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Executive Summary

COMPARATIVE VALUE OF NEW PRODUCTS WOULD BE ASSESSED BY NATIONAL COMMITTEE under a concept proposed by Rep. Wyden (D-Ore.) in a speech before the Federation of American Health Systems' annual conference in Washington, D.C. March 25. Wyden suggested an impartial agency -- "something like a National Pharmacy and Therapeutics Committee" -- that "would publish its judgment as to whether a particular new medical technology has been shown to be superior to existing products, either in terms of cost or effectiveness." Under Wyden's proposal, clinical studies to demonstrate the comparative value of new products would be conducted by drug and device manufacturers, with the design of those studies subject to approval by the national committee. To fund studies of the effectiveness of new medical and surgical procedures, "all federally approved insurers would assess a small premium surcharge," he suggested. There would be a two-fold incentive for manufacturers to conduct comparative value studies, Wyden said: shorter review times for breakthrough technologies and increasing pressure from managed care organizations to include cost-effectiveness studies in the development process. FDA reviews for "the small number of worthwhile breakthrough technologies that emerge every year" could be cut short, Wyden pointed out, "arranging instead for intensive epidemiological studies or controlled trials of those products after they get to market to be sure the early promise was really there." In addition, Wyden noted, "as more and more health care is purchased through cost-sensitive managed-care organizations," the pronouncements of the national expert panel "would become important enough to persuade manufacturers to undertake the necessary studies." A National Pharmacy and Therapeutics Committee was part of Sen. Pryor's (D-Ark.) original Medicaid budget bill in 1990 but was removed from a subsequent version. The House version of that bill, sponsored by Wyden, did not contain such a provision. The success of long-term health care reform will depend upon its ability to "control exploding health costs," Wyden argued, and the ability to distinguish products that are superior to existing products will be vital to spending control. Wyden presented his proposals as a tool to "cool off the superheated R&D engine that is cranking our new health care products as fast as scientists can publish the original discoveries that made the products possible." Until President Clinton's long-term reform package is put into place, Wyden noted, the president's choice for a plan to hold down health costs for the next couple of years "seems to have come down to either a Kafkaesque system of provider price controls, or a more practical alternative of regulating insurance premiums." Choosing price controls would "virtually ensure that the initial taste most people would have of our 'new' health system would be sour," Wyden contended. Instead, Wyden suggested, the president should choose "well-crafted insurance premium regulation," which would combine premium limits with insurance reforms. The Oregon Democrat proposed that, starting next year, federal law could tie the annual rate of increase in health insurance premiums to the percentage growth rate in the Gross Domestic Product, "plus a couple of additional percentage points." An exemption could be allowed for a one-time, higher "risk-adjusted" premium for a plan that could demonstrate that its enrollees are sicker than it could afford under the limited premiums. Federal or state officials could develop fee schedules that insurers could choose to use to pay providers. The legislation would also protect consumers by including a ban on pre-existing condition exclusions and guaranteeing issue and renewability of insurance coverage. The government would have to allow immediate alternative coverage for enrollees whose original plans have faltered. The "huge administrative savings" that would come from the inevitable consolidation of the insurance industry that would follow such legislation would be used to "jump-start" the program as the uninsured join plans, Wyden suggested. He also noted that government administrative costs would be substantially lower in dealing with "only a few hundred health insurance plans" rather than all the doctors, hospitals, and pharmacists to which price controls could apply.

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