Regulating biotechnology: a rational-political model of policy development

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Regulating biotechnology: a rational-political model of policy development Mary Wiktorowicz

a,b,*, Raisa Deber b,c

a Father

Sean O’Sullivan Research Centre, St. Joseph’s Health Care System Research Network, 2757 King Street East, Hamilton, Ontario L8G 5E4, Canada b Department of Clinical Epidemiology and Biostatistics, McMaster University, Hamilton, Ontario L8N 325, Canada ’ Department of Health Administration, University of Toronto, McMurrich Building, 12 Queen’s Park Crescent West, Toronto, Ontario M5S lA8, Canada Received

29 November

1996

Abstract While technology assessment is seen as a mechanism for achieving effective and efficient use of health care resources, it has not as yet made the impact on policy decisions that its potential would suggest. Considerable barriers have been encountered in translating assessment results into policy concerning the adoption and use of technologies, with ‘political’ factors often being decisive. This paper places technology assessment in the context of the policy process to clarify both (a) how conflicting interests and organizational features can often hinder the selection of optimal policies, and (b) the potential roles technology assessment could nonetheless play. The resulting framework is termed the ‘rational-political’ model of policy development. The paper uses the example of policy making about the regulation of biotechnology, drawing on information from a survey of decision-makers (n = 561) involved in issues concerning the development, approval, and payment for pharmaceutical products. 0 1997 Elsevier Science Ireland Ltd. Keywords: Health care policy; Health care decision making; ogy assessment

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Technol-

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1. Introduction As an area of public policy, the regulation of biotechnology is complex, involving social and economic trade-offs, in a field characterized by scientific uncertainty and competing goal valuations. Biotechnology is also an area in which there is considerable government involvement, for not only does it involve fundamental issues of health and safety, it also encompasses government’s role as provider, or at least a funder of health services, as well as its role as sponsor of a competitive pharmaceutical industry [I]. Among the major products of biotechnology are pharmaceuticals, which cannot be approved for sale unless they are shown to be safe and efficacious. Moreover, in the current climate of fiscal restraint and rising health care costs, pharmaceutical therapies are increasingly being subjected to economic analysis in order to inform resource allocation decisions. Technology assessment is based on the ideal of rational decision making, such that choices made will be based on evidence, and act to maximize chosen goals [2,3]. Current normative views hold that the most desirable approach should be the use of evidence-based medicine [4-61. In such rational approaches, political influence is seen as a negative factor, that can serve to hinder optimal decisions. In contrast, political scientists have recognized that politics is inevitable, and as such is an integral part of the policy process [7]. For what policy-makers define as problems, and how they define them, depends to a large extent on who participates in decision-making and what values they bring into it. The outcome of policy debates will therefore largely be determined by the manner and extent to which various interests participate in the process that leads to policy development, as well as the weight ascribed to their concerns [8]. In this paper, we suggest the rational-political model as a theoretical framework that explicitly recognizes the role of politics and the values it introduces as part of policy making, but in the context of a rational process. The model separates policy issues into ‘facts’ and ‘values’ matrices, and identifies ‘institutional mechanisms’, which establish who participates in such decisions and what the process entails, as key factors in policy development [9]. What we therefore do in the rational-political model is in part re-integrate the political component by recognizing that it exists. The model is then applied to the regulation of biotechnology, where, focusing on the values matrix, we discuss the results of a survey of decision-makers involved in the field of biotechnology.

2. Biotechnology

as a regulatory

issue

Advances in biotechnology are leading to an increasing array of pharmaceuticals and vaccines, diagnostic kits, genetic screening tests, and the potential for gene therapy [lo,1 l] and represent one of the most significant frontiers in medical science. While these innovations make possible an increased source of health care options, they also bring forward unprecedented ethical, political, legal and economic dilemmas [ 12,131.

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In the past, medical decision making was largely a matter of private, not public policy. However, the combined effect of various social and technological trends have led to public controversies. These include the proliferation of bio-medical technologies without appropriate assessment, the distribution of resources in a financially constrained health care system, the interface between the private market and a publicly funded health care system, and the difficulties involved in regulating a rapidly evolving technology. Biotechnology is leading to a proliferation of new, high-volume, and often high-priced interventions, including drugs and biologics; and although benefits may potentially be great, in certain cases the cost implications are massive. For example, while a biotechnology-derived version of Factor VIII virtually eliminates the chance that haemophiliacs will contract AIDS, hepatitis or other diseases from treatment, the biotech-derived product costs 5-8 times as much as the conventionally produced version, bringing the cost of a 1 year supply to more that $25 000, putting it out of the reach of many patients in the U.S. (141. Moreover, as Moloney and Rogers [15] have shown, frequently-used technologies are major contributors to health care costs, even if their per unit costs are low. In regulating biotechnology, the inherent level of uncertainty involved is a constraining factor. Since precise levels of risk and benefit associated with a product are often difficult to establish under current standards, and no product can be completely without risk, the concepts of safety and efficacy are relative rather than absolute, reflecting the ‘trans-scientific’ nature of the regulatory process [50]‘. And any constraints placed on empirical testing further decrease the certainty through which a scientific model can be validated. Scientific advances that allow regulatory knowledge and expertise to progress, also give rise to changes in perceptions of risk and benefit over time, and create a potential for negotiated solutions to arise. The ability to develop sensible policy regarding the adoption and use of emerging technologies is also complicated by the rapidity with which the technology evolves, where a moving target presents greater challenges to those trying to derive wise policy. Ideally, the systematic assessment of new technologies should occur as part of the development stage, to better inform the process of policy formulation [16]. In practice, this may not always be feasible. Policy makers must therefore balance the potential risks of premature adoption with the loss of benefits if introduction is delayed. Regulatory policies governing the application of rapidly evolving fields face additional challenges. Once implemented, a policy may soon cease to be appropriate as rapid technological developments surpass previous limitations. Because the modification and refinement of an innovation continues even after its adoption, the timing of technology assessment may itself become problematic [17]. Indeed, the continued development of new technologies and their spread to other uses make assessment and regulation more difficult than they would otherwise be [18]. Regulatory policies must therefore be characterized by their potential to maintain flexibility without losing credibility [19]. ’ Weinberg has identified ‘trans-scientific’ issues as those which “can be asked of science and yet which cannot be answered by science.. .(t)hough they are. epistemologically speaking, questions of fact and can be stated in the language of science, but are unanswerable by science, they transcend science” [50].

