06/17/2016 12:44 pm ET Updated Jun 18, 2017

Cost Effectiveness Analysis (CEA) in U. S. Health Care--Long Overdue

Cost effectiveness analysis (CEA), as applied to health care, attempts to estimate the value of expenditures on procedures or treatments that is returned to patients, such as longer life, better quality of life, or both. Given that the U. S. has the most expensive health care in the world, with comparatively low value and outcomes compared to many other advanced countries, you would think that CEA would be a major part of health policy in this country. Sadly, the opposite is true, and it is notably absent from the way we do things.

This is not to say that no attempts have been made in past years to introduce ways to evaluate effectiveness of health care services, whether involving comparative efficacy or costs. Two national organizations were established in the 1970s--the Office of Technology Assessment (OTA) in 1975 and the National Center for Health Care Technology (NCHCT) in 1978--but both were later abolished after a strong backlash from powerful vested interests, especially the medical device industry and some medical professional organizations. (1,2) The FDA remains our main regulatory body, but it is handcuffed by political forces preventing it from using CEA in its coverage policies. It has been underfunded over the years, and is largely dependent on user fees from the industries it supposedly regulates for much of its annual budget, with obvious built-in conflicts of interest analogous to the fox in the henhouse.

The Affordable Care Act (ACA) postured toward the need for comparative research on health care services by establishing the Patient-Centered Outcomes Research Institute (PCORI). It was intended to pursue clinical effectiveness research (not cost-effectiveness), but it was hobbled from the start by specific bans in the legislation on any authority to dictate coverage or reimbursement policies. A recent study found that it has had minimal impact, with only one-third of its funding going to clinical effectiveness research. (3) It will also disappear in 2019 unless reauthorized by Congress.

As we know, up to one third of all health services provided each year are either unnecessary, inappropriate, or even harmful. (4) Here are some examples of why we need a much stronger approach to research on comparative efficacy and cost effectiveness of health services being provided in this country:

  • A 2008 study of 90 drugs approved by the FDA between 1998 and 2000 found that only 394 of 909 clinical trials were ever published in a peer-reviewed journal. (5)
  • Much of the research done by drug manufacturers are in for-profit commercial networks, conducted by their marketing departments, without rigorous scientific methods and with unreliable results; unfavorable results are typically not reported.
  • Two-thirds of new drug applications to the FDA each year aren't really new, but instead are reformulations or minor modifications of existing drugs or requests for new uses, hyped as new drugs. (6)
  • Between 2003 and 2012, the number of defective Class I recalls of medical devices, which carry a significant probability of death, increased from 7 to 57. (7)
  • The FDA approved expanded marketing of off-label cancer drugs in 2009 despite the lack of clinical evidence of their effectiveness. (8)
  • Testosterone drugs for men are widely marketed by the drug industry, claiming their own "research" shows no adverse cardiovascular events, such as heart attacks and strokes, but major studies over the last 30 years have documented an increase of more than 50 percent of these events among men taking these drugs. (9)
  • Spending on prescription drugs in the U. S. rose to457 billion in 2015, one-sixth of total health care spending. (10)

We should ask why we still don't have an ongoing, evidence-based mechanism to evaluate the comparative clinical and cost effectiveness of health services. The answer is that it has been opposed successfully to date by the economic and political power of the vested interests that profit from the status quo of our deregulated marketplace. The Citizens United decision has enabled the infusion of even more money into politics, in both major parties, and massive lobbyist campaigns are launched by corporate stakeholders defending their interests whenever new legislation for CEA is being contemplated. Meanwhile, the insurance industry blames the drug industry for accelerating costs even as it increases its own costs and profits at the expense of its enrollees and taxpayers.

Whenever the need for comparative clinical or cost effectiveness research is raised, corporate stakeholders bring up a number of myths, such as "CEA would stifle innovation," "it would lead to rationing of care," and "how can you measure the value of health services anyway"? CEA is an established but underused discipline in this country. As one response to these myths, wouldn't it be a good idea to address the widespread overuse of full-body CT scanning as a screening technique, since more than 30 million such scans are performed every year, posing potentially harmful radiation exposure, without evidence of benefit or approval by the FDA or the American College of Radiology? (11)

The big unanswered question is who and how to decide on the cost effectiveness of health care services-- market interests and politics driven by money vs. science and evidence. We have seen how poorly the first approach works. We can look to science-based models around the world for better examples, such as The National Institute for Health and Care Excellence (NICE) in the United Kingdom. In this country, sooner than later, we need an independent, non-partisan, science-based national commission, free from political influence, funded on a long-term basis, and with authority to recommend coverage and reimbursement policies in the public interest. It would logically be part of single-payer financing reform with national health insurance coupled with a private delivery system. As we finally deal with this important issue, we should heed this advice by Sir Michael Rawlins, chairman of NICE:

The United States will one day have to take cost effectiveness into account. There is no doubt about it at all. You cannot keep on increasing your health care costs at the rate you are for so poor return. You are 29th in the world in life expectancy. You pay twice as much for health care as anyone else on God's earth. (12)

John Geyman, M.D. is the author of The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans.


1. Perry, S. The brief life of the National Center for Health Care Technology. N Engl J Med 307: 1095-1100, 1982.

2. Leary, WE. Congress's science agency prepares to close its doors. New York Times, September 24, 1995: A 26.

3. Emanuel, Z, Spiro, T, Huelskoetter, T. Re-evaluating the Patient-Centered Outcomes Research Institute. Center for American Progress, May 31, 2016.

4. Wenner, JB, Fisher, ES, Skinner, JS. Geography and the debate over Medicare reform. Health Affairs Web Exclusive W-103, February 13, 2002.

5. Holtz, RL. What you didn't know about a drug can hurt you: Untold numbers of clinical trial results to unpublished; those that are made public can't always be believed. Wall Street Journal, December 12, 2008: A16.

6. Field, RI. Mother of Invention: How the Government Created Free-Market Health Care. New York. Oxford University Press, 2014, p. 51.

7. Burton, TM. Recalls doubled of medical devices. Wall Street Journal, March 21, 2014: B4.

8. Abelson, R, Pollack, A. Medicare widens drugs it accepts for cancer care: more off-label uses. New York Times, January 27, 2009.

9. Ryan, A. Empty promises from dangerous testosterone-containing drugs. Public Citizen News, March/April 2014, p. 6.

10. Reuters. U. S. health agency estimates 2015 prescription drug spending rose to $457 billion. New York Times, March 8, 2016.

11. Brenner, DJ, Hall, EJ. Computed tomography--an increasing source of radiation exposure. N Engl J Med 357: 2277-2284, 2007.

12. Rawlins, M. As quoted by Silberman, J. Britain weighs the social cost of high-priced drugs. NPR, July 3, 2008.