Comparative effectiveness research presents a barrier to innovation based on the uncertainty it creates within the payer community,
Steven Burrill, CEO of venture capital firm Burrill & Co. said.
Speaking at the ECRI Institute’s “Comparative Effectiveness and Personalized Medicine: An Essential Interface” conference, Burrill called that barrier “extraordinary.” The conference was held Oct. 19-20 at the National Institutes of Health.
“The opportunity for the innovative company is dramatically changed” from years ago, Burrill said. He noted that despite the “massive” amounts of cash that go into drug discovery today, there are only about 20 new drugs on the market every year.
“You have to remember that most of the capital that enables us to move [innovative] technology from [development] into the marketplace is because people like I will invest in it,” Burrill said. “People like me will not invest in it because we are uncertain about what we have to do to prove comparative effectiveness.”
Burrill went so far as to say that comparative effectiveness also provides a significant benefit to products already on the market.
“Those products don’t need to prove they are comparatively effective to stay on the market,” Burrill said. “New products have to prove it to get there. What we did accidentally was to provide an extraordinary benefit to the old products that aren’t innovative and an extraordinary barrier to entry to new products that are innovative because the capital markets won’t be there” to bring those products to market.
Overall, Burrill did not dismiss the usefulness of the information that comparative effectiveness research will provide.
“There’s no question that as societies, we’d like to know that the things coming to market work better and cost less than things that are in the market,” Burrill said. “But the short-term impact of the next decade or decade and a half is that may never happen because we’ve just squashed innovation.”
Venture capital interest in the evolution of comparative effectiveness is a relatively new phenomenon. Earlier this year, venture capitalists speaking at the Drug Information Association’s annual meeting put the spotlight on the growing role comparative effectiveness is playing in investment decisions (“Venture Capitalists Have A Growing Interest in Comparative Effectiveness,” “The Pink Sheet,” June 21, 2010).
Speaking alongside Burrill was Sue Siegel, partner at venture capital firm Mohr Davidow Ventures, who noted that venture capitalists are struggling to advise the companies in which they invest on how to get the evidence they need to satisfy coming requirements for comparative effectiveness.
“We are sort of scratching our heads, to be honest,” Siegel said. “It is something that we are trying to figure out. Is there a way to play in this particular area and still make returns?”
She noted that in a world where CER is a critical component, “the big prize is getting adoption as it relates to clinical utility and outcomes and really getting [a new product] as part of the standard practice of medicine.”
Different Payer Requirements
A key factor that makes Burrill pessimistic about the ability of innovators to thrive in a CER-dominated environment is the complexity of the payer system in the United States, a system where the varied payers might have different requirements and might not even be aware of innovations that are available.
“Innovation is stymied today because the payer community is not aware of or [does not] pay for the value we create,” Burrill said, referring specifically to diagnostic tests that will be a key stepping stone toward personalized medicine.
Siegel concurred. “There aren’t clear reimbursement paths right now,” she said, emphasizing that diagnostics are having a very difficult time.
Burrill continued: “We live in a world that we create … fabulous products. We throw them over the wall to doctors and hospitals and ultimately patients, but they have nothing to do with who pays for them, so in this country we have an even more complex payer dynamic, and we as innovators are totally naïve about the context of what payers are going to pay for.”
Compounding the problem is the different way payers judge the worth of innovation.
“We really don’t understand the value equation because the value equation” is different for all of the different payers. “So now I not only have to prove that it works and it’s better, but I have to prove it to every payer which … will run me through different things. The burden is extraordinary.”
The payer that has been most forthcoming with its expectations for CER is WellPoint, which recently published guidelines explaining how it will evaluate CER studies submitted by product manufacturers (“WellPoint’s CER Guide Explains How It Will Determine Usefulness of Studies,” “The Pink Sheet,” May 24, 2010).