The American Recovery and Reinvestment Act of 2009 (ARRA), which is the stimulus bill that was signed into law in February, included $1.1 billion in funding for comparative effectiveness research. Of this amount, the AHRQ received $300 million, and the NIH received $400 million. An additional $400 million was to be allocated by the Office of the Secretary of the Department of Health and Human Services (HHS). How should the HHS Secretary allocate these funds?

That was the question Congress posed to two committees, one organized by the Institute of Medicine (IoM), and one organized by the Federal Coordinating Council for Comparative Effectiveness Research, a group created by the ARRA with representatives from all of the major federal health agencies. Yesterday, both committees released their recommendations. A summary of the IoM’s report is available here (a PDF of the full report can be downloaded with registration at the website of the National Academies Press, http://www.nap.edu/). The Council’s report is available here. There are also two perspective articles published online in the New England Journal of Medicine on June 30, one on the IoM recommendations and one on the Council’s recommendations.

Both sets of recommendations include some surprises, at least from my perspective. In the case of the IoM recommendations, for example, while priority research topics for particular diseases, such as cardiovascular disease, are listed, almost one-fourth of the committee’s recommended priority topics are in the health care delivery system research area, a broad category that includes topics related to dissemination of results, health behavior and care management, and comparisons of settings of care, among others. One, for example, is to “compare the effectiveness of alternative redesign strategies—using decision support capabilities, electronic health records, and personal health records—for increasing health professionals’ compliance with evidence-based guidelines and patients’ adherence to guideline-based regimens for chronic disease care.”

For its part, the Council recommended that a majority of the HHS Secretary’s funds go to comparative effectiveness data infrastructure development, such as building, expanding, and linking longitudinal administrative claims databases, or linking administrative data with electronic health record-based or registry data.

The common thread here is the need for a well-designed IT infrastructure for our healthcare system, with a central role for electronic medical records. An interview article in the July 2009 issue of McKinsey Quarterly with Hal Wolf, a senior executive with Kaiser Permanente, makes it clear that KP HealthConnect, Kaiser Permanente’s electronic medical record database, is what has enabled the institution to identify and disseminate best practices. Mr. Wolf says, “We can now determine how even small changes in care pathways can have a significant impact on outcomes, and we can study patients with specific combinations of co-morbidities to identify the best treatment approaches for them.”

In a recent article published online in Health Affairs, Ari Hoffman and Steven D. Pearson put forth the useful concept of “marginal medicine” as the source of potential waste most likely to be revealed by comparative effectiveness research. They list four evidence-related categories of marginal medicine: 1) inadequate evidence of comparative net benefit for any indication; 2) use beyond boundaries of established net benefit; 3) higher cost when established benefit is comparable to other options; and 4) relatively high cost for incremental benefit compared to other options. The latter two categories address cost-effectiveness, a topic scrupulously avoided by the IoM and Council recommendations, mainly because of the controversy the issue of comparative cost-effectiveness still evokes. The last thing the pharmaceutical industry would like to see is a recreation in the US of the UK’s NICE system, which has restricted coverage of drugs deemed not to be cost-effective.

In the wider context of medical interventions, however, drug treatments, which account for approximately 11% of total US healthcare spending, will often prove to be cost-effective, particularly if the alternative is physician procedures or hospitalization, which are the two biggest drivers of spending. For example, in a new study published online in the New England Journal of Medicine examining drug spending and other medical spending among a group of Medicare beneficiaries before and after the introduction of the Part D drug benefit, beneficiaries who previously had no coverage or limited coverage for drugs prior to Part D ended up spending more on drugs after getting coverage, but their other medical expenditures declined. Even though the current emphasis on comparative effectiveness research in the US is not focused on the cost effectiveness of drugs, it is only a matter of time before the cost-effectiveness of treatments—certainly not limited to drugs—is systematically integrated into coverage and reimbursement decisions. Pharmaceutical companies that design their clinical development programs to address issues of cost-effectiveness, taking into account different modes of care, will be well-placed to thrive in the US healthcare system’s next era, even if the transition to that next era takes longer and is more difficult than current reformers envision.