The 21st Century Cures Act: pharmacoeconomic boon or bane?

Abstract

Barriers to entry in healthcare markets constitute one of the overriding concerns of health economists. The recent enactment of the 21st Century Cures Act in the United States reduces statutory entry barriers to the discovery, development, testing, and licensing of drugs and medical devices. Drug and device makers also see the burdensome and time-consuming requirements of the Food and Drug Administration?s approval process as key barriers to lowering the costs of their products, considering it takes a decade of research amounting to $1 billion just to bring a single drug to the market. Along with novel opportunities for medical product innovation and faster treatment of diseases, the expedited approval process carries with it contentious challenges involving the safety, efficacy and value of drugs and devices. The ensuing trade-offs and unintended consequences of such a regulatory game-changer bring to the fore one of the most enduring debates between medicine and economics: Whether – or to what extent – cost and efficiency factors affect clinical inquiry into possible solutions to human illnesses. The practical and theoretical contributions of pharmacoeconomics should enlighten contemporary and future issues and discussions surrounding the implementation of this landmark legislation. After all, despite its undeniably good intent and far-reaching significance, no law can ever be perfect.

Keywords:

• barriers to entry
• clinical trials
• drugs
• economic efficiency
• medical devices
• pharmaceutical markets
• regulatory

JEL classifications:

• C7
• I11
• I18
• K32

Barriers to entry in healthcare markets constitute one of the overriding concerns of health economists. These barriers provide some of the basic conceptual distinctions between health and other goods^1,2. By delimiting supply and competition and, therefore, consumer access, entry barriers can adversely affect the price, quantity, and quality of healthcare^3,4, whether or not they bear directly on welfare⁵. Entry barriers can be natural (or structural) as a result of differences in production costs and demand, artificial when they are intentionally erected or enhanced by incumbent market participants, or statutory if given force of law or regulation⁶. In the pharmaceutical context, these barriers refer to the presence of high “start-up” costs and other obstacles (including regulations) that prevent or delay market introduction of new drugs and devices. In doing so, they restrict medical innovation, faster treatments, and market competition.

The 21st Century Cures Act, passed by the US Congress and signed into law by President Obama in December 2016, represents for the pharmaceutical and medical device industries a pressing and vital measure to reduce statutory entry barriers. Its raison d'etre: “to accelerate the discovery, development, and delivery of 21st century cures”. Among the most heavily lobbied legislative measures in American history, it funds cancer research, mental health treatment, the BRAIN initiative, the battle against opioid abuse, and FDA (Food and Drug Administration) efforts to promote new medical technology. It is timely and fitting that we devote an editorial to this multi-faceted legislation.

Some of its most salient (and controversial) provisions are contained in Title III, which mandates the FDA to expedite clinical testing and approval of new drugs, and, thus, their eventual entry into pharmaceutical markets. It also supports continued exploration of the use of real world data (i.e., healthcare information from electronic health records, billing databases, product and disease registries, patient input, and other atypical sources). Real world evidence need not be incompatible with randomized clinical trials in assessing safety and efficacy of drugs and devices. A “structured, risk-benefit assessment framework” will “facilitate balanced consideration of benefits and risks” and “develop and implement a consistent and systematic approach to the discussion of regulatory decision-making with respect to, and the communication of, the benefits and risks of new drugs”⁷. To realize these objectives, the various sections of Title III call for “patient-focused drug development”, “advancing new drug therapies”, “modern trial design and evidence development”, “patient access to therapies and information”, “antimicrobial innovation and stewardship”, “medical device innovations”, and “vaccine access, certainty and innovation”⁸.

Congressional sponsors hope that life-threatening and irreversibly debilitating diseases will finally find their cure, as this landmark piece of legislation offers a quicker path for “breakthrough” medical technologies⁹. Together with the National Institutes of Health (NIH), the pharmaceutical and medical device industries hailed this legislation for its “sweeping” and “incredibly important reforms to get treatments to people faster”¹⁰. They see the burdensome and time-consuming requirements of the FDA's approval process as key barriers to lowering the costs of their products, considering it takes a decade of research amounting to $1 billion just to bring a single drug to the market¹¹.

Scores of health and consumer advocacy groups vigorously opposed the 21st Century Cures Act as it went through the legislative mill over a 2-year period. They argued that full clinical trials cannot be short-cut with “drug summaries” to prove efficacy, and that drugs could be certified under the new law based on early or premature data, only to be proven ineffective later^12,13. The Public Citizen’s Health Research Group also found the designation of “breakthrough” devices very broad, which could lead to clearance of devices even if they are not yet ready for their market⁹. In addition, few seem aware that funding the $6.3 billion legislation requires a hefty, $3.5 billion budgetary slash (constituting almost 30%) of the Prevention and Public Health Fund established under the Affordable Care Act (“Obamacare”) to help prevent Alzheimer’s disease, hospital-acquired infections, and various health conditions. Many health and consumer advocates thus saw the new legislation as a victory for “Big Pharma”, particularly in a controversial presidential election year^9,12. They raised the seemingly fundamental “disconnect” between bipartisan efforts to pass the 21st Century Cures Act, and unipartisan efforts to repeal the Affordable Care Act¹⁰. As an uninvolved observer, this author witnessed first-hand the countless charges and testimonies exchanged by opposing interests during the long and protracted deliberations that attended this key legislation on Capitol Hill.

Just as a coin has two sides, a game-changer as comprehensive as the 21st Century Cures Act can be deemed as an instrument for either dismantling barriers to medical progress or eroding clinical standards and consumer health protections. That is to say that it will inevitably leave a trail of “winners” and “losers,” and impose benefits and costs, depending on what variables are factored into the equation. For one, many healthcare advocates opposed the new legislation for weakening what they consider to be the FDA's essential protective barriers. The NIH strongly favored it for boosting research funding on drugs and diseases with the support of the pharmaceutical industry.

