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COST EFFECTIVENESS RESEARCH IS UNDERFUNDED IN HEALTH SYSTEM, CEA CHAIR TELLS SENATE LABOR; INCREASES SHOULD BE BUILT INTO HIGHER BIOMEDICAL RESEARCH FUNDING

Executive Summary

The current health care system spends "much too little" on research into cost effectiveness for therapies and technologies, Council of Economic Advisors Chair Laura D'Andrea Tyson told the Senate Labor Committee Oct. 19 at a hearing on the economic impact of President Clinton's health care reform proposal. "We don't do enough research in cost effectiveness of therapies, whether they are equipment therapy or drug therapy," Tyson asserted. "We need to [spend] more research dollars on looking at alternative therapies, so that we can make better informed judgments over time about which therapies really are cost effective, and which are not. One factor contributing to the low level of cost effectiveness research spending, Tyson noted, is that our current health care system has no incentive to ask the question very often 'how cost effective is this remedy or that remedy.'" As a result, "we have a system in which every player in the system is passing the cost along to someone else and not asking that question enough." Tyson told the panel that she "would like to see us spend more" on examining the cost effectiveness of alternative therapies. The reformed health care system should be constructed, Tyson argued, "so that the incentive is already there for the use of [cost-effective] technologies widely." With luck, Tyson pointed out, "if we change the system, we may actually encourage technological breakthroughs that are much more cost effective." Increased cost effectiveness research should be part of a general increase in the level of biomedical research spending, Tyson noted. Responding to a query from committee member Sen. Harkin (D-Iowa) about what the economic payoff would be from an increased emphasis on biomedical research, Tyson agreed that "the evidence is fairly strong that there are very high returns on this kind of government spending." Harkin noted that outcomes research is a "very important task," but emphasized that progress in basic medical research will be essential to the health care reform effort. "If we don't find the causes and cures for Alzheimer's alone, I don't care what kind of health care system you have out there -- it's going to sink us, because the cost will be exorbitant," Harkin contended. "Yet, no one talks about medical research in medical terms," Harkin objected. "What is the economic impact going to be if we don't find causes and cures and treatments for Alzheimer's, prostate cancer, breast cancer, most of the things that strike us later on in life? And what would the return be if we were to increase our funding in biomedical research by another percent -- rather than 1%, make it 2% or 3%?" Harkin also pointed out that increased biomedical research spending is "going to create jobs." Not only will high-tech jobs be created, he suggested, but "the whole education system" will be encouraged "to move in that direction." Therefore, by putting more money into biomedical research and assuring steady funding for researchers, the government would have an effect in terms of "the types of jobs that are created [and] the pull on getting young people to take up this field of study in college or postgraduate study." That also "has an economic impact," Harkin asserted, but "you won't find this in any of the talk on health care reform." Agreeing with Harkin's assessment of the importance of basic biomedical research, Tyson assured him that she would try to make it part of the health care reform discussion. Tyson also warned: "I personally think that we run a great danger, not just in the biomedical area but in all of those areas important to the country -- we need to make sure that we don't in a short-sighted way, undermine what is the fundamental foundation of our long-term prosperity." America's prosperity, she maintained, "is based very much on its basic scientific break-throughs." The country's biotechnology industry, Tyson noted, "is in no small measure the consequence of our basic biomedical research strength."
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