NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Impact of Comparative Effectiveness Research on Health and Health Care Spending

Anirban Basu, Tomas J. Philipson

NBER Working Paper No. 15633
Issued in January 2010
NBER Program(s):   HC   HE

Public technology assessments in general and Comparative Effectiveness Research (CER) in particular have been justified by offsetting benefits of improving patient health and reducing health care spending. However, little conceptual and empirical understanding exists concerning the quantitative impact of public technology assessments such as CER. This is needed to assess whether CER has benefits that outweighs its investment costs. This paper provides a systematic framework to analyze the impact of CER on health outcomes and medical care spending. We interpret CER to infuse evidence on product quality into the market place declaring product winners and losers. This shifts demand by patients and doctors as well as coverage by third party payers towards the winners of CER studies and away from losers. We trace out the spending and health implications of such responses to evidence on product quality in privately and publicly financed health care markets. We simulate these effects for antipsychotics that are among the largest drug classes of the US Medicaid program and for which CER has been conducted by means of the CATIE trial in 1999. Our main conclusion, from both the conceptual and empirical analysis, is that investments into CER may not always have the intended benefits of lowering spending and improving health outcomes. Because CER may result in higher spending and worse health, it is important to have methods to evaluate quantitatively the impacts of CER investments.

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This paper was revised on December 5, 2011

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Published: Basu, Anirban & Jena, Anupam B. & Philipson, Tomas J., 2011. "The impact of comparative effectiveness research on health and health care spending," Journal of Health Economics, Elsevier, vol. 30(4), pages 695-706, July.

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