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Applying economic evaluation to drug subsidy decisions:

an Australian perspective

Adriana Platona

Director

Pharmaceutical Evaluation Branch

adriana.platona@health.gov.au

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Australian system Universal access through Pharmaceutical Benefits

Scheme for over 50 years

Cost-effectiveness evaluation mandatory for decisions about funding of pharmaceuticals since 1993

Experience from >1,150 PBAC decisions involving economic evaluation

Is the system it perfect?

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NO, JUST THE BEST!

To provide timely, reliable and affordable access for the Australian community to necessary and cost-effective medicines– Equity of access AND value for money

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Australian health care system Federal government - Canberra

– subsidises community-based services State/territory governments

– provide public hospital services (partially funded by federal government via transfer payments)

Coordinated care? Coordinated policies for drug purchasing ?

Tendering occurs in hospitals, nationally for vaccines, but not for PBS

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Major community programs Medicare Benefits Schedule

– medical, pathology, diagnostic, imaging services

– Medical Services Advisory Committee (MSAC)

Pharmaceutical Benefits Scheme (PBS) National Immunisation Schedule

– Pharmaceutical Benefits Advisory Committee (PBAC)

Current work – improve coordination– In decisions eg for hybrid technologies, drugs requiring

molecular testing

– In processes MSAC 12-18 months; PBAC 17 weeks

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The 17 week PBAC cycle Manufacturer prepares application Submission is evaluated 10 weeks Technical sub-committees – Economics, Drug

Utilisation Occasional PBAC initiates reviews

– ATRAs vs ACE– Herceptin metastatic breast cancer– Clopidogrel for stable angina in patients undergoing stenting – Current work: rheumatoid arthritis

No fee currently charged for evaluation – proposal to introduce cost-recovery

Independent review of PBAC decisions

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Forecast DoHA Expenditure

2008/09 Au$billion7.3

7.3

9.713.6

13.9PharmaceuticalBenefits

Aged andCommunity Care

HealthcareAgreements

Medicare Benefits

Other

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9

PBS cost to government

0

1000

2000

3000

4000

5000

6000

Au

$ b

illi

on

Concessional

General

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Volume of PBS prescriptions

020406080

100120140160180

Mill

ions

of s

crip

ts

Concessional

General

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Regulatory and reimbursement 1. Marketing approval from TGA “registers”

drug– efficacy, safety, quality

2. PBAC “recommends”– comparative effectiveness, comparative safety,

comparative costs

– www.health.gov.au or www.pbs.gov.au» PBAC Outcomes and Public Summary Documents” ;

PBAC agenda published 6 weeks prior to meeting

Minister “declares”

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Current work

Strategic collaboration between regulatory clinical evaluation and reimbursement clinical evaluation - For methodological issues: eg. surrogate outcomes,

molecular targeting

- Processes

- Better use of scarce evaluation resources

13 All major submissions have an economic analysis

New drug

Major change to current restriction

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Major submissions 1991-2008

0102030405060708090

100

subsequent

no eco eval

1st eco eval

15 Types of economic evaluation in manufacturers initial submissions

0%10%20%30%40%50%60%70%80%90%

100%

c/ma

partial

c/ea

c/ua

Number: 38 67 47 62 58 61 61 47 51 46 36 36 49 49 52 49 809

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PBAC does not have a single threshold for the incremental cost-effectiveness ratio (ICER)

Strength of economic evaluation depends on quality of clinical data!

Weak clinical data means uncertain ICER

17 Activity Indicators for the Pharmaceutical Benefits Scheme

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Activity indicators

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Uncertain ICER can be managed through better data and/or lower price frequently backed up by legal contracts (deed of

agreement) between government and drug company about jointly managing the risks in financial expenditure

a few examples of CED in practice

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Cost-Effectiveness: benefits

“Outcomes-based reward system” – buy health outcomes

Cost-justification - not legal to pay a higher price unless a drug has better efficacy or better safety over the comparator

Robust, consistent decision-making Basis for greater transparency BUT not always a cost-containment tool

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Current PBAC Guidelines

Current PBAC Guidelines URL:– http://www.health.gov.au/internet/main/publishing.ns

f/Content/pbacguidelines-index

– 2008 (version 4.3) No minimum standard for clinical data

(Complex decisions for drugs for orphan indications) Promote comparability across submissions Transparent inputs and methods of analysis

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6 sections to a major submission

A: context– restriction and comparator

B: clinical evaluation C: details of inputs into economic

evaluation D: economic evaluation – structure and

results E: utilisation and financial implications F: quality use of medicines, risk-sharing

arrangements and other relevant factors

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A: context of submission

Requested restriction – aim is to identify and restrict in those likely to

benefit most

– Problematic when discordance between regulatory and reimbursement indications arise