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In an ideal world, the terms of reference which guide the regulatory process would be based on goals attained through social consensus. However, in a pluralist society with many conceivably legitimate but contradictory goals, achieving a rational balance among the competing interests becomes increasingly complex [12]. 3. Approaches

to policy analysis

While evaluative evidence can play an important role in decisions regarding the utilization and diffusion of technologies, the systematic use of assessment in the policy process has faced considerable barriers [20-221 which develop as a result of the organization of interests and the underlying institutional structures. Determining social consensus would appear to require consideration of a wide variety of values and interests. However, not all groups are equally likely to make their viewpoint known. The resolution of regulatory issues is therefore complicated by the differential mobilization of affected groups, leading to political imbalances. Because political participation requires considerable resources, ‘concentrated interests’ with high stakes in the outcome, are more likely to participate in a policy debate than are individuals or organizations whose potential losses are minimal (often referred to as ‘diffuse interests’) [23]. Organized interests are among the most important of the various institutions involved in defining issues, due to their specialized knowledge and because they derive a degree of legitimacy from their claim to represent an interest community. Interest groups with access to the resources relevant to regulatory decision-making such as information and technical expertise, are therefore likely to have greater clout in influencing administrative decision makers [24,30]. Such advantages are often self-perpetuating, since the costs of political involvement are lower for established groups than for those without an existing organizational base [25,26]. These processes lead to the development of policy networks which establish links between agencies and concentrated interest groups [27]. Due to professional commitment and a desire to maintain support for their agency, government administrators are likely to maintain and facilitate these networks [28]. Organized groups such as industry, providers and consumer groups who have much to gain from political participation, may influence the process such that undue weight is placed on their goals, distracting from a focus on the larger perspective [23,29]. In the past, organizations representing physicians have been pivotal in both developing [6] and implementing [3 l] policies regarding technology diffusion. However, policy is more than the sum of countervailing pressures from interested parties. Pressures are mediated by an organizational framework that establishes the context in which groups and individuals interpret their self-interest and define their policy preferences. The configuration of the institutions that aggregate the opinions of contributors into a set of policies can therefore have an independent effect on policy outputs [9,32,33]. The effect of these features on the decision-making process is explored through a model proposed for the development of policies concerning the regulation of biotechnology.

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4. A rational-political

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model for regulating

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biotechnology

In regulating biotechnology, a range of complex issues are considered regarding the choice of policy options, and involves at least three distinct sets of policy decisions. The first question is whether to invest in research and to develop an intervention; which rests largely with private decision-makers and is based mainly on market research. The second decision is whether to approve an intervention; which is based primarily on safety and efficacy considerations, and is made at the national government level. The third question is whether to pay for an intervention; this tends to be based on a wide variety of considerations (as the literature on the diffusion of innovations reflects), and be made by a large number of decision makers. How will such decisions be made? The rational approach to policy development involves the comprehensive organization and analysis of the information. A popular tool is the ‘decision tree’, which lays out the relevant data in terms of options, the potential consequences of each option, the probability that each potential outcome would materialize, and the value (or utility) placed on each potential outcome. This model explicitly separates ‘facts’ (options, probabilities) from values (utilities), and suggests a methodology to select the preferred option (computation of the maximum expected utility, or of risk-benefit ratios, etc.) [29,34]. Nonetheless, it assumes a single decision maker. What occurs if there are multiple decision makers, who would make different rational choices? Whose values should be used? Economic theory has made it clear that one cannot assume the existence of a ‘social welfare function’ to allow the rules of individual decision making to be applied to societal decisions [35,36]. One is inextricably forced to consider the realm of politics and how it mediates among varying interests. The rational-political model accordingly separates the policy process into two ‘matrices’ (facts and values), plus a mechanism for converting these into a policy output (Fig. 1).

5. The facts matrix The facts matrix assumes a rational model. Its rows include the list of policy goals, while its columns are the list of potential policy actions. Each cell entry represents the likelihood (based on the best available information, which may be only expert judgement) that the given policy action would achieve the given goal. However, since policy-makers use only a selection of facts, and both the process of selection and the validity attached to alleged facts are influenced by value judgements as to what is ‘relevant’, facts and values are closely interwoven [37]. As Stocking [38] suggests, it is rare that evidence alone will dictate an appropriate policy action, since this will depend on the goals selected. While the rational model outlines a process for decision-making, it does not guarantee the desirability of the values imposed upon it or even the validity of the factual assumptions made [29].

