Introduction

Dr Alan HaycoxReader in Health EconomicsHealth Economics UnitUniversity of Liverpool Management

School

Onco-Pharmacoeconomy Training Onco-Pharmacoeconomy Training CourseCourse

Turkey ISPOR Training CourseTurkey ISPOR Training Course

Course objectivesCourse objectives

The two course objectives are:

Understanding the basics of health economics and the underlying rationale

Understanding the application of health economics to oncology especially the concept of opportunity costs

Course timetableCourse timetable

11.00 – 12.00Rationale behind health economics

including opportunity costs13.00 – 15.00Understanding health economics,

health benefit of current cancer drugs and end of life concepts

15.30 – 17.30Workshop around the concept of

opportunity costs based on HERCEPTIN in adjuvant breast cancer in the UK

Rationale for Health EconomicsRationale for Health Economics

Brian Godman

University of LiverpoolMario Negri Institute, Milan, Italy Karolinska Institute, Stockholm, Sweden

Why growing use of Health Why growing use of Health Economics?Economics?Healthcare represents a significant

proportion of national expenditure

New initiatives needed to maintain comprehensive and equitable healthcare with increased volumes and new expensive drugs – especially new oncology drugs

Health economics provides a basis for evaluating different options when resources are scarce – concept of opportunity costs

New specialist drugs key cost driver New specialist drugs key cost driver in Sweden requiring additional in Sweden requiring additional measures measures

Ref: Godman and Wettermark 2009

Total drug expenditures in Stockholm County (prescriptions, hospital, OTC) 1977-2007

0

1

2

3

4

5

6

7

8

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Bill

ion

SE

K

Specialist drugs

Non-specialist drugs

The cost of new oncology drugs in Sweden is accelerating matching UK concerns

Ref: Specialist drug project Stockholm, Godman 2009

One UK cancer expert (Professor Sikora at the Hammersmith Hospital) recently estimated that the next generation of cancer drugs could cost the UK alone up to £50billion a year within four years - equivalent to raising the basic tax rate by 15% (15p in the £)

New expensive products (especially new cancer drugs) now account for over 50% of the in-patient hospital drug budget in Marseilles hospitals, with sales growing at over 20% per year. This is leading to a reduction in other services

As a result, use of health economics and concept of opportunity costs will grow especially in cancer

Ref: Sikora 2008, Sermet, Andrieu and Godman et al 2010

The cost of new cancer drugs is a The cost of new cancer drugs is a growing concern in other EU growing concern in other EU countries countries

The Basis of Health EconomicsThe Basis of Health Economics

Demand for healthcare is infinite◦ Increased expectations, ageing populations

and technological changeResources are scarce

◦ Doctors, nurses, hospitals, pharmaceuticalsChoices are necessary

◦ Do we increase the drug budget, pay for more surgeons, increase radiotherapy services or improve pain managements?

Prioritisation is required◦ On what basis? Who should make decisions?

Costs and benefits must be compared◦ How do we measure benefits?

Cost measurement: 3 StagesCost measurement: 3 Stages

Resource identification

Resource measurement

Resource valuation

Resource IdentificationResource Identification

Typically all relevant resource (cost ) items that are used (consumed) during the care process are identified in any health economic evaluation

These are recorded and subsequently costed during the course of undertaking the HE evaluation

Resource MeasurementResource Measurement

The amount of each resource consumed (used) is measured:◦Capital Items (items that provide

services over more than 1 year), e.g. Equipment Buildings

◦Recurrent Items (items consumed within 1 year or less) Materials/ supplies/consumables such as

pharmaceuticals Labour, Utilities (gas, electricity, water, etc.)

