Normally, $15 million a year doesn't buy you much in the federal government. A notable exception is the Effective Health Care Program at the Agency for Healthcare Research and Quality (AHRQ). Drug manufacturers, device makers, health plans, state Medicaid agencies, Wall Street analysts, physicians, and patient groups should all follow it closely.

The Medicare Modernization Act of 2003 (MMA) authorized AHRQ to conduct and support research on outcomes, comparative clinical effectiveness, and appropriateness of pharmaceuticals, devices, and health care services. With a modest budget, a tiny but dedicated staff, and partnerships with top research institutions, AHRQ's Effective Health Care Program involves three approaches to research the comparative effectiveness of different medical treatments, drug therapies, and clinical practices:

1. Review and Synthesize Knowledge: AHRQ's network of 12 Evidence-based Practice Centers systematically review published and unpublished scientific evidence on what is known. Given the huge volume of studies and journal articles produced every year, it is next to impossible for providers, payors, and other key decision makers to keep up and even harder for them to thoughtfully weigh the evidence. AHRQ and its research partners synthesize the science and build a meaningful evidence base.

2. Promote and Generate New Knowledge: The DEcIDE Research Network studies new scientific evidence and analytic tools in an accelerated and practical format. DEcIDE stands for "Developing Evidence to Inform Decisions about Effectiveness." Comprised of 13 university research centers and think tanks, the DEcIDE network conducts accelerated practical studies about the comparative clinical effectiveness, safety, and appropriateness of specific health care services, drugs, and devices. In other words, what works best for patients.

3. Compile Findings and Translate and Disseminate Knowledge to Decision Makers: AHRQ's John M. Eisenberg Clinical Decisions and Communications Science Center takes the research results and transform them into into a variety of useful, actionable formats for stakeholders (e.g., providers, payors, purchasers, patients, manufacturers). Specifically, these include (a) consumer guides (short summaries of health care research that can help with decisions about treatments), (b) clinician guides (brief evidence summaries to assist clinical decision making), (c) policymaker guides (short reports of research evidence for use in health care policy making), and (d) white papers on state-of-the-art concepts in health communication.

The past couple years, the initiative has focused on ten priority health care conditions, selected because of their high impact on Medicare, Medicaid, SCHIP, and other federal health programs:

Later this year, AHRQ will entertain nominations for other priority conditions.

Here's a sampling of the excellent work already generated. For a directory of these reports, with free access in PDF format, click here:

The Effective Health Care Program has 40 other reports in the works, covering a wide range of topics. These include more comparative effectiveness reviews of specific drugs as well as tools to measure quality, reduce errors, and monitor therapies. To get notified when new research becomes available, sign up for AHRQ's email list.

Science Business: The Promise, the Reality, and the Future of Biotech

Summary: Why has the biotechnology industry failed to perform up to expectations - despite all its promise? In Science Business, Gary P. Pisano, Ph.D. answers this question by providing an incisive critique of the industry. Dr. Pisano not only reveals the underlying causes of biotech's problems; he offers the most sophisticated analysis yet on how the industry works. And he provides clear prescriptions for companies, investors, and policymakers seeking ways to improve the industry's performance. According to Dr. Pisano, the biotech industry's problems stem from its special character as a science-based business. This character poses three unique business challenges: (1) how to finance highly risky investments under profound uncertainty and long time horizons for R&D, (2) how to learn rapidly enough to keep pace with advances in drug science knowledge, and (3) how to integrate capabilities across a broad spectrum of scientific and technological knowledge bases.

The Business of Healthcare Innovation

Summary: Robert Lawton Burns, Ph.D., MBA focuses on the key role of the 'producers' as the main source of innovation in this wide-ranging analysis of business trends in the manufacturing branch of the health care industry. Written by industry academics and executives, the book provides a detailed overview of the pharmaceutical, biotechnology, genomics / proteomics, medical device, and information technology sectors. Most importantly, it describes the growing convergence between these sectors and the need for executives in one sector to increasingly draw upon trends in the others.

Overdose: How Excessive Government Regulation Stifles Pharmaceutical Innovation

Summary: This book is the first to offer a comprehensive examination of the pharmaceutical industry by following the tortuous course of a new drug as it progresses from early development to final delivery. Richard A. Epstein looks closely at the regulatory framework that surrounds all aspects of making pharmaceutical products today, and he assesses which current legal and regulatory practices make sense and which have gone awry. While critics of pharmaceutical companies call for ever more stringent controls on virtually every aspect of drug development and approval, Professor Epstein cautions that the effect of such an approach will be to stifle pharmaceutical innovation and slow the delivery of beneficial treatments to the patients who need them.

The New Medicines: How Drugs are Created, Approved, Marketed, and Sold

Today, most people use prescription medications. Every year, the multi-billion dollar pharmaceutical industry produces new medicines that treat everything from arthritis to AIDS, from high cholesterol to depression. But, despite recent controversies regarding the safety of drugs, consumers know little about the medications that they ingest and inject. How are these new medicines invented? How do consumers know that drugs are safe and effective? How are they tested? Who regulates their production - and who watches the regulators? How do drug companies produce the vast quantities needed for the marketplace, and why do they market their drugs as they do? The New Medicines (by Bernice Schacter, Ph.D.) leads the reader through the maze of the modern drug industry - from bench to bedside - and provides consumers with a step-by-step understanding of how new medicines are created, approved, marketed, and sold.

