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DRUG FIRMS BEGIN FOCUSING ON COST-EFFECTIVENESS

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Later this month, the Synergen Corp. will complete clinical trials of a new biotechnology drug for treating sepsis, a deadly bacterial infection. With the spotlight on health-care costs, Synergen intends to show that its new molecule not only saves lives but also saves money over other sepsis treatments.

Drugs have long been held to just two standards - safety and efficacy. But huge customers like insurance companies and health maintenance organizations are beginning to insist on a third: cost-effectiveness - that is, whether one drug more than another can reduce hospital stays, say, or employee absenteeism.The criterion is gaining sway with government regulators and may be embraced by the Clinton administration, which has vowed to make drug-price containment a cornerstone of its plan to cut the nation's health-care bill.

And perhaps the most conspicuous targets are the wonder drugs of biotechnology companies like Synergen, many of which can cost patients as much as $30,000 a year. The industry says its research and development as well as expensive manufacturing processes justify these prices.

Yet to prove that their products are worth the price, companies like Synergen are hiring new specialists called "pharmaco-economists," who have degrees in both economics and pharmacology and look at the cost-effectiveness and quality-of-life issues of drugs. Synergen has added two phar-ma-co-economists to its clinical research staff, and in the case of its antisepsis drug Antril, it decided to conduct cost-effectiveness tests alongside clinical trials rather than holding them after the drug received federal approval, as is customary.

"Before we ever heard of Bill Clinton, before he was a presidential candidate, I believed that in the '90s, just as sure as you had to prove safety and efficacy, you also would have to convince people that you are delivering economic value, and that even goes for life-saving therapies," said Jon S. Saxe, president and chief executive of Syner-gen, which is based in Boulder, Colo.

But measuring a drug's cost-effectiveness can be tricky. How does a company show the cost to society of, say, arthritis to prove that a remedy is worth its hefty price tag?

And some drug executives warn that regulating drug prices may not have the intended effect, even carrying potential bad side effects.

In addition, drugmakers warn, regulating prices could constrain the amount they spend on research and development. "Countries that have no price controls or limited controls have the greatest research efforts," said Bernard S. Bloom, a research professor at the University of Pennsylvania's School of Medicine. "Countries with very strict controls have no research."

Yet because drug prices are one health-care cost that can be controlled, and because the industry's high profit margins are so visible, political pressure to restrain drug pricing is inevitable, economists say.

While the Food and Drug Administration does not use price as a criterion in approving a new drug, advisory panels of scientists that help the agency evaluate new types of therapies have started taking cost into consideration.

Drug-pricing reform is likely to come under the umbrella of managed competition, that is, the creation of an environment that fosters competition between different kinds of health-care providers. Managed competition "signals an era in which people in all parts of the health-care-provider constellation are going to have to prove cost-effectiveness, not just clinical viability," said Jeremy Rosner, vice president for domestic policy with the Progressive Policy Institute in Washington.