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6. The values matrix The second stage of the process therefore involves constructing the values matrix, in which the rows are the list of policy goals (from the facts matrix), while the columns are the list of the potential policy actors. Each cell entry thus represents the importance attached by each actor to each policy goal. Various stakeholders will have different goals regarding regulation, and these will be affected by contending paradigms, self-interest, and ideologies [39]. Since the process of determining values and priorities is an inherent part of policy development, the question then arises of whose values should prevail [29,40]. On some issues, a high degree of consensus may exist. For example, in setting priorities regarding biotechnology, all actors are likely to agree that considerable weight should be assigned to the policy goal ‘safety.’ However, the priority assigned step I.

FACTS~¶ATRIX:

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1. The Rational-Political

Model

of policy

development.

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to such other goals as ‘technology assessment prior to diffusion’, ‘high rate of return on investment’, or the ‘implementation of clinical guidelines’ may be more contentious. Patients and providers who believe that expansions in services promote their interests may oppose assessment that might lead to a curtailment in services. Industry may view assessment as limiting the potential for product marketing. However, not all policy actors participate in decision-making, and it is only to the extent that various groups participate in decisions that their knowledge and values become factors in the outcomes [21]. How then are the weights to be assigned to the actors obtained?

7. Institutional

mechanisms

for policy selection

To a large degree, identifying a mechanism for policy selection involves choosing which institutional framework will be used to arrive at regulatory decisions, since this will determine how participation takes place and eventually the weighting different goals will receive. For example, the process used to involve affected interests and solicit public comments directly affects the range of interests and issues that will be considered, as well as the sequence and stage at which these factors enter into the process. Various decision-making processes will have different implications for the range and weighting of the interests involved, the types of options considered, and the source and format of the information used [26]. Involving affected interests early in the decision-making process may introduce distributive issues that emphasize certain lines of scientific or economic inquiry and/or foreclose others, and issues arising from those participating at a later stage in the process may also carry progressively less weight as pressures to reach a decision increase [27]. The important thing to realize is that not all views are given equal weight. Selecting an institutional mechanism for issue resolution thus also determines how participation takes place, and eventually the weighting that different goals will receive. Institutional constraints imposed on regulatory decision-making include the level of procedural burdens placed on participating groups, the extent to which adversarial or negotiating stances are assumed, and the extent and timing of opportunities for participation [27]. Certain collective decision-making processes are also more likely to produce certain types of outcomes. Strategies designed to achieve a change in policy call for empowering a different set of individuals to make the decisions and have jurisdiction over the issues. In changing decision-making structures, what is at stake is the power to control a sphere of policy, where restructuring entails reallocating power [40]. The seemingly technical issue of determining an institutional mechanism for issue resolution thus also determines how participation takes place, and eventually, the weighting different goals will receive. The third step in the model therefore involves identifying an actor weight vector, that is, an institutional mechanism that assigns weights to each policy actor. This vector is then applied to the values matrix, by multiplying these weights by the cell entries, to obtain a weight to be placed on each policy goal. The final step in the

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model would then take the new goal weight vector, and apply it to the facts matrix, to select the policy action that will come closest to achieving the desired outcomes. How issues are defined, therefore, depends on the nature of the decision-making process, who is invited to participate, and what their values are. The model therefore recognizes existing institutional arrangements, and clarifies that if one is uncomfortable with the conclusions of current policies, that there are additional levers for change.

8. A real world example: regulating

biotechnology

and the values matrix

To gain a better understanding of the views of decision-makers involved in the field of pharmaceuticals, and to clarify the ‘values’ matrix of the model, we conducted a survey of stakeholders. Our study focused on three main types of decisions: (a) the development of pharmaceuticals; (b) the approval of pharmaceuticals; and (c) the decision to pay for pharmaceutical products. The full study also examined the institutional mechanisms used to determine policy in these areas. In this paper, we report on the results from the 1993 survey of decision makers in Canada and the U.S. involved in these decisions.

9. Methods 9.1. Groups surveyed The key groups in the survey were: the brand-name and generic pharmaceutical industry (n = 102); government regulators (the FDA, .Health Canada) (n = 82), payers (provincial governments, the insurance industry) (n = 55) formulary committee members in teaching hospitals (n = 195), and a group of technical experts (academics and consultants active in pharmaceutical policy research, and members of pharmaceutical, and medical associations) (n = 127). The total number of respondents was 561, and the rate of response was 71.6%. In political science terminology, we included only the immediate policy community, and therefore excluded such groups as the general public and decision makers from outside health care (e.g. finance departments). 9.2. Survey instrument Among the items in the survey were a series of questions about the weights assigned to potential policy goals. Since decisions involving biotechnology often involve compromises in the goals considered most important, respondents were asked to indicate the importance they would place on a series of 12 goals for decisions regarding the development, regulatory approval, and payment for pharmaceuticals and biologics. The goals included were: ‘safety of the products’, ‘effectiveness of the products’, ’stimulation of the economy by creating employment,

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tax revenue and a skilled work force’, batentability of the products’, ‘benefits for the maximum number of individuals, ’ ‘benefits for the most severely ill individuals, ’ ‘timely availability of drugs and biologics, ’ ‘rate of return on investment,’ ‘cost-effectiveness of the products’, ’affordability of the products ’, ‘increased research at universities and public institutions’, and ‘increased industry research’. Ratings were made on the basis of a five-point Likert scale, where 1 is ‘not important’, 3 is ‘somewhat important’, and 5 is ‘very important’. Responses were categorized into stakeholder groups based on each decision maker’s current organization of employment. We then employed analysis of variance to assess the extent to which there were differences in what various groups considered important, using post-hoc analysis to identify the groups among which differences exist. The data was analyzed using the SPSS-PC statistical package. In our analysis we highlight (i) the goals that were seen as most important for the three types of decisions; (ii) the areas of disagreement and (iii) in cases of disagreement, who would be making the decisions and the nature of the decisionmaking process. We also review the second part of the survey, which gathered stakeholders’ views on the appropriateness of current regulatory approval processes, as well as a section that assessed the extent to which decision-makers agreed with a number of possible policy options related to approval and payment decisions. In our review we note areas of disagreement, which groups are involved in developing policy in such areas, and given their views, what policy outcomes might be expected.

