ORGANIZATION The Pharmaceutical Benefits Advisory Committee (PBAC) is a statutory independent expert committee which makes recommendations to the Australian Government on medicines to be listed on the national reimbursement formulary (Pharmaceutical Benefits Scheme). PROBLEM OR ISSUE ADDRESSED The proportion of regulatory and reimbursement applications in which the efficacy assessment is limited to surrogate outcome data is increasing. Pressure to bring products to market quickly and facilitate access by patients to new treatments, as well as the costs and time involved in conducting clinical endpoint trials, has led to increasing reliance on these data. While substantial activity is focused on methodological, mainly statistical, approaches to the validation of surrogate outcomes, the determination of the magnitude of absolute or comparative treatment benefit offered by new medicines must be made by regulatory and reimbursement decision makers even where validity has not been clearly demonstrated. GOALS To highlight the need for a more coordinated approach to clinical trial design and the assessment of outcome data by regulatory and reimbursement agencies with respect to reliance on surrogate outcomes. OUTCOMES ITEMS USED IN THE DECISION IMPLEMENTATION STRATEGY In late 2007, the PBAC established a multidisciplinary working group which included representatives from the PBAC and its Economics Sub-Committee, and the Australian regulator (the Therapeutic Goods Administration), as well as external experts, and representatives of the pharmaceutical industry with the objective of identifying recent developments, policy and methodological, with respect to surrogate outcome data. RESULTS One of the more complex issues encountered during the comparative effectiveness and comparative cost effectiveness assessment of medicines is the determination of the incremental treatment effect when the available evidence is limited to surrogate outcome data. Reimbursement decision-makers attempting to determine incremental cost effectiveness must not only identify any qualitative difference in treatment effect, this must also be measured and valued for incorporation into cost effectiveness analysis. Where clinical benefit is only demonstrated against a surrogate endpoint and where the validity of that surrogate endpoint is uncertain, the relationship between a change in the surrogate and a change in the final clinical endpoint will also be uncertain. Despite much analysis and deliberation the working group was unable to identify a definitive strategy for evaluating a surrogate outcome data in the context of an economic evaluation, but acknowledged that the transformation of surrogates outcomes into final outcomes is associated with significant and extensive uncertainty which can substantively impact on the capacity of decision makers to make robust determinations of comparative cost effectiveness. This difficulty and uncertainty could be reduced through greater, earlier and more systematic collaboration between regulators and funders, and coordinated engagement with the developers of new products. Although formal cooperation agreements exist between a number of regulatory agencies, formal relationships between regulators such as the EMEA and any of the European HTA/reimbursement agencies, such as the UK's National Institute for Health and Clinical Excellence (NICE), for the joint identification, evaluation and validation of surrogate endpoints, and the determination of the significance accorded to them in the regulatory and reimbursement decision-making process, do not appear to exist. LESSONS LEARNED Regulators evaluating medicines for marketing approval processes are not the only decision makers who rely on the results of randomised trials. The commercial success of a new medicine is increasingly dependent on a successful reimbursement approval, and this often means significant public investment. Ideally regulatory-reimbursement collaboration should occur in the design phase of clinical trials so that endpoints that are meaningful, measurable and relevant to both regulators and funders are identified and utilised. Policy makers currently debating the establishment of a framework for comparative effectiveness research in the United States may also wish to engage in the debate around the identification, selection and validation of surrogate endpoints as this will be essential to the meaningful interpretation of these comparative analyses. Overall, the role of multiple decision makers in the process from drug development to drug subsidy and the need for better coordination is a very important one.