Burning a hole in the budget: tobacco spending and its crowd-out of other goods.

Smoking is an expensive habit. Smoking households spend, on average, more than $US1000 annually on cigarettes. When a family member quits, in addition to the former smoker's improved long-term health, families benefit because savings from reduced cigarette expenditures can be allocated to other goods. For households in which some members continue to smoke, smoking expenditures crowd-out other purchases, which may affect other household members, as well as the smoker. We empirically analyse how expenditures on tobacco crowd-out consumption of other goods, estimating the patterns of substitution and complementarity between tobacco products and other categories of household expenditure. We use the Consumer Expenditure Survey data for the years 1995-2001, which we complement with regional price data and state cigarette prices. We estimate a consumer demand system that includes several main expenditure categories (cigarettes, food, alcohol, housing, apparel, transportation, medical care) and controls for socioeconomic variables and other sources of observable heterogeneity. Descriptive data indicate that, comparing smokers to nonsmokers, smokers spend less on housing. Results from the demand system indicate that as the price of cigarettes rises, households increase the quantity of food purchased, and, in some samples, reduce the quantity of apparel and housing purchased.

Cost of innovation in the pharmaceutical industry.

The research and development costs of 93 randomly selected new chemical entities (NCEs) were obtained from a survey of 12 U.S.-owned pharmaceutical firms. These data were used to estimate the pre-tax average cost of new drug development. The costs of abandoned NCEs were linked to the costs of NCEs that obtained marketing approval. For base case parameter values, the estimated out-of-pocket cost per approved NCE is $114 million (1987 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a 9% discount rate yielded an average cost estimate of $231 million (1987 dollars).

The price of innovation: new estimates of drug development costs.

The research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.

Spending on postapproval drug safety.

Withdrawals of high-profile pharmaceuticals have focused attention on post-approval safety surveillance. There have been no systematic assessments of spending on postapproval safety. We surveyed drug manufacturers regarding safety efforts. Mean spending on postapproval safety per company in 2003 was 56 million dollars (0.3 percent of sales). Assuming a constant safety-to-sales ratio, we estimated that total spending on postapproval safety by the top twenty drug manufacturers was 800 million dollars in 2003. We also examined, using regression analysis, the relationship between the number of safety personnel and the number of initial adverse-event reports. This study offers information for the debate on proposed changes to safety surveillance.

Returns to R&D on new drug introductions in the 1980s.

This study finds that the mean IRR for 1980-84 U.S. new drug introductions is 11.1%, and the mean NPV is 22 million (1990 dollars). The distribution of returns is highly skewed. The results are robust to plausible changes in the baseline assumptions. Our work is also compared with a 1993 study by the OTA. Despite some important differences in assumptions, both studies imply that returns for the average NCE are within one percentage point of the industry's cost of capital. This is much less than what is typically observed in analyses based on accounting data.

The distribution of sales revenues from pharmaceutical innovation.

OBJECTIVE: This report updates our earlier work on the returns to pharmaceutical research and development (R&D) in the US (1980 to 1984), which showed that the returns distributions are highly skewed. It evaluates a more recent cohort of new drug introductions in the US (1988 to 1992) and examines how the returns distribution is emerging for drugs with life cycles concentrated in the 1990s versus the 1980s. DESIGN AND SETTING: Methods were described in detail in our earlier reports. The current sample included 110 new drug entities (including 28 orphan drugs), and sales data were obtained for the period 1988 to 1998, which represented between 7 and 11 years of sales for the drugs included. 20 years was chosen as the expected market life for this cohort, and a 2-step procedure was used to project future sales for the drugs--during the period until patent expiry and then beyond patent expiry until the 20-year time-horizon was completed. Thus, the values in the first half of the life cycle are essentially based on realised sales, while those in the second half are projected using information on patent expiry and other inputs. MAIN OUTCOME MEASURES AND RESULTS: Peak annual sales for the top decile of drugs introduced between 1988 and 1992 in the US amounted to almost $US1.1 billion compared with peak sales of less than $US175 million (1992 values) for the mean compound. In particular, the top decile accounted for 56% of overall sales revenue. Although the sales distributions were skewed in both our earlier and current analysis, the top decile in the later time-period exhibited more rapid rates of growth after launch, a peak that was more than 50% greater in real terms than for the 1980 to 1984 cohort, and a faster rate of expected decline in sales after patent expiry. One factor contributing to the distribution of sales revenues becoming more skewed over time is the orphan drug phenomenon (i.e. most of the orphan drugs are concentrated at the bottom of the distribution). CONCLUSION: The distribution of sales revenues for new drug compounds is highly skewed in nature. In this regard, the top decile of new drugs accounts for more than half of the total sales generated by the 1988 to 1992 cohort analysed. Furthermore, the distribution of sales revenues for this cohort is more skewed than that of the 1980 to 1984 cohort we analysed in previous research.