10. Results and discussion 10.1. Development-agreement

on important

goals

When asked to rate the importance of various goals for development, all groups found ‘safety of the products’ and ‘effectiveness of the products’ to be very important, with an overall mean of 4.9 for both safety and effectiveness. There was also agreement among the groups with the goal ‘benefits for the maximum number’ requiring care (mean = 4.1), and ‘benefits for the most severely ill’(mean = 3.9) as shown in Fig. 2. Respondents also agreed that the ‘timely availability of drugs and biozogics’ was important with a mean of 4.1, though industry rated it higher than other groups (a statistically significant difference was found in the ANOVA analysis). 10.2. Development-agreement

on less important

goals

While there were some statistically significant differences revealed in the ANOVA, decision-makers generally agreed that other goals were comparatively less important, including ‘stimulation of economy’ (mean = 2.8), ‘university research’ (mean = 3.4) and ‘industry research’ (mean = 3.4) as shown in Fig. 3.

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Safety Effectiveness Ben Max Ben Sick Timely

Fig. 2. Agreement on important goals for development decisions: ‘safety of the products’ (Safety), ‘effectiveness of the products’ (Effectiveness), ‘benefits for the maximum number requiring care’ (Ben Max), ‘benefits for the most severely ill’ (Ben Sick), and ‘timely availability of drugs and biologics’ (Timely); where 1 is ‘not important,’ 3 is ‘somewhat important,’ and 5 is ‘very important’.

10.3. Development-disagreement on goals However, as Fig. 4 shows, there were significant statistical differences among the groups on the following set of goals. Not surprisingly, industry rated ‘patentability of the products’, as very important (mean = 4.2); the other groups rated it as much less important (payers’ mean = 2.4). Industry also found ‘rate of return on investment’, as important (mean = 4.0) while other groups considered it much less important (hospital formulary decision makers’ mean = 2.6). ‘Cost-effectiveness of the products’, was considered less important by regulators (mean = 3.4) than other groups, such as payers who indicated it was very important (mean = 4.4). Regulators also found ‘affordability of the products’ only somewhat important (mean = 3.6), while payer’s mean was closer to very important (mean = 4.3). Despite the differences among groups in the goals considered most important, in the end it is pharmaceutical companies that make the decisions as to which products to develop, and it is their goals that ultimately direct the process. In the survey, respondents from industry felt that cost-effectiveness was an important

Stim Econ Univ Res lndust Res

Fig. 3. Agreement on less important goals for development decisions: Bon), ‘university research’ (Uniu Res), and ‘industry research’ (In&t and 3 is ‘somewhat important,’ and 5 is ‘very important’.

‘stimulation of the economy’ (Stim Res); where 1 is ‘not important,’

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Patent Rate of Return Cost Effect Affordability

i

2

3

4

Fig. 4. Disagreement on goals for development decisions: of return on investment’ (Rate of Return), ‘cost-effectiveness of the products’ (Affordability); where 1 is ‘not important,’ important’.

‘patentability of the products’ (Patent), ‘rate of the products’ (Cost Effect), ‘affordability 3 is ‘somewhat important,’ and 5 is ‘very

goal, but not as important as that noted by government third party payers. This data would therefore suggest that pharmaceutical firms are taking note of payers’ demands for cost-effective products. However, whether they translate this goal into action will likely depend on whether they believe that doing so will affect other goals, such as those related to rate of return.

10.4. Approval-agreement

on important goals

As Fig. 5 reveals, all stakeholders agreed that the goals of safety and effectiveness of the products (both with means = 4.9) were very important for approval decisions, and that ‘benefitsfor the most severely ill’ (Ben Sick) (mean = 3.8) was an important goal. Although all groups found ‘Benejts for the maximum number of individuals’ (Ben Max) important (overall mean = 3.9), the mean score for industry was significantly lower than for payers and hospitals.

Safety Effectiveness Ben Sick Ben Max

Fig. 5. Agreement on important goals for regulatory approval decisions: ‘safety of the products’ (Safety), ‘effectiveness of the products’ (Effectiveness), ‘benefits for the maximum number requiring care’ (Ben Max), ‘benefits for the most severely ill’ (Ben Sick); where 1 is ‘not important,’ 3 is ‘somewhat important.’ and 5 is ‘very important’.

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Stim Econ

Univ Res

Must

Res

Fig. 6. Agreement on less important goals for regulatory approval decisions: ‘stimulation of the economy; (Stitn &on), ‘university research’ (UC Res), and ‘industry research’ (Indust Res); where 1 is ‘not important,’ 3 is ‘somewhat important,’ and 5 is ‘very important.’

