• Who says PCORI can’t do cost effectiveness?

    The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

    Yesterday, the New York Times had another installment—this one on the shocking price of asthma drugs—in its must-read series on the extravagant costs of medical care in the United States. Why does the federal government countenance such sharp pricing practices, the article asked? One reason: “Unlike its counterparts in other countries, the United States Patient-Centered Outcomes Research Institute, which evaluates treatments for coverage by federal programs, is not allowed to consider cost comparisons or cost-effectiveness in its recommendations.”

    This is certainly the conventional wisdom. To fend off charges that PCORI was a rationing board, Congress in the Affordable Care Act prohibited it from so much as mentioning costs in funding and running studies. Instead, PCORI’s sole charge is to compare the clinical efficacy of different treatments. It’s a comparative-effectiveness institute, not a cost-effectiveness institute. Period.

    This storyline has always been a bit strained. The gap between comparative-effectiveness research and cost-effectiveness research just isn’t that large. Suppose you want to compare two common treatments. To figure out which one is better, you’d ideally run a trial that randomly assigned otherwise-similar patients to the different treatments. If you can’t do that, you’d want to carry out a large observational study with robust controls. Either way, these sorts of studies are time-consuming and terrifically expensive. But let’s say you managed one or the other—after all, this is just the kind of hard work that PCORI is supposed to encourage. Once you have reliable information about the relative efficacy of the two treatments, all you have to do to get a handle on their cost-effectiveness is plug in their respective costs. Compared to running the underlying study, that’s child’s play.

    In any event, the conventional wisdom is wrong. The ACA does not, in fact, prohibit PCORI from considering costs. Here’s the relevant statutory language: “The Patient-Centered Outcomes Research Institute … shall not develop or employ a dollars-per-quality adjusted life year … as a threshold to establish what type of health care is cost effective or recommended.” (For those not steeped in the lingo, a “quality adjusted life year,” or QALY, is a standardized measurement for judging how much a medical intervention improves health outcomes.)

    The first thing to notice is that this isn’t a flat prohibition on folding cost into PCORI research. It’s drafted much more narrowly. The statute just forbids PCORI from using a dollar-per-QALY metric “as a threshold” for establishing cost-effectiveness or for making recommendations. What does that mean? Well, it means that PCORI can’t say that a treatment costs “too much” just because its costs exceed, say, $50,000 for every QALY saved. That $50,000-per-QALY line would be a threshold.

    But does the statute prohibit PCORI from considering costs altogether? Nope. So far as the ACA is concerned, it’s perfectly OK for the institute to use dollar-per-QALY metrics. It just can’t use those metrics as thresholds. In practice, that leaves a lot of room for PCORI to think about costs. The institute could, for example, compile cost information about the treatments that it studies. No thresholds there. Alternatively, it could rank the cost-effectiveness of alternative treatments. Again, no thresholds. As John McDonough, an insider to the Senate negotiations over the ACA’s enactment, has written, the statute “is silent on including cost-effectiveness within the scope of study.”

    But wait a minute. Didn’t PCORI get caught up in the furor over “death panels”? Wasn’t the dollars-per-QALY language meant to ease the concerns of critics who feared government rationing? Sure. But the language that Congress actually adopted was a hard-fought compromise with those who hoped to see PCORI take a more active role in identifying cost-effective treatments. The squirrelly “as a threshold” language was probably a deliberate effort to paper over the disagreement and get the two sides to agree to something. Opponents of PCORI could crow that they defanged it even as supporters of cost-effectiveness research could claim a quiet victory.

    None of this is to say that PCORI must consider costs. Indeed, in the current political environment, it would be foolish—maybe suicidal—for the institute to dwell on cost concerns. The thing about statutes, though, is that they tend to persist even as the political environment changes. Today, PCORI isn’t in the business of considering the costs of different asthma medications. But tomorrow? Stay tuned.

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    • The question is how long do we think it will take for the social and political environment to change? People still complain about managed care. People still have images of faceless insurer bureaucrats issuing blanket denials for expensive drugs or procedures. Heck, if you are at policy events in DC and one of the Lyndon Larouche people are there, you’ll hear them rant about how we should repeal the HMO act. Those people are crazy, but they do speak to something in the American psyche.

      I’ve worked at two firms where we have a choice between a PPO and an HMO. I’ve uniformly chosen the HMO because I’m cheap. But I do know folks who just want to be able to self-refer to specialists (often for good reason in their case), and they’re in the PPO. I am not sure that Americans will be accepting of cost effectiveness in even twenty years.

    • “…on the shocking price of asthma drugs.” In a word: monopoly.

      US patent law is abominable in allowing drug companies to charge absurd amount for medications that are very cheap to produce. And the “cost of research” canard doesn’t fly–drug companies earn hundreds of times over their research costs. Create a fair marketplace, and drug prices will plummet.