Economic return of clinical trials performed under the pediatric exclusivity program.

CONTEXT: In 1997, Congress authorized the US Food and Drug Administration (FDA) to grant 6-month extensions of marketing rights through the Pediatric Exclusivity Program if industry sponsors complete FDA-requested pediatric trials. The program has been praised for creating incentives for studies in children and has been criticized as a "windfall" to the innovator drug industry. This critique has been a substantial part of congressional debate on the program, which is due to expire in 2007. OBJECTIVE: To quantify the economic return to industry for completing pediatric exclusivity trials. DESIGN AND SETTING: A cohort study of programs conducted for pediatric exclusivity. Nine drugs that were granted pediatric exclusivity were selected. From the final study reports submitted to the FDA (2002-2004), key elements of the clinical trial design and study operations were obtained, and the cost of performing each study was estimated and converted into estimates of after-tax cash outflows. Three-year market sales were obtained and converted into estimates of after-tax cash inflows based on 6 months of additional market protection. Net economic return (cash inflows minus outflows) and net return-to-costs ratio (net economic return divided by cash outflows) for each product were then calculated. MAIN OUTCOME MEASURES: Net economic return and net return-to-cost ratio. RESULTS: The indications studied reflect a broad representation of the program: asthma, tumors, attention-deficit/hyperactivity disorder, hypertension, depression/generalized anxiety disorder, diabetes mellitus, gastroesophageal reflux, bacterial infection, and bone mineralization. The distribution of net economic return for 6 months of exclusivity varied substantially among products (net economic return ranged from -$8.9 million to $507.9 million and net return-to-cost ratio ranged from -0.68 to 73.63). CONCLUSIONS: The economic return for pediatric exclusivity is variable. As an incentive to complete much-needed clinical trials in children, pediatric exclusivity can generate lucrative returns or produce more modest returns on investment.

Reduced length of hospital stay in colorectal surgery after implementation of an enhanced recovery protocol.

BACKGROUND: Enhanced recovery after surgery (ERAS) is a multimodal approach to perioperative care that combines a range of interventions to enable early mobilization and feeding after surgery. We investigated the feasibility, clinical effectiveness, and cost savings of an ERAS program at a major U. S. teaching hospital. METHODS: Data were collected from consecutive patients undergoing open or laparoscopic colorectal surgery during 2 time periods, before and after implementation of an ERAS protocol. Data collected included patient demographics, operative, and perioperative surgical and anesthesia data, need for analgesics, complications, inpatient medical costs, and 30-day readmission rates. RESULTS: There were 99 patients in the traditional care group, and 142 in the ERAS group. The median length of stay (LOS) was 5 days in the ERAS group compared with 7 days in the traditional group (P < 0.001). The reduction in LOS was significant for both open procedures (median 6 vs 7 days, P = 0.01), and laparoscopic procedures (4 vs 6 days, P < 0.0001). ERAS patients had fewer urinary tract infections (13% vs 24%, P = 0.03). Readmission rates were lower in ERAS patients (9.8% vs 20.2%, P = 0.02). DISCUSSION: Implementation of an enhanced recovery protocol for colorectal surgery at a tertiary medical center was associated with a significantly reduced LOS and incidence of urinary tract infection. This is consistent with that of other studies in the literature and suggests that enhanced recovery programs could be implemented successfully and should be considered in U.S. hospitals.