10.5. Approval-agreement

on less important goals

Decision-makers from the various groups also agreed that ‘stimulation of the economy’ (mean = 2.0), ‘industry research’ (mean = 2.4) and ‘university research’ (mean = 3.4) were comparatively less important. However, a statistical difference was found on ‘university research’, which industry found less important than the other groups, as shown in Fig. 6. This result may be due to the fact that in the past, the bulk of basic research was traditionally done by universities, but at present an increased level of basic research is being taken on by industry. Moreover, when a t-test was done to compare the responses of Canadian decision-makers to those from the U.S. a statistically significant difference was found on both ‘university research’ and ‘industry research‘, which were rated as more important by all stakeholder groups in Canada, compared to those in the U.S. This result may reflect the fact that both types of research receive greater financial support in the United States, so that American decision-makers may perceive these goals as lessof a priority. 10.6. Approval-disagreement

on goals

However, as Fig. 7 shows, there were significant differences among the groups on ‘cost-effectiveness of the products’, which payers found important (mean = 4.0), while regulators and industry considered it much less so (mean = 2.5). Payers also rated ‘affordability of the products’ as important (mean = 3.6), while regulators’ mean was only 2.6. There was also disagreement on ‘benefits for the maximum number requiring care ‘, ‘patentability of the products’, and ‘rate of return on investment’, though these were lesspronounced. Based on these results, we detected a community of interest between regulators and respondents from the pharmaceutical industry, with a reluctance by regulators to see cost-effectiveness as important to the approval process, even though payers would like to see this happen. However, since payers are not included in the processesthat oversee the develop-

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Patent Rate of Return Cost Effect Affordability

Fig. 7. Disagreement on goals for regulatory approval decisions: ‘patentability of the products’ (Patent), ‘rate of return on investment’ (Rate of Return), ‘cost-effectiveness of the products’ (Cost Effect), ‘affordability of the products’ (Affordability) and ‘benefits for the maximum number requiring care’ (Ben Max); where 1 is ‘not important,’ 3 is ‘somewhat important,’ and 5 is ‘very important.’

ment of drug approval policy, their goals and values will receive little or no priority on these issues. 10.7. Payment-agreement

on important goals

When considering paying for products, again, all groups agreed that ‘safety’ and ‘effectiveness’ are very important, with a mean of 4.5 for ‘safety’; ‘effectiveness’ was rated slightly higher at 4.8. There was also general agreement that ‘benejits for the maximum number requiring care’, (mean = 4.3) ‘benejits for the most severely ill’, (mean = 4.1) and ‘timely availability of products’ (mean = 3.6) were important as shown in Fig. 8.

Safety Effectiveness Ben Max Ben Sick Timely 1

2

3

4

5

Fig. 8. Agreement on important goals for payment decisions: ‘safety of the products’ (Safety), ‘effectiveness of the products’ (Effectioeness), ‘benefits for the maximum number requiring care’ (Ben Max), ‘benefits for the most severely ill’ (Ben Sick) and the ‘timely availability of drugs and biologics’ (Timely); where 1 is ‘not important,’ 3 is ‘somewhat important’, and 5 is ‘very important.’

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Patent Rate of Return Stim Econ Univ Res h-dust Res

i 1

2

3

4

Fig. 9. Agreement on less important goals for payment Eon), ‘patentability of the products’ (Patent), ‘rate ‘university research’ (&iv Res), and ‘industry research’ ‘somewhat important,’ and 5 is ‘very important.

10.8. Payment-agreement

-I5 decisions: ‘stimulation of the economy’ (Mm of return on investment’ (Rate of Return), (Indust Res); where 1 is ‘not important,’ 3 is

on less important goals

Responses from decision-makers also revealed that the same goals that were comparatively less important for development and approval were also less important for payment decisions. These included ‘stimulation of the economy’, ‘patentability of the products ‘, ‘rate of return on investment ‘, ‘.mdustry research‘, and ‘university research’, as revealed in Fig. 9. 10.9. Payment-disagreement

on goals

However, significant differences were found among the groups for payment decisions on ‘cost-effectiveness of the products’, which payers found very important (mean = 4.8) while regulators found it less so (mean = 4.3). ‘Affordability of the products’ was also rated as very important by payers (mean = 4.6), whereas regulators’ mean was lower at 4.1, shown in Fig. IO.

Cost Effect

Affordability

1

2

3

4

5

Fig. 10. Disagreement on goals for payment decisions: ‘cost-effectiveness of the products’ (Cost Effect) and ‘affordability of the products’ (~~~o~~ub~~ity); where 1 is ‘not important,’ 3 is ‘somewhat important,’ and 5 is ‘very important.’

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In the end, payers’ highest priority for decisions regarding the payment of pharmaceuticals was found to be cost-effectiveness, with 34% of this group indicating that it was the most important goal for payment. Once products become available, all groups agree they should be purchased, but disagree on how much should be paid for them. Since payers would prefer not to give up access to products, they instead focus on reducing costs, or at least placing greater weight on the goal of ‘cost-effectiveness’, in approval and payment decisions. Another issue growing in importance is how products should be used, since even the least expensive product is not cost-effective if it is inappropriately prescribed, which is one reason why clinical guidelines are receiving increased attention. 11. Regulatory