Inside the FDA: The Business and Politics Behind the Drugs We Take and the Food We Eat

Because of the importance of what it regulates, the FDA comes under tremendous political, industry, and consumer pressure. But the pressure goes far beyond the ordinary lobbying of Washington trade groups. Its mandate - one quarter of the national economy - brings the FDA into the middle of some of the most important and contentious issues of modern society. From "designer" babies and abortion to the price of prescription drugs and the role of government itself, Inside the FDA takes readers on an intriguing journey into the world of today's most powerful consumer agency. In a time when companies continue to accuse the FDA of nitpicking and needlessly delaying needed new drugs, and consumers are convinced that the agency bends to industry pressure by rushing unsafe drugs to market, Inside the FDA digs deep to reveal the truth. Through scores of interviews and real-world stories, author Fran Hawthorne (senior contributing editor of Institutional Investor) also shows how and why the agency makes some of its most controversial decisions as well as how its recent reaction to certain issues - including the revolutionary cancer drug Erbitux, stem cell research, and bioengineering of food - may jeopardize its ability to keep up with future scientific developments.

More Excellent Books on Pharma and Biotech:

For additional reading on the pharmaceutical industry, biotechnology, and prescription drug issues, please check out my recommended reading lists:

Best Blog on FDA and Pharma Industry Communications:

For insightful, industry-savvy advice on the FDA, drug regulation, and pharma strategic communications, please visit Eye on FDA - the excellent blog by my friend and colleague Mark Senak, JD, senior vice president at Fleishman-Hillard.

In the Deficit Reduction Act (DRA), Congress authorized the new $150 million Medicaid Transformation Grant Program to help states design and implement reforms to increase quality and efficiency of Medicaid. This is a unique opportunity to help states restructure and modernize Medicaid, save taxpayer dollars, and improve services. But states must act fast to take advantage.

State Medicaid agencies may submit grant proposals to CMS by September 15, 2006. For grants, CMS has a total budget of $75 million in FFY 2007 and another $75 million in FFY 2008. The amount of each grant will vary and will depend on the number of applications received. State matching funds are not required.

While states have wide discretion in proposing projects and may propose multiple projects in a single grant application, CMS is encouraging states to look at ways to improve Medicaid program operations and efficiency.

In the area of improving Medicaid program efficiency, CMS is particularly interested in grant projects to:

CMS is also interested in projects to improve the effectiveness of Medicaid. Examples include projects on:

In the arena of improved care delivery, CMS is particularly interested in grant proposals to:

This is a unique, one-time opportunity for states but, with grant applications due in six weeks, the timeline is tight. States needing help or advice in writing an application may contact me or my friends at Sellers Feinberg for assistance.

The market dynamics, business models, and corporate strategies of pharma, biotech, genomics, medical device development, and health care information technology are converging. And you better get ready.

Written by business gurus at the Wharton School and health industry executives, The Business of Healthcare Innovation provides an invaluable analysis of key business trends in the manufacturing side of health care. Editor Lawton R. Burns, Ph.D. and contributors focus on the producer side of health care and demonstrate how manufacturers serve as the principal drivers of health care innovation.

Specifically, The Business of Healthcare Innovation:

· Provides an insightful, detailed overview of the most influential players - namely, the pharmaceutical, biotechnology, genomics/proteomics, medical device, and information technology sectors.

· Describes and assesses the market structures, business models, and corporate strategies of each of these six sectors.

· Shows how the six sectors are converging, drawing increasingly on the trends, tools, and solutions of each other.

A compelling, business-savvy look at the manufacturing side of health care, The Business of Healthcare Innovation is highly recommended for executives, policy makers, investors, and consultants to business and government decision makers.

Once the Food and Drug Administration (FDA) approves a new prescription drug for one medical indication, physicians are free to prescribe it for virtually any condition. While there are downsides of prescribing drugs "off-label," it allows patients and payors to benefit as physicians test drugs under real-world conditions and identify new applications.

Because formal clinical trials and the FDA review process can take years, valuable new uses of a drug may be validated by studies in peer-reviewed medical journals years before the new indication becomes officially approved. And because of research and regulatory costs, drug makers cannot justify pursuing FDA approval for new indications, even when a new indication is highly cost-effective for purchasers, plans, and patients. Indeed, some diagnoses have no "on-label" drugs and are treated entirely on an off-label basis.

With the new Medicare drug benefit (Medicare Part D), the federal government will become the world's largest buyer of prescription drugs. In Part D, a prescription drug is coverable by a Medicare drug plan (PDP or MA-PD) only if it is prescribed for a medically accepted indication as defined under federal Medicaid law. This includes uses that are approved by the FDA or supported by a citation in one of four drug compendia:

· American Medical Association Drug Evaluations
· American Hospital Formulary Service Drug Information
· DRUGDEX Information System
· United States Pharmacopeia Drug Information

Because of this restriction in the Medicare Modernization Act, indications that are supported in peer-reviewed medical literature but not yet approved by the FDA or accepted in one of the compendia are not "medically accepted" by Medicare. In such cases, the Medicare drug plans may not pay for the drug.