The impact of geologic variability on capacity and cost estimates for storing CO 2 in deep-saline aquifers

While numerous studies find that deep-saline sandstone aquifers in the United States could store many decades worth of the nation's current annual CO 2 emissions, the likely cost of this storage (i.e. the cost of storage only and not capture and transport costs) has been harder to constrain. We use publicly available data of key reservoir properties to produce geo-referenced rasters of estimated storage capacity and cost for regions within 15 deep-saline sandstone aquifers in the United States. The rasters reveal the reservoir quality of these aquifers to be so variable that the cost estimates for storage span three orders of magnitude and average>$100/tonne CO 2. However, when the cost and corresponding capacity estimates in the rasters are assembled into a marginal abatement cost curve (MACC), we find that ~75% of the estimated storage capacity could be available for<$2/tonne. Furthermore, ~80% of the total estimated storage capacity in the rasters is concentrated within just two of the aquifers-the Frio Formation along the Texas Gulf Coast, and the Mt. Simon Formation in the Michigan Basin, which together make up only ~20% of the areas analyzed. While our assessment is not comprehensive, the results suggest there should be an abundance of low-cost storage for CO 2 in deep-saline aquifers, but a majority of this storage is likely to be concentrated within specific regions of a smaller number of these aquifers. © 2011 Elsevier B.V.

Auriculotherapy for pain management: a systematic review and meta-analysis of randomized controlled trials.

OBJECTIVES: Side-effects of standard pain medications can limit their use. Therefore, nonpharmacologic pain relief techniques such as auriculotherapy may play an important role in pain management. Our aim was to conduct a systematic review and meta-analysis of studies evaluating auriculotherapy for pain management. DESIGN: MEDLINE,(®) ISI Web of Science, CINAHL, AMED, and Cochrane Library were searched through December 2008. Randomized trials comparing auriculotherapy to sham, placebo, or standard-of-care control were included that measured outcomes of pain or medication use and were published in English. Two (2) reviewers independently assessed trial eligibility, quality, and abstracted data to a standardized form. Standardized mean differences (SMD) were calculated for studies using a pain score or analgesic requirement as a primary outcome. RESULTS: Seventeen (17) studies met inclusion criteria (8 perioperative, 4 acute, and 5 chronic pain). Auriculotherapy was superior to controls for studies evaluating pain intensity (SMD, 1.56 [95% confidence interval (CI): 0.85, 2.26]; 8 studies). For perioperative pain, auriculotherapy reduced analgesic use (SMD, 0.54 [95% CI: 0.30, 0.77]; 5 studies). For acute pain and chronic pain, auriculotherapy reduced pain intensity (SMD for acute pain, 1.35 [95% CI: 0.08, 2.64], 2 studies; SMD for chronic pain, 1.84 [95% CI: 0.60, 3.07], 5 studies). Removal of poor quality studies did not alter the conclusions. Significant heterogeneity existed among studies of acute and chronic pain, but not perioperative pain. CONCLUSIONS: Auriculotherapy may be effective for the treatment of a variety of types of pain, especially postoperative pain. However, a more accurate estimate of the effect will require further large, well-designed trials.

Valuing drinking water provision as an ecosystem service in the neuse river basin

The valuation of ecosystem services such as drinking water provision is of growing national and international interest. The cost of drinking water provision is directly linked to the quality of its raw water input, which is itself affected by upstream land use patterns. This analysis employs the benefit transfer method to quantify the economic benefits of water quality improvements for drinking water production in the Neuse River Basin in North Carolina. Two benefit transfer approaches, value transfer and function transfer, are implemented by combining the results of four previously published studies with data collected from eight Neuse Basin water treatment plants. The mean net present value of the cost reduction estimates for the entire Neuse Basin ranged from $2.7 million to $16.6 million for a 30% improvement in water quality over a 30-year period. The value-transfer approach tended to produce larger expected benefits than the function-transfer approach, but both approaches produced similar results despite the differences in their methodologies, time frames, study sites, and assumptions. © 2010 ASCE.