Resource ValuationResource Valuation

Average costsMarginal costsOpportunity

costs

A value is attached to each resource consumedResources can be valued differently…

Health economists and policy makers emphasise the importance of ‘opportunity costs’ in valuing overall expenditure as budgets are finite

The most important concept:The most important concept:Opportunity CostOpportunity CostThe opportunity cost of using resources

to produce a good or service is the benefits foregone from those resources not being used in their next best alternative. The concept of opportunity cost lies at the heart of all economic analyse

The health policy goal is to maximise patient outcomes with available resources. This means some benefits will be foregone – but these should be minimised

150 vaccinations for Measles,Mumps and Rubella

One-third of a cochlear implant

11 cataract removals

1 heart bypass operation

One-third of a junior school teaching assistant for a year

2000 school dinners

Opportunity cost in practice - The Opportunity cost in practice - The opportunity cost of one course of opportunity cost of one course of IVF IVF

Case History – Adjuvant HERCEPTIN Case History – Adjuvant HERCEPTIN in Breast Cancer in one UK Hospitalin Breast Cancer in one UK HospitalCurrently 355 patients receive adjuvant

treatment in Norfolk and Norwich at GB£0.503mn/ year (16 cured at a cost/ cure ranging from £23000 - £137,000)

Treating 75 patients with early stage breast cancer with HERCEPTIN would cost GB£1.94mn/ year rising to GB£2.3mn with testing, monitoring and administration at a cost/ cure of £650,000

Finite budgets mean tough decisions need to be made on which treatments should be funded and which should be terminated or reduced

Ref: Barrett et al BMJ 2006

Costs and potential benefits of Costs and potential benefits of adjuvant cancer treatments in adjuvant cancer treatments in Norfolk HospitalNorfolk Hospital

Treatment and number of patients Drug cost (GB£000)

Cost/cured patient

(GB£000)

Adjuvant chemotherapy for lung cancer (15 patients)

23 23

Oxaliplatin as adjuvant therapy for colon cancer compared with fluorouracil alone (20 patients)

137 137

Neoadjuvant chemotherapy for oesophageal cancer (25 patients)

8 2.67

Rituximab in addition to CHOP for non-hodgkin lymphoma in patients over 60 (25)

215 71.67

Adjuvant aromatase inhibitors in postmenopausal breast cancer (270 patients) [NB drug costs will fall substantially in Europe once generics routinely available]

120 15

Total – 355 patients and 16 cured 503Ref: Barrett et al BMJ 2006

Possible lessons for TurkeyPossible lessons for Turkey

Other countries have approached the fact of finite resources through a variety of initiatives including:o Setting value criteria for funding new

drugs, e.g. cost/ QALY and minimum effectiveness criteria

o Establishing pre-launch the potential budget impact of new drugs along with potential savings, e.g. new generics becoming available. Subsequently agreeing patient characteristics/ prescribing criteria ahead of launch with key clinicians and monitoring their effectiveness and utilisation post launch

Ref: Ferguson et al 2000

Key stakeholders including leading cancer clinicians agreed only new cancer products with A and B effectiveness criteria and alpha data quality should be funded and prescribed at premium prices in view of resource constraints

Effectiveness

A

B

C

alpha -

D

Data Quality

alpha +

Criteria

beta

Median survival improved > 9months + improved QoL

Median survival improved 3 - 6 months + improved QoL

Improved QoL, no impact on survival

Minimal impact QoL, no impact survival

Criteria

Meta analysis or two high quality RCTs

One poor quality RCT and/or several Phase II studies

One high quality RCTs and supporting Phase II data

3 Levels of effectiveness and data quality chosen

Minimum effectiveness criteria for Minimum effectiveness criteria for funding new drugs in UK cancer funding new drugs in UK cancer hospitalshospitals

Overall survival

Time to progression (TTP)/ Progression free survival (PFS)

Response rate, e.g. OR, PR

Other

2

11

13

1

Primary efficacy end point in main studies

Number

7%

41%

48%

4%

%

• Survival data (when available – overall 13 trials):o Range: 0 – 3.7 months additional survival

versus comparatoro Mean: 1.5 months, Median: 1.2 months

Survival data important as limited Survival data important as limited additional benefits for most cancer additional benefits for most cancer drugsdrugs

Ref: Apolone et al 2005

There are 4 Methods of economic There are 4 Methods of economic evaluationevaluationThe four methods are

◦Cost Minimisation Analysis (CMA)◦Cost Effectiveness Analysis (CEA)◦Cost Utility Analysis (CUA)◦Cost Benefit Analysis (CBA)

These four approaches will be discussed after the coffee break

Any questions?