In their scholarly paper, Vernon and Goldberg map the range of CER-induced reductions in R&D spending into their “opportunity costs as measured by: (i) forgone life years, (ii) quality-of-life improvements, and (iii) dollars.” They make two critical points: 1. The productivity of investment in pharmaceutical R&D is remarkably high—perhaps one of the most productive uses of capital in the economy, and 2. Firm incentives to invest in pharmaceutical R&D will likely be quite sensitive to the cost of conducting CER prior to and a condition of reimbursement. As a result, incentives will be adversely affected. “Taken together…the economic cost of new CER regulations will have a deleterious effect on social welfare, doing far greater harm than good.”
Those favored CER assume that many new drugs, devices, and technologies greatly boost healthcare costs and that all healthcare spending in the country could be cut if the lowest spending in the county could be adopted nationwide. Yet evidence shows “the extraordinary economic value attributable to medical and pharmaceutical innovation…and that medical innovation has yielded significant increases in life expectancy” and “actually increases in the efficiency and diffusion of medical innovations…have allowed humans to work less while producing more and therefore living longer” often with less cost.
“We believe that public policy affecting drug development investment incentives consistently fails to capture the value of this well-documented—and increasing—contribution of medical innovation to human progress….CR is at odds with empirical evidence that medical innovation—not regulation—increases life expectancy and reduces the cost of services needed to obtain such gains,” the study said.
“CER can delay time to market and reduce the rate and extent of technological diffusion….The impact of CER found the process delayed use by over two years. CER use, the study authors said, as part of reimbursement decisions in cancer was associated with 60 percent fewer medications being made available than when such reviews were not used.
“Most importantly,” the authors said, “CER will be used by [state] health exchanges [under ObamaCare] and the government in determining what health services and products will be covered under the new health care law.” The evidence can lead to “only one conclusion,” Vernon and Goldberg wrote: “CER regulations pose a clear and present threat to social welfare…a very costly one indeed.”
In addition, the authors added, government policies or regulations that impede medical innovation threaten the future solvency of such financially shaky programs such as Social Security and Medicare.
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