R&D Costs and Returns to New Drug Development: A Review of the Evidence

© 2012 by Oxford University Press. All rights reserved.This article reviews the extensive literature on R&D costs and returns. The first section focuses on R&D costs and the various factors that have affected the trends in real R&D costs over time. The second section considers economic studies on the distribution of returns in pharmaceuticals for different cohorts of new drug introductions. It also reviews the use of these studies to analyze the impact of policy actions on R&D costs and returns. The final section concludes and discusses open questions for further research.

Integrated pathway and epistasis analysis reveals interactive effect of genetic variants at TERF1 and AFAP1L2 loci on melanoma risk.

Genome-wide association studies (GWASs) have characterized 13 loci associated with melanoma, which only account for a small part of melanoma risk. To identify new genes with too small an effect to be detected individually but which collectively influence melanoma risk and/or show interactive effects, we used a two-step analysis strategy including pathway analysis of genome-wide SNP data, in a first step, and epistasis analysis within significant pathways, in a second step. Pathway analysis, using the gene-set enrichment analysis (GSEA) approach and the gene ontology (GO) database, was applied to the outcomes of MELARISK (3,976 subjects) and MDACC (2,827 subjects) GWASs. Cross-gene SNP-SNP interaction analysis within melanoma-associated GOs was performed using the INTERSNP software. Five GO categories were significantly enriched in genes associated with melanoma (false discovery rate ≤ 5% in both studies): response to light stimulus, regulation of mitotic cell cycle, induction of programmed cell death, cytokine activity and oxidative phosphorylation. Epistasis analysis, within each of the five significant GOs, showed significant evidence for interaction for one SNP pair at TERF1 and AFAP1L2 loci (pmeta-int  = 2.0 × 10(-7) , which met both the pathway and overall multiple-testing corrected thresholds that are equal to 9.8 × 10(-7) and 2.0 × 10(-7) , respectively) and suggestive evidence for another pair involving correlated SNPs at the same loci (pmeta-int  = 3.6 × 10(-6) ). This interaction has important biological relevance given the key role of TERF1 in telomere biology and the reported physical interaction between TERF1 and AFAP1L2 proteins. This finding brings a novel piece of evidence for the emerging role of telomere dysfunction into melanoma development.

The effectiveness of low-level laser therapy for nonspecific chronic low back pain: a systematic review and meta-analysis.

BACKGROUND: In recent decades, low-level laser therapy (LLLT) has been widely used to relieve pain caused by different musculoskeletal disorders. Though widely used, its reported therapeutic outcomes are varied and conflicting. Results similarly conflict regarding its usage in patients with nonspecific chronic low back pain (NSCLBP). This study investigated the efficacy of low-level laser therapy (LLLT) for the treatment of NSCLBP by a systematic literature search with meta-analyses on selected studies. METHOD: MEDLINE, EMBASE, ISI Web of Science and Cochrane Library were systematically searched from January 2000 to November 2014. Included studies were randomized controlled trials (RCTs) written in English that compared LLLT with placebo treatment in NSCLBP patients. The efficacy effect size was estimated by the weighted mean difference (WMD). Standard random-effects meta-analysis was used, and inconsistency was evaluated by the I-squared index (I(2)). RESULTS: Of 221 studies, seven RCTs (one triple-blind, four double-blind, one single-blind, one not mentioning blinding, totaling 394 patients) met the criteria for inclusion. Based on five studies, the WMD in visual analog scale (VAS) pain outcome score after treatment was significantly lower in the LLLT group compared with placebo (WMD = -13.57 [95 % CI = -17.42, -9.72], I(2) = 0 %). No significant treatment effect was identified for disability scores or spinal range of motion outcomes. CONCLUSIONS: Our findings indicate that LLLT is an effective method for relieving pain in NSCLBP patients. However, there is still a lack of evidence supporting its effect on function.