Yet, there is no gainsaying that the new legislation will have important implications on the price, quantity, quality, and healthcare value of drugs and medical devices. Will fewer randomized controlled trials and human subjects reduce their cost and wait-time at the expense of the desired effects (in terms of safety, efficacy, and better quality-of-life)? Can quality-of-life improvements be maximized at minimum cost, as new standards and protocols for drug development and delivery are put in place by the FDA? Is it possible for the new regulatory framework to inhibit scientific innovation and raise prices (e.g. if it is “captured” by rent-seeking interests)? And to what extent, and with what caveats, can medical economics supply empirical answers or conjectures to these and other questions about the 21st Century Cures Act?

Time will tell. One of the enduring debates between medicine and economics concerns whether (or to what extent) cost and efficiency factors affect clinical inquiry into possible solutions to human illnesses¹⁴. Implicit in this debate is a set of incentives that underlies certain decisions to initiate, suspend, or prematurely terminate clinical trials based on the market potential of a drug or medical device and the expense associated with FDA approval. Against this backdrop, concerns have been raised that the 21st Century Cures Act might make it even more difficult to perform drug or device safety analyses. One pharmacologist largely attributes the insufficiency of clinical trials to continued FDA reliance on a vested interest like the pharmaceutical industry ?to conduct most research on the risks and benefits of medications. It is naive to expect companies to voluntarily fund studies that could sink lucrative products? (p. 2170)¹⁵. He cites, for illustration, how some drug makers ?had funded multiple clinical trials of their selective scrotonin-reuptake inhibitor anti-depressants but reported the results of only the favorable trials – distorting the evidence base physicians use in choosing drugs? (p. 2170)¹⁵.

The case of multiple sclerosis (MS) offers a variant of the same theme. Immunobiological findings and pathophysiological theories—along with advances in biotechnology, enhancements in clinical trial design, and development of magnetic resonance imaging—have made possible a variety of drugs, devices, and procedures in more recent years to slow down MS progression and reduce its severity and associated disabilities. However, market introduction can be slow¹⁴. Based on similar studies, a shift to oral therapies from the standard injectable therapies has also reached MS treatments in recent years; higher compliance and better outcomes have yet to be proven outside of the clinical trial setting¹⁶. Scientists nonetheless lament that “interpretation of these studies has been controversial, with debates over clinical efficacy often being sidelined by issues of health economics” (p. i20)¹⁷.

Bioethical concerns about economic efficiency also abound in this debate. Situations will arise, for instance, where it becomes difficult to recruit or retain human subjects in the four phases of clinical trials without offering them sufficient incentives. Generally, the larger and longer the experiment, the greater is the attraction of employing incentives (innocuous or otherwise) in pharmaceutical research¹⁸. Whether expediting drug approval under the 21st Century Cures Act can tilt the balance in favor of economic considerations, and how these might affect the development, availability, and delivery of drugs, especially for killer diseases and new indications, remains to be seen.

One other point relative to this debate: Any new (and novel) regulatory policy will contain some degree of risk and uncertainty². As stakeholders seek to maximize their gains and minimize their costs under an expedited approval process, we can expect to see ensuing trade-offs and unintended consequences. Pharmaceutical and medical device companies, for example, can considerably expand their markets as the new legislation now allows them to promote off-label uses to insurance companies. In this sense, choices made by drug makers, regulators, and other stakeholders will likely be more strategically interactive.

Game theory in pharmacoeconomics is particularly insightful. It reminds us that repeated interactions among transacting parties (e.g. drug makers and the FDA) over an indefinite period of time tend to breed mutually “cooperative” decision-making (e.g. concerning the value and use of “drug summaries” for new illnesses in lieu of full clinical trial data, the breakthrough device pathway, etc.). This is because infinitely repeating interactions lead each party to acquire more information about the other party’s risk-taking and decision-making propensities, while at the same time establishing “reputations” of their own for certain propensities that will be transactionally useful to the other party^19,20. Voluntary co-operation will likely be facilitated by the statutory nature of most clinical barriers (or protections, depending again on whose standpoint). That is because these barriers are borne out of regulatory fiat, rather than of the specific features and workings of competitive pharmaceutical markets.

Pharmacoeconomic tools and principles will be of immense value under the new risk-benefit assessment framework. By helping establish whether a new or costlier drug or device offers sufficient clinical advantage to justify the cost or increased cost, pharmacoeconomics can enhance both access to new medicines and scientific innovation. In the succeeding issues of the Journal of Medical Economics, we hope to see empirical evaluations of the 21st Century Cures Act that partake of the character of cost-minimization, cost-benefit, cost-utility, and cost-per-QALY, as well as other forms of decision-analytic, modeling. The journal categorizes pharmacoeconomic studies by medical specialty. Their practical—and theoretical—contributions cannot be underscored enough. They will enlighten contemporary and future issues and discussions surrounding the implementation of this landmark legislation. After all, despite its undeniably good intent and far-reaching significance, no law can ever be perfect.

Roger Lee Mendoza School of Business, Wilmington University, New Castle, DE, USA [email protected]

Transparency

Declaration of funding

This paper has received no funding.

Declaration of financial/other relationships

None reported.

Acknowledgements

The author acknowledges with thanks the helpful comments and suggestions of this journal's anonymous peer reviewers and its managing editor, Tanya Stezhka. The editorial assistance of Elizabeth Gural of La Salle University and Charlotte McSharry of Taylor & Francis, Oxford, is also gratefully acknowledged. Nonetheless, the usual caveat applies.