Back to Basics: Health Economics Gavin Lewis, Head of Health Economics, Roche BOPA, Brighton, 18 th October, 2009 HCMR00008 / Date of Preparation October

Back to Basics: Health Economics

Gavin Lewis, Head of Health Economics, Roche

BOPA, Brighton, 18th October, 2009

HCMR00008 / Date of Preparation October 2009

Learning Objectives

• Following this session you should be able to better understand:1. Principles of Health Economics2. Meaning of a cost per QALY3. Role of health economics in patient access to

new medicines4. Key challenges facing application of Health

Economics to Oncology


Agenda

• What is Health Economics?– Why do we need it?– What is it?– Cost Effectiveness analysis

• How is Health Economics applied in the NHS?– What is a Cost per QALY? – Calculating a cost per QALY

• Health Economics and Oncology– Key challenges– Recent Developments



Background Common misunderstandings of Health Economics

1. “The most cost-effective patient is a dead patient”

2. “NICE are all about cost containment”

3. “The cheaper drugs are the most cost-effective drugs”

4. “Cost Effectiveness analysis doesn't consider the patient’s quality of life”


Why do we need Health Economics?


Health Economics provides the tools and analytical framework to help address these

objectives

Context: Provision of Health Care

• 3 distinct issues are raised when discussing the provision of health care:

– Ageing population– New technologies– Patient expectation

• UK has a tax-funded healthcare system and therefore finite resources

• Key objectives of healthcare provider:– Ensure equality of access to healthcare– Generate the greatest health benefit from finite set of

resource


A more recent addition to the evidence base

Efficacy

Cost Effectiveness

Safety

Tolerability

Reimbursement Criteria“The Fourth Hurdle”

• Mandatory evidence requirement to ensure funding for new medicines

RegulatoryCriteria


What is Health Economics?


Some Definitions

• Economics– Study of the allocation of scarce resources

• Health Economics– Economic principles applied to healthcare

• Pharmacoeconomics– Economic principles applied to drug therapy

• Economic Evaluation– main decision making tool in economics– Economic evaluation is about efficiency and is:

‘the comparative analysis of alternative courses of action in terms of both their costs and consequences’ (Drummond, 1997)

– There are different types……


Types of economic evaluation

• Cost minimisation analysis– Equal outcomes / clinical benefit assumed– Which has lowest overall total costs?

• Cost Benefit analysis– Both costs and outcomes expressed in monetary value– Difficult to value all health benefits in monetary terms

• Cost Effectiveness analysis– Outcomes expressed in natural units– Cost per “% drop in blood pressure” / SRE avoided / cure

• Cost Utility analysis – Outcomes expressed in QALYs– Cross disease comparisons possible– What NICE use!– Considered current gold standard measure


Other types of Health Outcome analysis

• Epidemiological– Prevalence / incidence of disease

• Patient reported outcomes – Quality of life / Utility studies

• Descriptive Economic studies– Burden of disease analysis – long term cost

consequences of disease– Budget impact analysis – cost of treatment / drug– Resource utilisation / time and motion studies

• However for decision making require full economic evaluation – E.g. Cost Utility analysis


Principles and methods of Cost Effectiveness analysis


Understanding the principle of cost effectiveness analysis

• Gold standard method:– Cost Utility analysis which utilises the “cost per

QALY” or “incremental cost per QALY” (ICER)

• Methodology to formally evaluate the value for money of a given healthcare technology

• Value for money = “Efficiency”

• A misunderstood phrase……


What is efficiency?

• “Government announces reduction in number of civil servants, saving £50m as part of drive for greater efficiency”

• “Payment by Results may reduce total costs of delivering healthcare thus improving the efficiency of the NHS”

• Statements ignore impact on outcomes– E.g. PBR could reduce costs but increase mortality, is this

efficient?

• ”Cost-reducing” is not the same as efficiency!!

• Only if achieve same outcomes from reduced resources = improved efficiency.

– Need to synthesise both costs and outcomes to evaluate value for money

– Cost effectiveness analysisHCMR00008 / Date of Preparation October 2009

Decision making principles

• When judging value for money we naturally evaluate things in increments…

• Purchasing a new home…is it a good buy?

1. What else is available? (Identify options)

2. What is extra cost? (Purchase, stamp duty, repair etc)

3. What is extra benefit? (Location, Size etc)

• Key principle:– We can not judge value for

money in isolation - need to compare

• Principles of Cost Effectiveness Analysis no different!


Should the NHS adopt a new intervention?

Cost (+)

X ?

(-) Effectiveness - QALYs (+)

?

(-)

Areas of uncertainty Decision rule

is required

Do not Adopt

Adopt

Cost per QALY less than £30,000


The cost-effectiveness plane

£20,000

Incr

emen

tal

Co

sts

£10,000

£30,000

£40,000

Incremental Drug Benefit (QALYs)

0.5 1 1.5 2

B

Willingness to pay

thresholdA

Area of acceptance

Area of rejection


Cost Effectiveness Threshold

• Currently defined as £20,000 - £30,000 by NICE

• No fixed threshold

• Poor evidence base behind threshold

• Subject to ongoing research

• Defines how much society is “willing to pay” to obtain a gain in health outcome (1 additional QALY)– Too high: displace more CE interventions with

greater health benefit for same money– Too low: inhibit health improvements /

innovation


What is a Cost per QALY?