approval policy

A second part of the questionnaire assessed respondents’ views on the appropriateness of current regulatory approval processes. In response to a question asking individuals to indicate their views regarding the stringency of current regulations for the approval of drugs in their country, a significant difference was found between respondents from drug firms, who tended to perceive the regulations as ‘somewhat stringent’, and other groups including regulators, payers, hospitals and experts who considered them ‘about right.’ In response to ‘How should adverse effects be reported to government review agencies following product marketing?’ a significant difference was found, where industry reflected a tendency to feel that the reporting of adverse effects should be done ‘On a voluntary basis, using guidelines set by review agencies’. Alternatively, payers’ responses reflected their tendency to favour the most stringent reply, ‘Through regulations, using formal post-market surveillance’. 12. Possible solutions A third section of the questionnaire asked respondents the extent to which they agreed or disagreed with a number of statements, where 1 represents ‘strongly disagree’, 3 represents ‘neutral’ and 5 represents ‘strongly agree.’ We highlight those that relate to possible policy solutions for payment and approval decisions, and that show statistically significant differences. As shown in Fig. 11, all groups tend to agree with the statement ‘policies to ensure the appropriate use of drugs should exist in all hospitals’, with hospitals being the most supportive (mean = 4.7), while individuals from industry were least supportive (mean = 3.9). In response to the statement, ‘standardized medical treatment regimens should be developed where cost-effective methods of therapy have been established’, payers were in agreement (mean = 4.3), whereas industry was closer to neutral (mean = 3.3). As the statements suggest more interventionist measures, a greater divergence in views becomes apparent. For example, in response to ‘The prices of pharmaceutical products should be regulated on a rate of return basis (like public utilities)‘, payers tended to agree (mean = 3.6), whereas industry clearly disagreed (mean = 1.9).

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Possible Solutions Pay iff CE

Treat.:

App iff CE

3.79 3.25 4.28 4.22 3.78

DeviffCE Price Reg. Stand. Treat. Hosp. Policies 1

2

3

4

5

Fig. 11. Views on possible policy solutions, where 1 is ‘strongly disagree,’ 3 is ‘neutral’ and 5 is ‘strongly agree’: ‘Policies to ensure the appropriate use of drugs should exist in all hospitals’ (Hosp. Policies), ‘Standardized medical treatment regimens should be developed where cost-effective methods of therapy have been established’ (Stand. Treat.), ‘The prices of pharmaceutical products should be regulated on a rate of return basis (like public utilities)’ (Price Reg.), ‘New drugs should be developed, (approved), only if they are proven (or expected to be) either more effective or less expensive than existing products.’ (Deu iff CE), (App zx CE). and ‘Insurers should pay for new drugs only if they are proven either more effective or less expensive than existing products’ (Pay iff CE).

Significant differences were also found in response to a series of these three statements: ‘New drugs should be developed, (approved) @aid for), only if they are proven (or expected to be) either more effective or less expensive than existing products.’ For the statement regarding the development of drugs, industry tended to disagree; regulators and experts were neutral, whereas payers and hospitals tended to agree. In response to the statement that ‘New drugs should be approved only if they are proven either more effective or less expensive than existing products’, industry and regulators disagreed with the assertion (mean = 1.9 and 2.3, respectively), while payers and hospitals tended to agree (mean = 3.9 and 3.5, respectively). This difference was statistically significant. For the statement, ‘Insurers should pay for new drugs only tf they are proven either more effective or less expensive than existing products’, industry clearly disagreed (mean = 2.3), whereas payers showed support for this statement (mean = 4.2). Significant differences between industry and the other groups were also present. Differences in the views of regulators (mean = 2.9) on one hand, and experts, hospitals and payers (means = 3.5, 3.6, and 4.2, respectively) on the other were also evident for this statement. In their comments, respondents also indicated that product side-effects are another important consideration that affect development, approval and payment decisions.

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model

The process of assessing stakeholders’ views on regulatory issues outlines areas of consensus as well as disagreement, which are known to lead to policy disputes. While the survey revealed the presence of shared perceptions among various groups, it also identified a number of areas in which conflicting priorities were evident.

13. I. Development

decisions

Since research is a public good and without adequate incentives private industry would invest too little in research and development, various initiatives have been adopted to increase research and development and to maximize the social benefits that derive from it. And while research is perceived as highly socially beneficial and desirable, it is pharmaceutical companies that make decisions regarding which products will be pursued through research and development. Such decisions are known to focus on products with the potential for high profit margins. This suggestion was confirmed in the survey results, where a wide divergence in priorities was found among stakeholder groups for the goals of ‘rate of return on investment’, and ‘patentability of the products’, in research and development decisions. While respondents from industry expressed their view that the )atentability of products’ and ‘rate of return on investment’ were very important, other groups such as payers indicated these goals were less than ‘somewhat important.’ The survey also found that payers viewed ‘cost-effectiveness of the products’ as ‘very important’ in development decisions, while regulators considered it only ‘somewhat important’. Similarly, while payers felt that ‘affordability of the products ’ was close to ‘very important’, regulators found this goal only ‘somewhat important.’ And while payers and hospitals tended to agree with the statement ‘New drugs should be developed only tf they are expected to be either more effective or less expensive than existing products’, industry and regulators tended to disagree,

whereas experts were neutral. In their role as overseeing drug benefit programs, payers are very sensitive to issues regarding cost-effectiveness and affordability, while regulators and industry find these issues comparatively less important. Despite the differences among groups in the goals considered most important for research and development decisions, it is pharmaceutical companies that make decisions as to which products to develop, and it is their priorities that ultimately direct the research and development process. However, since industry is known to respond to market demand, other groups may indirectly influence the process by making known the goals they consider important, including those of cost-effectiveness. As third party payers exert increasing control over the criteria used to decide which products will be reimbursed and under which conditions they will be prescribed, the goals of comparative-effectiveness and cost-effectiveness will likely have a greater influence on future development decisions than has been the case in the past.

