David Henry

1
Basing purchasing decisions on cost-effectiveness
rather than costsAnalysis of decisions made by
the Australian Pharmaceutical Benefits Advisory
Committee.

• David Henry
• School of Population Health Sciences
• WHO Collaborating Centre for Pharmacology and
• Rational Use of Drugs
• The University of Newcastle
• Australia

2
National Medicines Policy

• Licence safe and efficacious medicines of
  acceptable quality
• Affordable access
• Quality use of medicines
• Viable pharmaceutical industry

3
Australian drug subsidies (1)

• The Pharmaceutical Benefits Scheme
• Federal government program
• All Australian residents eligible
• In community, not in public hospital
• Subsidised indications may be restricted

4
Australian drug subsidies (2)

• In operation 50 years
• 588 different drugs (6/98)
• 125 million scripts (97/98)
• Au2.8 billion cost to government (97/98)
• 9.7 growth from 96/97 to 97/98

5
Choosing drugs for subsidy (1)

• Sponsor responsible for submission
• Information sources
• Information requirements
• Evaluation process

6
Choosing drugs for subsidy (2)

• Prerequisite registered drug
• Eminent statutory committee recommends
• Minister declares
• Positive drug subsidy list

7
Choosing drugs for subsidy (3)

• Sponsor lodges submission
• Government evaluates
• Independent committee considers value for money
• Government, with advice, negotiates final price
  with sponsor
• Minister declares and lists

8
The Submission

• Prepared by sponsors/consultants according to
  prescriptive guidelines
• Considers
• comparative efficacy
• preliminary economic analysis
• modelled economic analysis
• financial implications to PBS
• financial implications to government programs

9
The PBS Listing Process
10
Choosing drugs for subsidy (4)

• Post-listing reviews (at least annually)
• prices
• restrictions and listings
• Post-listing monitoring (at least annually)
• usage (including predicted versus actual)
• cost to PBS
• Coordinate post-listing activities

11
Context

• Pharmaceutical markets are imperfect
• We buy on behalf of the community
• The industry sells (80 of their prescription
  sales through the PBS)
• This is not a regulatory program
• We have different (and conflicting) interests

12
Context

• Assessment of data is heavily influenced by the
  context
• Pharmacoeconomic analyses are legitimate and
  valuable academic exercises
• BUT they are used as the basis of hard and
  important decisions
• Neither party starts from a position of true
  scientific equipoise in an innocent search for
  the truth

13
Context

• Our principal aim is to maximise health benefits
• We do not have a mandate to improve the economy
  or the industry
• Consequently we look at the measures of benefit
  first
• If the benefit is worth having then we look at
  the costs and the relationship between the two
• We require unconfounded estimates of benefit -
  thus our preference for clinical trials

14
Analogy to car purchase

• Would you be most influenced by
• a survey of owners provided by the manufacturer
• an independent road test performed by a reputable
  journal

15
Overview of PresentationSome lessons from
Australian PBS

• Importance of respecting the principles of
  quantitative epidemiology
• Pharmacoeconomic analyses and drug prices
• The impact of pharmacoeconomic analyses (and
  other factors) on decisions

16
1 Quantitative epidemiology and pharmacoeconomics

• Relationships between drug use, resource
  consumption, and clinical outcomes are complex
• Need to consider all dimensions of evidence
• Efficacy, applied efficacy, and effectiveness

17
Quantitative epidemiology and pharmacoeconomics

• In observational studies the relationship between
  drug use, resource consumption, and outcomes is
  affected by
• healthy (or sick) cohorts
• confounding by indication (for the drug)
• The extent of residual confounding may be greater
  then the effect of the drug. This will affect
  the pattern of resource use as well as the
  clinical outcomes
• This affects the numerator and the denominator in
  calculation of the cost-effectiveness ratio

18
Healthy Cohorts example

• Nurses Health Study HRT and risk of
  cardiovascular disease
• Unadjusted RR 0.47, adjusted RR 0.60 (0.47, 0.76)
• lt 2years 0.53 (0.31, 0.93) 10 years 0.70 (0.47,
  1.04)
• HERS trial
• Over 4.1 years RR 0.99 (0.80, 1.22)
• Other studies have shown reduced risk of several
  diseases amongst HRT users

19
Dimensions of EvidenceAll need to be considered
20
Dimensions of evidence - Relevance

• The extent to which the response variable used in
  the trial resembles the outcome of interest
• Surrogate outcomes can be very difficult to
  interpret (eg CD4 counts in AIDS, FEV1 in asthma)
• Anti-cholinesterase after 12 weeks of treatment
  the mean gain was 3.2 on a 70 point ADScog scale
• How to deal with surrogate outcome measures in
  pharmacoeconomics?