Main comparator– pragmatic: “the therapy prescribers would most

replace in practice”

– can be a product which is generic

24 B: clinical evaluation – EBM approach

Hierarchy of preferred sources of evidence– direct randomised trial(s)

– indirect comparisons: two sets of randomised trials involving common reference

– non-randomised studies

– expert opinion Minimise systematic and random error

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Issues with cost-minimisation Usually based on indirect comparison which introduces

uncertainty– Trials not always comparable– Minimum clinical important differences not always justified

(partly related to lack of coordination and insufficient details for decisions made by regulatory authorities)

– See expert reports on www.pbs.gov.au The new products simply asks for the same price of the

comparator, not a reduced price Although applications claim that one product replaces

another with small financial expenditure – often not true

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Superiority vs noninferiority

0

Better

Worse

?

x

x

Superior

Treatment effect over comparator Treatment effect over comparator

Better

0

Worse

Noninferior

x

?

x

MCIDDrug A

Drug B

Drug CDrug D

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C: Translating trial evidence

New section in the Guidelines Request a more explicit set of connections

between the clinical and economic evaluations

1. Identify and investigate whether translation issues arise and the impact on ICER

– applicability, extrapolation or transformation

2. Facilitate independent verification

3. Relate results to the economic evaluation

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Guidance on translation

Applicability of trial results to Australian patients– critical issue for HIV drugs, diabetes drugs

– subgroup analyses where justified

Extrapolation beyond trial horizon– What assumption is made about the treatment effect beyond

the trial

Transformation of trial outcomes– surrogate to final outcomes

– utility valuation

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Surrogate to final outcomes

3 steps to a more convincing transformation

1. Association between surrogate and final– typically epidemiological (longitudinal) studies

– plus biological reasoning

2. TE on surrogate predicts TE on final– requires randomised trials

– eg vit D analogues for renal disease

3. Rationale to accept this prediction given the mechanism of action of the proposed drug

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Association – what we get

Surrogateoutcome

Finaloutcome

Association Eg Framingham in

CVD

Detected difference in surrogate outcome

Projected (inferred)

difference in final outcome

31 Trial-based predictions – what we would like to get: capture uncertainty

Difference insurrogate outcome

Differencein finaloutcome

Relationship

Prediction bound

Prediction bound

95% CI ofrelationship

95% CI ofrelationship

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Surrogate to final outcomes

Extremely complex technical area Large area of uncertainty for ICER Need randomised controlled trials Enthusiasm for biomarkers as surrogate outcomes

– Smaller, faster trials

– But quantification of benefits uncertain

– Implications for safety assessment?

– Needs early and strategic engagement of regulatory and reimbursement agencies

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D: economic evaluation

Select between noninferiority and superiority– for noninferiority

» select between cost-minimisation and cost analysis– for superiority

» purely trial-based or» “stepped” evaluation – each step is linked with an area of

section C More extensive sensitivity analyses

– broad assessment of uncertainty – REMAINS AN ISSUE

– probabilistic sensitivity analysis has a role (new)

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Valuation of outcomes

CUA preferred Utilities from the same trials as the treatment effect

using MAUI No preference for a particular MAUI – rare to have trial

based Choice experiments: SG, TTO accepted Critical issue: framing bias in scenarios, interpretation

of utility gain QALYs not always useful - paucity of reliable research

about the trade-offs individuals are prepared to make for children, end-of-life

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Other supplementary analyses

Not accepted in the base case – only in sensitivity analyses

» production changes» carer impacts

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Summary of current issues Early and strategic engagement of regulatory and

reimbursement agencies Better coordination for drug-device/drug-test

products Economic evaluation is only one component for

pharmaceutical policy in Australia Published prices vs real effective prices High costs medicines Risk sharing arrangements CED

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Pricing policies For brand medicines or vaccines, after positive PBAC

recommendation that drug is cost-effective – consideration by PBPA

PBPA – Health, Industry, consumer, pharma industry Declaration about cost of production Profit margin approx 25-30% acceptable

Lower uptake of generics than in most other OECD countries – remains an issue

Until 2006, through cost-minimisation, generics entrant had the same price as the already available branded product

Financial benefit of generics accrued to pharmacy not federal government

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Pricing policies

Mandatory 12.5% price reduction when generic becomes available

1 August 2007, two separate formularies– F1 – single brand medicines– F2 – multiple brands; price reductions from 1 August 2009

» F2A – 2% price reduction for three years» F2T – one-off 25% price reduction

– No links between the F1 and F2 – some anomalies» Alendronate – risedronate; SSRI but not venlafaxine; simvastatin

but not atorvastatin or rosuvastatin Price disclosure – aims to claw-back discounts by

manufacturers to pharmacy