A recent book, CRITICAL — What We Can Do About The Health-Care Crisis, authored by incoming “Health Czar” Tom Daschle, calls for the creation of a Federal Health Board (FHB). Among other proposed board functions, the FHB would “promote ‘high value’ medical care by recommending coverage of those drugs and procedures backed by solid evidence.”

This role sounds reminiscent of U.S. Department of Health and Human Services (DHHS) erstwhile National Center for Health Care Technology (NCHCT), whose charge was to assess the usefulness of established and new medical technologies. Although its tenure was short-lived (1979-82), one should learn from the NCHCT’s demise. I was there, and I offer the following reflections.

The NCHCT (having a $4 million budget and a staff of 20) was authorized in 1978 by Section 309 of the Public Health Service Act to conduct and sponsor assessments of health care technologies and to coordinate such efforts within the DHHS. The center was not regulatory and fulfilled two main functions:

1. Multifaceted assessments of technologies (e.g., safety, efficacy, effectiveness, and cost effectiveness, social, ethical and economic impacts), and

2. Scientific and medical evaluations for use in making Medicare coverage decisions (i.e., determining whether specific procedures are “reasonable and necessary” and thus appropriate for reimbursement by Medicare).

Reasons For The NCHCT’s Demise

Opponents of the NCHCT’s continuation — principally the Health Industry Manufacturers Association (now the Advanced Medical Technology Association) and the American Medical Association — argued that (1) physicians conduct their own technology assessments, so the NCHCT was redundant; (2) the NCHCT was a cost-control scheme in disguise; and (3) the NCHCT served as a health care industry regulator without codification of rules for decision making, a powerful charge in light of the anti-regulatory sentiments that swept into Washington in the early 1980s. When the Reagan administration eliminated the NCHCT by zeroing its budget for fiscal year 1982, its functions (to some extent) were transferred on to the National Center for Health Services Research (NCHSR), renamed the Agency for Health Care Policy and Research and later again renamed the Agency for Healthcare Research and Quality (AHRQ).

Challenges In Conducting Technology Assessment

Once a new medical technology is approved, there is tremendous pressure from investors to expand the market size (sales), both within the approved indication(s) and elsewhere (off-label applications). The NCHCT found itself under immense pressure to allow for a wide diffusion of new technologies. The following is a short list of the main challenges it faced in limiting technologies to those that were in fact both efficacious and cost-effective.

A dearth of data and studies. The NCHCT’s medical technology evaluation functions (principally focused on medical devices) were based on Food and Drug Administration (FDA) approval, published literature of early limited application, and professional opinion. In many cases, FDA approval hinged on whether use of the product could achieve a surrogate endpoint target (i.e., a lab value or other intermediate measure); the presumption was that the surrogate endpoint target was related to improvement in a clinical endpoint (improved survival, etc.). Other than these requisite FDA clinical trials, there was a dearth of studies to demonstrate real-world clinical effectiveness, a deficiency that lessened the ability of professional groups to comment on the product’s usefulness.

Expanded and off-label indications. Technologies that were covered by Medicare for a limited use quickly propagated to the treatment of patients having complications/comorbidities who were excluded from the requisite FDA clinical trials; for these patients, the benefits of the new technologies were unknown. Application of these technologies also propagated to other indications (off-label use) without the support of valid scientific evidence. As the Congressional Budget Office said recently, citing the findings of a RAND study, “Overuse occurs when a service is provided even though its risk of harm exceeds its likely benefit — that is, when it is not warranted on medical grounds. A more expansive definition would include cases in which the added costs of a more expensive service did not exceed the added benefits it was expected to provide.”

A Case Study Of Today’s Challenge

We use epoetin (EPOGEN) treatment of chronic anemia, a common complication of chronic kidney disease and end-stage renal disease (ESRD), as a case study to exemplify (1) attempts to expand the market, (2) studies necessary to assess these attempts, and (3) the translation of scientific evidence into policy formation. Documentation of epoetin therapy is unique because Medicare requires providers to submit monthly epoetin dosages and hematocrits for payment of this service. Medicare’s epoetin reimbursement policy also created a perverse financial incentive to overuse this drug.

Epoetin was introduced in 1989 to reduce the need for infusion of blood units for treatment of anemia among ESRD patients. Prior to availability of epoetin, blood units were frequently administered to approximately 10% of the ESRD patients (another 20% received an occasional blood unit for mild anemia). The remaining 70% of patients did not receive blood unit infusion for treatment of anemia. By 2005, however, 99% of in-center hemodialysis patients received epoetin treatment. How did this therapy diffuse to near-universal use among the dialysis population? Was this diffusion backed up by solid scientific evidence? How can it be that a comprehensive technology assessment has not been conducted more than two decades after epoetin has been on the market?

Epoetin dosing levels have changed dramatically since the substance’s  introduction into the U.S. market. The mean dose of epoetin has increased about fourfold in dialysis patients, and Medicare expenditures for epoetin rose to ~$2 billion in 2004, constituting 11% of all Medicare ESRD costs. Unfortunately, other than studies documenting usefulness for a small group of patients who would otherwise be dependent on infusion of blood units, there are no other clinical trials to guide policymakers on how to cover and/or reimburse for this costly treatment. Despite this deficit of valid scientific evidence, Medicare has consistently covered/reimbursed for the expanded use, costing the Medicare program over $20 billion to date.

In an attempt to increase sales of approved indications and expand to other indications, proponents commissioned both clinical trials and highly flawed observational studies that ended with conflicting results. Justification for this prodigious expenditure continues to rest with the presumption that a positive change in the surrogate endpoint (in this case, hematocrit) is related to an improvement in a clinical endpoint (improved survival, quality of life, etc.), despite the fact that this has been disproved by clinical trials and disallowed by the FDA.

Our epoetin research addresses the translation of epoetin research into practice (today, over 99% of dialysis patients receive this drug continuously) and the role of government in requiring and applying scientific evidence to policy formation. The two existing clinical trials (Besarab, 1998, and Singh, 2006) were terminated due to higher mortality rates in the higher target hematocrit treatment arms. Unfortunately, there are no other clinical trials to guide policymakers on how to pay for this costly treatment. Our contention is that Medicare policymakers should base their decisions on future payment for this service and others on a reasonable demonstration of “real-world” clinical effectiveness.


Rapid diffusion of costly health care technologies with undocumented benefits is endemic to the soaring costs of the U.S. health care system. Our case study is unique because epoetin dose and physiological response (hematocrit) data are readily available to assess the benefits of chronic anemia epoetin treatment on a continuous basis. This case study (and cautionary tale) is offered to the proposed Federal Health Board as an example of the advantage of enhancing Medicare claims to obtain vital information to assess benefits, as well as the pitfalls — both fiscally and in terms of patient safety — of not conducting a comprehensive technology assessment.