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an economic analysis as a condition for approval and listing on the national or, in Canada, providencial formularies. |
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With some drug therapy that allows for earlier hospital or nursing home discharge, the cost savings is apparent. New antiulcer drugs costing about $900 per year have made ulcer surgery, which costs nearly $30,000, obsolete. Coronary bypass surgery costs over $40,000. Certain types of heart disease can be treated as effectively with medications costing approximately $300 per year. The annual cost for a new drug for schizophrenia costs about $4500 annually. This drug enables many schizophrenics to leave hospitals, where care can cost more than $70,000 per year. A recent three-year pharmacoeconomic study cofunded by the manufacturer and the National Institutes of Diabetes, Digestive, and Kidney Diseases, reported that captopril use in diabetic nephropathy could save Medicare approximately $2.6 billion over a 10-year period [89]. |
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There is currently no best source for outcome research. The Agency for Health Care Policy and Research has conducted some research and will continue to fund studies on outcomes research and develop more clinical-practice guidelines. The FDA data are limited to direct comparisons of one agent against another. For example, the FDA may have studies comparing two calcium channel blockers but none that compared all of them to see which is the most effective for which subgroups of patients. Pharmaceutical companies have no incentive, for example, to show that older, less expensive drugs are more cost effective than a newer, more expensive one. Employers and managed care organizations would gain from such broad research but have not been willing to invest heavily in it. The recently conducted Blue Cross and Blue Shield Association Technology Evaluation (TEC) comparative trials on breast cancer are an exception. |
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In the future, pharmaceutical prices may be based on outcome, not cost, as FDA regulation of outcome research becomes more likely. Today, FDA approval carries diminished control over the market as utilization decisions are increasingly being made by health plans and government agencies. Approval by the FDA is now becoming only the first step in bringing a new product to market. |
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6. Pharmaceutical Industry Structural Reform |
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All of these economic factors call for changes in the traditional structure and operation of pharmaceutical companies. Growing numbers of reorganizations and downsizings are visible signs of the economic squeeze that industry is faced with. However, the paradigm of pharmaceutical company integrations can be viewed as a declaration of their commitment to research. What started in 1989 with SmithKline/Beecham and Bristol-Myers/Squibb continues with Roche/Syntex, American Home Products/Cyanamid and, most recently, Glaxo's bid for Burroughs Wellcome. Unlike the recent vertical integrations (e.g., Merck/Medco), horizontal integration is aimed at bolstering the company's drug dis- |
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