While this helps Medicare drug plans manage their financial exposure and allows them to crack down on inappropriate drug therapy, it also means that it'll be harder for physicians to identify valuable new uses of medications. As we loose this critically important path to expanding our evidence base, patients and the economy will suffer.

This is yet another reason why we need a comprehensive approach to post-market surveillance and assessment of prescription drugs, continuous improvement of the evidence base of what works, and more effective ways to bring that evidence to day-to-day clinical practice.

Regardless where you come down on the issue of contraception and availability of the new Plan B "morning after" pill, the Food and Drug Administration's handing of Plan B provides ample evidence against expanded regulation of the pharmaceutical industry.

Plan B, an emergency contraction drug, was approved for sale by prescription in 1999 "indicated to prevent pregnancy following unprotected intercourse, a known or suspected contraceptive failure, or in cases of sexual assault." When taken within 72 hours of unprotected intercourse, it reduces the chance of pregnancy by 84 percent. Plan B is not RU-486, the so-called abortion pill. It doesn't not work if the woman is already pregnant, although reportedly it sometimes prevents a fertilized egg from implanting in the uterus.

Because Plan B is more effective the sooner it is taken, an FDA advisory panel voted overwhelmingly to recommend the drug for sale over the counter (OTC). Concerned that women under 16 may not understand the label instructions, the FDA rejected the committee's recommendation.

To accommodate the FDA's concerns, the drug's maker, Barr Pharmaceuticals (NYSE: BRL), asked the FDA to allow OTC access to Plan B for women age 16 and older. A prescription would still be required for those 15 and younger. For many, that seemed like a reasonable approach, although of course it wouldn't satisfy radicals on the Left or the Right. Now, contrary to the statutes governing the FDA and the FDA's own rules, the matter is again on hold.

Plan B is a political football to be sure and the FDA Commissioner, Lester M. Crawford, is in a tough spot. Any discussion of contraception " particularly an entirely new method designed to help reduce the chance of a pregnancy after intercourse " brings out both sides, particularly the Far Left and the Far Right.

However, the FDA's job is not to make the nation's social policy or, for that matter, the nation's health policy. Its sole job " and therefore sole authority " is to determine whether Plan B is safe and effective. It already made that decision in the affirmative. Federal law " and the FDA commissioner's promises to Congress " dictates that Barr's request for OTC status be approved. If elected lawmakers are concerned about women's or girls' access to contraceptives (either because they see it as too restrictive or too loose), then they are free to debate it to their heart's content and the rest of us can watch them on C-SPAN. However, the FDA is an administrative agency charged with a specific scientific mission.

The FDA's mishandling of Plan B does have a positive aspect. It provides an excellent case study in why we must guard against over regulation of health care, whether of pharmaceuticals or medical services. Just as it's important to make sure our courts not legislate, it's also important that executive branch agencies stick to their knitting.

With the new Medicare drug benefit, the federal government will soon become the world's largest buyer of prescription drugs. Taxpayer-funded programs " notably Medicaid and Medicare " already account for just under half of the nation's health spending. With more and more medical dollars in the hands of the government (gulp), lawmakers will be overcome with an urge to legislate and regulate. We must guard against this terribly perverse, inherently counterproductive instinct.

With so much public money in the mix, it is not realistic to assume a complete separation of science and politics. But that's why we have a system of laws, due process, transparent decision-making, and limited, precise delegation of authority. The situation of Plan B and the FDA shows how this can quickly brake down if we are not watching.

Preventable medication mistakes in hospitals is a leading causing of death. Top patient safety experts and The Leapfrog Group have called upon hospitals to replace risky, paper-based prescriptions with computerized physician order entry (CPOE) systems.

If installed in every major hospital, CPOE systems would save tens of thousands of lives each year. However, few hospitals have CPOE systems and few plan to get them any time soon. In addition to costing $3-10 million per facility, hospital execs often face stiff resistance from docs unwilling to learn, replace their Rx pads with Palm Pilots, and work as teams. Even worse, because facilities are paid for quantity and not quality, improved patient safety often lowers a hospital's revenue (fewer errors = fewer patient days = lower revenue).

Harvard Medical School researchers Eric G. Poon, David Blumenthal, and colleagues recently interviewed senior managers in 26 hospitals to identify ways to overcome barriers to adopting and implementing CPOE. Their thoughtful, on-target recommendations appear in the latest issue of Health Affairs.

Solutions, not unexpectedly, include financial incentives to hospitals, stronger hospital and physician leadership, greater public attention to patient safety, establishing more uniform data standards, and modernizing hospital IT infrastructures.

For further reading on savings lives through improved technology, check out my reading lists on:

- Health care quality.

- Medical errors.

- Health care information technology.

- Electronic medical records.