, Volume 28, Issue 10, pp 877–887

Comparative Effectiveness Regulations and Pharmaceutical Innovation

  • John A. Vernon
  • Joseph H. Golec
  • J. Stedman Stevens
Policy and Implementation Comparative Effectiveness and Pharmaceutical Innovation

DOI: 10.2165/11537570-000000000-00000

Cite this article as:
Vernon, J.A., Golec, J.H. & Stevens, J.S. Pharmacoeconomics (2010) 28: 877. doi:10.2165/11537570-000000000-00000


As healthcare reform evolves and takes shape, comparative effectiveness research (CER) appears to be one of the central topics on the national healthcare agenda. Over the past couple of years, comparative effectiveness has been explicitly incorporated in more than ten bills. For example, the passage of the American Recovery and Reinvestment Act of 2009 authorized $US1.1 billion for CER. Comparative effectiveness, when costs are formally considered, offers the hope of efficient resource allocation within US healthcare markets. However, the future operationalization and implementation of comparative effectiveness is uncertain, and there exist potentially negative, and unintended, consequences under certain scenarios.

One example, and the focus of this article, is pharmaceutical innovation. Incentives for pharmaceutical R&D could be affected if drug development costs increase as a result of firms having to bear, directly or indirectly, the costs of running larger, randomized, head-to-head comparative effectiveness trials. While this may or may not be the case with current and future comparative effectiveness legislation and its subsequent implementation, the potential consequences for pharmaceutical innovation warrant recognition.

This is the purpose of the article. To achieve this goal, we develop several models of clinical trial design, drug development costs and R&D investment. By example, we shed light on the causal links between the models and the ways in which industry R&D investment can be affected.

Copyright information

© Adis Data Information BV 2010

Authors and Affiliations

  • John A. Vernon
    • 1
    • 2
    • 3
  • Joseph H. Golec
    • 4
  • J. Stedman Stevens
    • 1
  1. 1.1101C McGavran-Greenberg Hall, Department of Health Policy and ManagementThe University of North Carolina at Chapel HillChapel HillUSA
  2. 2.Institute for Pharmacogenomics and Individualized TherapyThe University of North Carolina at Chapel HillChapel HillUSA
  3. 3.National Bureau of Economic Research (NBER)New YorkUSA
  4. 4.Department of FinanceThe University of ConnecticutStorrsUSA