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REGULATORY SPONSORED ARTICLE Sponsored article Imperative: Comparative Effectiveness Research Pressures by government and private payers on biopharmaceutical companies to establish the value of their products presents the necessity to develop outcomes data which will affect all aspects of the biopharma product lifecycle. By Morgan Lewis & Bockius partner Stephen Paul Mahinka. Structural Changes in Biopharmaceutical Industry Stimulating Comparative Effectiveness Research For most of the existence of the modern biopharmaceutical industry, the selection of potential candidates for research and development, determinations of pricing for products, and marketing have been divorced from comparative effectiveness considerations. With the inexorable rise globally of healthcare expenditures, coupled with pressures on national healthcare budgets and the expansion of healthcare insurance and coverage, traditional modes of operation are increasingly not possible for the biopharmaceutical industry. Whether referred to as comparative effectiveness research (CER), outcomes research, pharmacoeconomics, or healthcare technology assessment (HTA), the imperative is clear: Biopharma companies must incorporate cost- effectiveness and value-demonstration data at all levels of the product lifecycle. There are numerous, mutually-reinforcing, structural changes in the global biopharmaceutical industry environment that have created this substantially-enhanced focus on cost-containment mechanisms. Among the principal driving changes are: • Demographic changes, significantly increasing demand for biopharmaceutical products. Among the industrialized nations, in Europe, the US, and Japan, changing demographics, with an increasingly aging population that traditionally demands provision of much greater levels of healthcare products and services; • Globally, a significantly decreased capability to pay for the rise of demand for healthcare products and services in view of reduced economic growth; and • The continued rise in prices of many bio18 pharma products, especially in areas such as oncology,1 as the recent protest by a group of oncologists regarding pricing of Sanofi’s Zaltrap, which led to a 50% reduction in the product’s price;2 • In the US, the expansion of healthcare insurance coverage to approximately 30 million people by the Patient Protection and Affordable Care Act of 2010 (PPACA, or “Obamacare”); and • In the US, the continuing shift of over 70 million people in the baby-boom generation to over 65 years old (which began in 2011). These structural shifts have been accompanied by other developments, some statutory and others reactions to statutory changes, including consolidation among biopharma industry customers intended in part to assist in negotiating for price reductions. These increasing pressures to develop and utilize CER are expected to have a “substantial impact” within the next three to five years, according to one recent survey.3 In the US, numerous changes made by PPACA were intended to address this increased demand for products and services through a combination of initiatives that have the potential to impose demand levels and pricing/payment restrictions. These include: • Stimulating comparative effectiveness research; • Creation of a regulatory approval pathway for biosimilars; • Creation of the Independent Payment Advisory Board (IPAB), charged with focusing on control of Medicare expenditures; • Creation of the Patient-Centered Outcomes Research Institute (PCORI), charged with focusing on CER; • Stimulating the development and use of standardized quality of care / quality of service guidelines by healthcare providers; • Stimulating the use of healthcare information technology by healthcare providers to manage/reduce demand and increase efficiency; and • Stimulating the development and use of hospital / physician practices combination entities to reduce demand and prices for healthcare products and services and increase efficiency, termed Accountable Care Organizations (ACOs). PPACA and Comparative Effectiveness Research PPACA contains several provisions directly supporting the development of CER concerning healthcare products and services. A new entity, established under Section 6301 of PPACA, is the PCORI, which is intended to assist in conducting CER and disseminating research findings. PCORI is charged with identifying national priorities, establishing a methodology committee, and developing a research project agenda for CER. Because of biopharma industry concerns that PCORI would be used essentially as a price-reduction entity, PPACA required that PCORI’s CER “findings not be construed as mandates for practice guidelines, coverage recommendations, payment, or policy recommendations” This directive, however, is limited only to government use of the findings. Private payers can use PCORI’s findings as a basis for their product or service approval or reimbursement decisions. This difference has the clear potential to allow for implementation of CER sponsored by PCORI notwithstanding the ostensible prohibition of any such consequences from cre- LMG LIFE SCIENCES 2013