What is a QALY? - concept

• “Quality adjusted life year”

• Which drug would you prefer?– Drug a) additional 12 years of life?– Drug b) additional 10 years of life?

• Drug a) IV – large side-effects, weekly hospital visits, toxic, nausea.

• Drug b) Oral formulation, perfect health

• Therefore need to adjust survival benefits for standard/quality of life

• Achieved via a “utility score”


Utility Scores

• Way of capturing Quality of Life in Cost Effectiveness Analysis

• Measured on a scale of 0 to 1

• 1 = Perfect Health

• 0 = Death– Negative values possible

• Captured through patient reported generic quality of life instruments

– EQ-5D, SF-36

• Can be applied across all disease areas and variety of health states

By placing a tick in one box in each group below, please indicate which statements best describe your own health state today. Mobility I have no problems in walking about I have some problems in walking about I am confined to bed Self-Care I have no problems with self-care I have some problems washing or dressing myself I am unable to wash or dress myself Usual Activities (e.g. work, study, housework, family or leisure activities) I have no problems with performing my usual activities I have some problems with performing my usual activities I am unable to perform my usual activities Pain/Discomfort I have no pain or discomfort I have moderate pain or discomfort I have extreme pain or discomfort Anxiety/Depression I am not anxious or depressed I am moderately anxious or depressed I am extremely anxious or depressed


What is a QALY? - calculation

• Patients on Drug A live longer than patients on Drug B• Utility Scores:

• Drug A = 0.40

• Drug B = 0.65 • QALYs for Drug B (6.5) greater than Drug B (4.8)

Patient Survival

0 2 4 6 8 10 12

Drug A

Drug B

Years

Patient QALYs

0 2 4 6 8 10 12

Drug A

Drug B

QALYs


Cost per QALY

• Standardised measure to assess the value for money of a health intervention

• “How much additional NHS money is required to produce an additional QALY using the intervention under question?”

• Cost per QALY is therefore a COMPARATIVE measure– Additional costs and benefits relative to

chosen comparator


What is a Cost per QALY?

0

1 0000

2 0000

3 0000

4 0000

5 0000

6 0000

7 0000

Total NHS Costs QALYs

New InterventionCurrent Practice

Interested in difference / Marginal differences


How do you calculate a cost per QALY?


Calculating a Cost per QALY:

• Total Cost = Drug cost + NHS Resource costs

• Total QALY = (Survival)*(Utility score)

• Period of survival is often stratified into discrete “health states” – Response versus Progression– Cure versus Active disease

(Total Costs Drug A) – (Total Costs Drug B)(Total QALYs Drug A) – (Total QALYs Drug B)



Calculating a Cost per QALY:



The Cost per QALY, an example.

• “How much additional cost is required to generate an additional quality adjusted life year compared to current practice?”

Current Practice

New Drug Difference

Total NHS Cost

per patient

£10,000 £18,000 £8,000

Total QALYs

per patient

6.20 6.90 0.70

Cost Per QALY

£11,429


What influences Cost per QALY?

• Drug Price

• Patient Survival

• Patient Quality of Life

• Related NHS resources– Drug Administration– Nurse / Pharmacy time– Side Effect management– Medical Supplies

We can not judge the merits of treatments in isolation from current alternatives


Cost per QALY Summary

• When given the Total costs and QALYs for each intervention cost per QALY a simple calculation

• Controversy surrounds estimation of QALYs:– Multiple health states and utility scores– Longer term outcomes and overall survival unknown

• Clinical outcomes rarely available for the necessary lifetime time horizon of the analysis

• ICER can be very sensitive to small changes in model assumptions

• Uncertainty around parameter estimates the most consistent source of debate within economic evaluation and NICE decisions


NICE’s preferred methodology – the Reference Case

Source: National Institute for Clinical Excellence (NICE). Guide to the Methods of Technology Appraisal. London: NICE, 2004.


Background Common misunderstandings- revisited

1. “The most cost-effective patient is a dead patient”

• Cost Effectiveness ratios include survival, reduce survival increases cost per QALY

2. “NICE are all about cost containment”• NICE guidance can dramatically increase costs

within a disease area. “Efficiency” not same as “cost-cutting”


Background Health Economic Myths - Revisited

3. “Cheaper drugs are the more cost effective drugs”

• Cost Effectiveness takes into account the benefits generated by a given drug

4. “Cost Effectiveness analysis doesn't consider the patient’s quality of life”

• The “QALY” is the outcome measure of CE analysis


Health Economics and Oncology


Key Challenges

1. Methodology Limitations and Oncology– EQ-5D sensitivity– Dynamic CE ratio– Variation in threshold by patient characteristics

2. Oncology Clinical Trial Design– Comparator– PFS and OS relationship (Cross-over)– Quality of Life outcomes– Sub Groups / Personalised Medicine– Means and Medians– Resource Use


Recent Developments

1. HTA Policy developments:– NICE End of Life Criteria– Kennedy Review– Pharmaceutical Oncology Initiative (POI)– PPRS innovation package– Patient Access Schemes

2. Regionalised HTA– Pre-NICE Health Economics requirements


Thank you


Back Up


End of Life Criteria

• Patients with less than 24 months life expectancy

• Additional 3 months survival from new treatment

• “Small patient numbers” (approx 7,000?)

• No alternative with comparable benefits

• Single indication


Documents

Back to Basics: Health Economics Gavin Lewis, Head of Health Economics, Roche BOPA, Brighton, 18 th October, 2009 HCMR00008 / Date of Preparation October