21
Effectiveness or applied efficacy?

• The notion of effectiveness in
  pharmaco-economics may be flawed
• It is often taken to be a dilution of drug effect
  in real life - poor compliance, co-morbidity etc.
• Recent work on applicability of trial results
  stresses the importance of identifying effect
  modifiers
• Relative treatment effects can be applied to risk
  estimates derived from prognostic equations

22
2. Pharmacoeconomic analyses and drug prices

• For many chronic diseases drug acquisition costs
  are a major component of the overall management
  costs
• Many pharmacoeconomic analyses are very sensitive
  to acquisition cost
• The drug spend is a large, often growing, and
  (unfairly) prominent component of healthcare
  expenditure

23
Pharmacoeconomic analyses and drug prices

• Propositions
• Drug prices should be determined by the results
  of pharmaco-economic analyses - ie
  performance-based prices
• Between-country differences in prices for similar
  drugs are justified, but not within-country price
  differences
• Weighted (or blended) pricing of drugs with
  different indications is possible
• The principles of pharmaco-economics argue
  against global prices

24
Price Comparison UK and Aus Aug/Sept 1997
A
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Antidepressants
26
NSAIDs
27
Antibiotics
Aus
28
Blended Pricing using cost-effectiveness
analysis to set the price of ACE inhibitors

• ACE inhibitors
• used in hypertension, CHF, post AMI, and
  diabetic retinopathy
• Clinical endpoint trials available for the last
  three, but not the first
• Acceptable ICERs agreed to for these outcomes
  approx A30000/ life year gained

29
Using cost-effectiveness analysis to set a price
ACE inhibitors (cont)

• Based on the trial-based estimates of LYG, the
  equations were reversed to derive an indicative
  price for that indication
• ACEI awarded the price of a thiazide diuretic for
  uncomplicated hypertension (7-8/month)
• Drug utilisation data to estimate the relative
  use over the four indications
• A blended price calculated from the acceptable
  prices for each indication and the relative use
  for that indication

30
Using cost-effectiveness analysis to set a price

• The use of acceptable cost-effectiveness ratios
  can be used to deal with different indications
• However different thresholds can be used to
  determine indicative prices in different settings
• This provides a rationale for different prices in
  developing countries and argues against a global
  price

31
3. The impact of pharmacoeconomic analyses on
decisions in Australia

• Analysis of around 300 submissions

32
Types of economic evaluation
Number 38 67 47 62 58 61
333
Total
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Basis of economic evaluation
Number 79 76 84
239
34
Scientific basis
No 57 88 84 79 76 84
468
35
Decisions according to type of analysis 1993-1998
36
Life-year league table(George and Harris)
(Mann-Whitney U-test plt0.001)
Incremental cost/extra life-year gained
Evaluations
37
QALY league table
(Mann-Whitney U-test p0.09)
Incremental cost/extra QALY gained
c
b
a
Evaluations
38
Cost to PBS/year
million (Mann-Whitney U-test p0.82)
Cost to PBS/year
Evaluations
39
Relevant factors (objective)

• Acceptable incremental cost-effectiveness ratio
• Patient affordability
• Financial implications to the PBS
• Incremental health gain/patient

40
Difficulty with surrogate outcomes

• Most submissions use surrogates
• For cost-minimisation analyses this is
  satisfactory
• With cost-effectiveness analysis the valuation is
  very difficult
• The government and the industry are considering
  two options
• the use of a multi-attribute utility instrument
• the use of willingness to pay
• co-sponsorship of pragmatic trials

41
Relevant factors (subjective)

• Risk of making wrong decision
• Assessment of rule of rescue
• Equity and access
• Capacity to channel drug subsidy to those likely
  to benefit most

42
Other effects of the policy?

• Threats to profitability?
• not an issue for health committees
• a legitimate issue for the Department of Industry
• Threats to innovation?
• this is a legitimate issue as it could have
  future health effects
• however the policy should reward true innovation,
  not penalise it

43
Conclusions

• Pharmacoeconomic analysis is the preferred means
  of making listing/subsidisation decisions
• Unconfounded estimates of relative benefit/harm
  should be starting point for any analysis
• We need better techniques for applying results of
  clinical trials

44
Conclusions (cont)

• The analyses can be used as a basis for
  price-setting in many different settings,
  including developing countries
• The costly selective and leaky nature of modern
  drugs makes blended prices or price/volume
  trade-offs a necessity
• The alternative is more sophisticated methods for
  identifying the true beneficiaries

45
Conclusions (cont)

• Pharmacoeconomic analyses should seldom be the
  sole basis for a purchasing/subsidisation decision