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The results of the survey revealed a number of shared perceptions between regulators and industry with respect to the drug approval process. For example, while payers found ‘cost-effectiveness’ of the products very important in approval decisions, regulators and industry found it less so. Similarly, while payers and hospitals rated ‘affordability of the products’ as important, regulators and industry expressed their view that ‘affordability’ was less than somewhat important to them. And while payers and hospital formulary decision-makers agreed that ‘New drugs should be approved only if they are proven either more effective or less expensive than existing products’, industry and regulators disagreed with this statement, again revealing differences in the priorities among stakeholder groups. A community of interest therefore became evident between regulators and the pharmaceutical industry, reflected in the common views and perspectives of the two groups, where regulators were reluctant to view ‘cost-effectiveness’ as important to the approval process, even though payers would like to see this as a priority. While the identification of interest between regulators and industry reflected in the survey results may correspond to the pattern depicted in regulatory capture [41], it has been suggested that capture theory has actually obscured a key feature of regulation, mainly that the most important actors in the regulatory process are organizations. A review of the drug approval process in Canada, the United States, the United Kingdom and France, found industry to be involved in the development of regulatory policies to varying extents in each country, to the exclusion of other groups [42]. In France and the United Kingdom this involvement has been an important factor in securing their interests. Under such conditions, the rules on which the regulatory process is based are seen as crucial resources, since ‘those who can shape or influence them possess a valuable form of power’, [43; 3841 namely the means to affect policy decisions [44]. For example, while all groups agree that ensuring safety and efficacy is very important in approval decisions, the nature of the standards set and the criteria on which they are based may be subject to debate, since they are ‘trans-scientific’ issues and involve a considerable level of judgement. Therefore the processes through which, and the individuals involved in determining the criteria on which safety and efficacy standards will be based play a key role. When assessing the views of stakeholders regarding the stringency of current regulations, a significant difference was found between respondents from pharmaceutical firms, who tended to perceive the regulations as ‘somewhat stringent’, and regulators, payers, hospitals and experts who considered them ‘about right’, again revealing differences in the perspectives of stakeholder groups. The next question is therefore the extent to which each group is involved in developing current regulations. Furthermore, while the heavy reliance placed on pre-market testing in safety and efficacy regulation generates extreme caution in approving drugs, pre-market testing can only have limited usefulness in the context of comprehensive and rigorous drug evaluations [45]. The regulatory framework therefore creates policy dilemmas for approval agencies, compelling them to impose heavy burdens on the drug develop-

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ment process, while at the same time providing inadequate protection from inferior products. With respect to post-market assessmentand the reporting of adverse effects to government review agencies, industry felt that reporting should be done ‘on a voluntary basis, using guidelines set by review agencies’. Conversely, regulators, hospitals and experts tended to favour ‘regulation, using guidelines set by review agencies’, while payers indicated their preference for the use of regulatory measures based on ‘formal post -market surveillance.’ Despite the significance of this issue, in Canada the reporting of adverse events has been based on a voluntary system for health practitioners, and companies have not been obliged to inform the Health Protection Branch of side effects reported in other countries, only those detected in Canada. Similar weaknesseshave existed in the adverse drug reaction monitoring systems in other countries. While the survey revealed significant differences among stakeholders concerning the goals of cost-effectiveness, affordability and rate of return, the rational-political model places an emphasis on the groups involved in the regulatory process and their values, which in turn determine which facts will be considered and weighed most heavily in reviewing policy alternatives. Given the approval processesestablished in most industrialized nations, only regulators and pharmaceutical companies are engaged in the dialogue that determines the scope and stringency of the criteria on which regulatory standards are based, with other groups excluded from the process [42,46,47]. 13.3. Payment/reimbursement decisions Since pharmaceutical benefits insurers often attempt to improve the quality of the demand for medicines by exercising control over the types of products reimbursed, they revealed their preference to see a greater emphasis placed on the goals of comparative-effectiveness and cost-effectiveness in guiding the nature of the ‘facts’ considered in reimbursement decisions. As third party payers exert increasing control over the criteria used to decide which products will be reimbursed, and under which conditions they will be prescribed, the goals of comparative-effectiveness and cost-effectiveness will likely have a greater influence on regulatory decisions. While such issuesform part of the ‘facts’ matrix, in order to integrate cost-effectiveness considerations into decisionmaking processes, the values of those involved in reimbursement decisions must support a role for such comparative criteria. To see greater emphasis placed on goals outside of the health care sector, including the control of public spending, strengthening the national pharmaceutical sector, and supporting research that holds the potential to generate innovative products and export revenues, individuals involved in public finance, trade and commerce would have to be included in regulatory decisions. Nonetheless, economic concerns would appear to be influencing the nature of the factors considered in shaping reimbursement decisions, given the trend to focus on cost-containment strategies. Similarly, to see a higher priority placed on issuessuch as health gain, accessto needed products, and promoting research to address unresolved health

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14. Conclusion In regulating pharmaceuticals, governments pursue several potentially competing objectives. The first is to protect consumers by ensuring that medicines are safe and efficacious. The second is to ensure that products are reasonably priced, and that public programs that allow access to them remain affordable. The third is to preserve the domestic pharmaceutical industry and the benefits it provides in terms of research and development, as well as its contribution to a nation’s economy. However, while the maximisation of pharmaceutical profits is dictated by the market, the distribution of benefits by governments is determined through the democratic process. An analysis of the regulation of pharmaceuticals must therefore consider the dilemmas faced by national governments who attempt to reconcile their often conflicting goals of preserving an internationally competitive researchbased industry, with their regulatory objectives of ensuring the safety and efficacy, as well as the accessibility of pharmaceutical products. To understand a government’s regulatory intervention, one must therefore recognize the constraints imposed on it by the need to preserve effective competition, and the role of regulatory instruments as a means to resolve recurrent conflicts between government and industry. The criteria used to assess the government’s objectives must therefore be considered in relative terms, where the manner and extent of participation of affected interests will inevitably play a role in determining both the standards sought and the instruments used to achieve them [42]. By separating and clarifying components of the policy process, the rational-political model assists in the analysis of policy development. By emphasizing the institutional process through which regulatory policy is established, the model stresses the importance of the range of policy actors involved, the level of their organisational development and the nature of their participation. These aspects in turn determine the influence that various actors will have on the policy process, the priority placed on competing goals, the ‘facts’ that are considered important, how such ‘facts’ are construed in the policy debate, which together determine how the scope of an issue is defined. Since institutional arrangements define the allocation of power among government and societal actors, they can lead to considerable variation in the manner in which regulatory conflict is resolved [49]. Institutional processes are likely to be particularly important when goals vary among the potential political actors. Individuals interested in seeing technology assessment play a pivotal role in policy decisions concerning product reimbursement, might consider the rational-po litical model as a framework for assessing strategies for implementation. First, the scope of the issue considered in a policy decision must be assessed. Who are the actors involved in the decision-making process and what is the nature of their participation? What emphasis do they place on various goals? What facts are

