The impact of comparative effectiveness research on health and health care spending

"The NBER Bulletin on Aging and Health provides summaries of publications like this. You can sign up to receive the NBER Bulletin on Aging and Health by email. Public subsidization of technology assessments in general, and Comparative Effectiveness Research (CER) in particular, has received considerable attention as a tool to simultaneously improve patient health and lower the cost of health care. However, little conceptual and empirical understanding exists concerning the quantitative impact of public technology assessments such as CER. This paper analyses the impact of CER on health and medical care spending interpreting CER to shift the demand for some treatments at the expense of others. We trace out the spending and health implications of such demand shifts in private- as well as subsidized health care markets. In contrast to current wisdom, our analysis implies that CER may well increase spending and adversely affect patient health, particularly when treatment effects are heterogeneous across patients. We simulate these economic effects for antipsychotics that are among the largest drug classes of the US Medicaid program and for which CER has been conducted by means of the CA