evidence on product quality into the market place declaring product winners and losers. This shifts demand by patients and doctors as well as coverage by third party payers towards the winners of CER studies and away from losers. We trace out the spending and health implications of such responses to evidence on product quality in privately and publicly financed health care markets. We simulate these effects for antipsychotics that are among the largest drug classes of the US Medicaid program and for which CER has been conducted by means of the CATIE trial in 1999. Our main conclusion, from both the conceptual and empirical analysis, is that investments into CER may not always have the intended benefits of lowering spending and improving health outcomes. Because CER may result in higher spending and worse health, it is important to have methods to evaluate quantitatively the impacts of CER investments.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15633.

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Date of creation: Jan 2010
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Publication status: published as Basu, Anirban & Jena, Anupam B. & Philipson, Tomas J., 2011. "The impact of comparative effectiveness research on health and health care spending," Journal of Health Economics, Elsevier, vol. 30(4), pages 695-706, July.
Handle: RePEc:nbr:nberwo:15633

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  1. Anirban Basu, 2011. "Economics of Individualization in Comparative Effectiveness Research and a Basis for a Patient-Centered Health Care," NBER Working Papers 16900, National Bureau of Economic Research, Inc.
  2. Anupam B. Jena & St�phane Mechoulan & Tomas J. Philipson, 2010. "Altruism and Innovation in Health Care," Journal of Law and Economics, University of Chicago Press, vol. 53(3), pages 497 - 518.
  3. Tomas J. Philipson & Dana Goldman, 2007. "Integrated Insurance Design in the Presence of Multiple Medical Technologies," American Economic Review, American Economic Association, vol. 97(2), pages 427-432, May.
  4. Pauly, Mark V. & Blavin, Fredric E., 2008. "Moral hazard in insurance, value-based cost sharing, and the benefits of blissful ignorance," Journal of Health Economics, Elsevier, vol. 27(6), pages 1407-1417, December.
  5. Jena, Anupam B. & Philipson, Tomas J., 2008. "Cost-effectiveness analysis and innovation," Journal of Health Economics, Elsevier, vol. 27(5), pages 1224-1236, September.
  6. Duggan, Mark, 2005. "Do new prescription drugs pay for themselves?: The case of second-generation antipsychotics," Journal of Health Economics, Elsevier, vol. 24(1), pages 1-31, January.
  7. Anupam Jena & Tomas Philipson, 2009. "Endogenous Cost-Effectiveness Analysis in Health Care Technology Adoption," NBER Working Papers 15032, National Bureau of Economic Research, Inc.
  8. Aaron A. Stinnett & John Mullahy, 1998. "Net Health Benefits: A New Framework for the Analysis of Uncertainty in Cost-Effectiveness Analysis," NBER Technical Working Papers 0227, National Bureau of Economic Research, Inc.
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Cited by:
  1. Basu, Anirban, 2011. "Economics of individualization in comparative effectiveness research and a basis for a patient-centered health care," Journal of Health Economics, Elsevier, vol. 30(3), pages 549-559, May.
  2. Jena, Anupam B. & Philipson, Tomas J., 2013. "Endogenous cost-effectiveness analysis and health care technology adoption," Journal of Health Economics, Elsevier, vol. 32(1), pages 172-180.
  3. Amitabh Chandra & Anupam B. Jena & Jonathan S. Skinner, 2011. "The Pragmatist's Guide to Comparative Effectiveness Research," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 27-46, Spring.
  4. Mousnad, Mohamed Awad & Shafie, Asrul Akmal & Ibrahim, Mohamed Izham, 2014. "Systematic review of factors affecting pharmaceutical expenditures," Health Policy, Elsevier, vol. 116(2), pages 137-146.
  5. Anirban Basu & David Meltzer, 2012. "Private Manufacturers’ Thresholds to Invest in Comparative Effectiveness Trials," PharmacoEconomics, Springer, vol. 30(10), pages 859-868, October.
  6. Anirban Basu, 2012. "Estimating Person-Centered Treatment (PeT) Effects Using Instrumental Variables," NBER Working Papers 18056, National Bureau of Economic Research, Inc.
  7. Evans, H.; & Basu, A;, 2011. "Exploring comparative effect heterogeneity with instrumental variables: prehospital intubation and mortality," Health, Econometrics and Data Group (HEDG) Working Papers 11/08, HEDG, c/o Department of Economics, University of York.

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