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considered and through what processes are they assessed? Accordingly, if certain goals are not incorporated into the scope at the appropriate level, those seeking to affect a policy decision might bring the relevant priorities and information to the attention of decision-makers, or act to change the institutional structure through which decisions are made. How can this framework be applied to decision making regarding adoption and use of biotechnology? The survey results stressed that all groups of respondents found the following factors important to making payment and provision decisions-safety, effectiveness, benefits for the most severely iN, and benejits for the maximum number. However, one must also recognize that the payment decision represents the culmination of a series of policy choices. Products are not eligible for funding until they have been developed, and approved. Our results indicated that these four goals were also most important to making earlier development and approval decisions. Thus, one can usually assume that a product presented for consideration by a hospital formulary has, to a large extent, already satisfied these critera2. The seeming agreement then evaporates as the attention instead shifts to a more contentious set of issues, the magnitude of the therapeutic effect given the costs of treatment. The survey revealed that decision makers involved in reimbursement decisions tend to focus on the goals of affordability and cost-effectiveness. However, demonstrating cost-effectiveness often involves gathering evidence based on pharmacoeconomic models, where clinical and economic outcomes are outlined, and varying degrees of judgement are applied in designing the algorithms on which such models are based. Even when such evidence is available, the level of benefit a product must demonstrate to be considered cost-effective is a matter of judgement. While guidelines exist regarding such criteria [4], a high degree of latitude is inherent in these decisions; particularly for biotechnology products whose benefits may not always be clear, while their cost remains high. Such uncertainty in turn leads to a grey area where ‘scientific judgement shades into broader policy judgement’ [26; 5681. Regulatory decision makers therefore engage in a risk/benefit analysis over which considerable discretion may be exercised, and where the criteria on which

decisions

are based may be subject to negotiation.

Such judgements will inevitably rely on the values and perspectives of the individuals involved in selecting and interpreting the evidence considered relevant, as well as their role in the decision-making process. Moreover, the ‘trans-scientific’ nature of such decisions creates the potential for various groups to make competing assertions of a product’s costs and benefits. Such uncertainties allow opportunities for groups to influence policy outcomes by broadening the scope of the issue to include their concerns as well as their interpretation of the information, and emphasizes the potential for negotiated solutions to develop. ’ At this stage efficacy data may be considered rather limited, since clinical trials assess products for a brief period of time, with a limited number of patients. Moreover, such patient groups as the elderly in which the product may have wide application, are often excluded from such trials, so that data on dosing, duration of therapy and long-term efficacy are often unavailable. Efkacy data are therefore necessary, but not always sufficient in determining whether a product will be publicly reimbursed.

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Whether a product will be included on a formulary is therefore intimately related to who will be involved in the process that leads to such decisions. To see a product adopted, the scope of the decision must be broadened to include the concerns of consumers, manufacturers and providers. Conversely, as budget managers whose primary goal is affordability become involved, the scope of the debate will be limited to such issues as cost-effectiveness. If benefits can be portrayed as marginal, then it will be easier for cost-motivated actors to ensure that their criteria dominate the decision, leading to delays in reimbursement until further evidence is available. However, if decision-makers are convinced that a product addresses a life-threatening condition, and is highly valued by visible groups, approval will likely result regardless of the costs involved, as has been the case with AIDS products. Seemingly minor changes in the locus of authority will therefore affect what forces will prevail in the decision-making process, as emphasized by the model’s focus on institutional mechanisms. The regulation of biotechnology must confront issues of scientific uncertainty and risk assessment, trade-offs in policy goals in an economically difficult climate, and flexibility to accommodate a rapidly evolving technology. While incomplete information may lead to irrational choices, defined as those not likely to achieve the desired policy goals, good quality information based on evaluative evidence will not be helpful unless it is known and used. The rational-political model suggests that there is indeed a major role for technology assessment in clarifying the ‘facts’ matrix and ensuring that the implications of technological innovations are known. However, the institutional mechanisms and the goals of the policy actors involved will influence the role that such evidence plays in the decision-making process. Our survey revealed evidence of differences in preferences for various goals across stakeholder groups on a number of issues. Biotechnology accordingly presents additional challenges to health policy, including how to develop a responsive regulatory framework that can accommodate broader participation of affected interests to achieve an optimal resolution of the issues.

Acknowledgements We would like to acknowledge the National Health Research and Development Program for their support through a fellowship to Mary Wiktorowicz. We also thank Drs Carolyn Tuohy, Frederick Lowy, Devidas Menon and a Health Policy reviewer for their helpful suggestions and comments.

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