IHE HTIP Health Economics Educational Workshop€¦ · • Health economics has key role in...

IHE Health Technology Innovation Platform

IHE HTIP Health Economics Educational Workshop

Principles of Health Economics

The Unique Healthcare Market and Basics

of Health Economics

Special Features in Health Economics

• Health is not a product you can buy

• Doctors know more about illness and treatment than patients; patients know more about their health than insurers

• People who are ill have greatest incentive to buy insurance

• Once you have insurance you use more health care and may not stay as healthy

• Patients lack the ability to make properly informed choices about health care and rely on clinicians to act as agents for them

o Marketability

o Information asymmetry

o Adverse selection

o Moral hazard

o Consumer rationality


Health Economics and Health Technology

• The lack of interaction between end user and producer and special features of health care mean prices cannot be set like other goods

• Health economics can provide a framework for assessing what price should be paid for health technology

• Based on the potential health that can be gained, the resources required, and the potential alternatives

• In publicly funded systems, government agencies make these interventions; in private insurance systems, insurers negotiate a price they were willing to pay


Specifics of Health Economics

• Not about cutting spending or rationing health care

• Recognition that resources are not infinite and tries to work out how best to use them

• Recognizing that every dollar spent on one intervention for one person cannot be spent on another intervention for another person

o If that intervention is not improving health in an efficient way, there is a loss of opportunity to spend those resources on an intervention that would


Specifics of Health Economics (cont’d)

• Public payers and society try to ensure maximum benefits for health spending

• Opportunities for industry – demonstrate value to increase odds of adoption


Health Economics and Health Technology

• Identify how best to spend scarce resources on a growing range of health technologies

• Compare alternatives to determine what you have to pay for the benefits that the options offer

• Determine which alternative is preferable and allows health to be maximized

• Allow considerations of the price at which a health technology represents good value


Importance of Health Economics

• Health economics has key role in achieving the triple aim

• Can provide a framework to reduce per capita cost of current and new health technology

• Plays a role in identifying how resources can be best used to maximize population health and the experience of care

Institute of Health Improvement. Triple Aim.


Willingness to Pay for Innovative Health Technology

Economic Evaluation for Health Technology

• Economic evaluation methods are used to answer questions about which alternative provides the best use of resources

• Assesses the benefits of a health technology compared to the costs associated

• Considers both the cost of the intervention and subsequent health costs that stem from the intervention

• Data for economic evaluation can be collected alongside efficacy studies


Cost-Effectiveness

• Use a plausible alternative, which is usually existing best practice and new alternatives

• Allow us to examine what costs are needed to gain a certain amount of health benefit


Cost-Effectiveness Planes

ΔC

ost

ΔOutcomes

NW quadrant NE quadrant

SW quadrant SE quadrant


Cost-Effectiveness Planes (cont’d)

ΔC

ost

ΔOutcomes

NW quadrant

Less effective and costs more

NE quadrant

More effective and costs more

SW quadrant

Less effective and costs less

SE quadrant

More effective and cost less


Cost-Effectiveness Planes (cont’d)

ΔC

ost

ΔOutcomes

NW quadrant


REJECT

NE quadrant


TRADE OFF

SW quadrant


TRADE OFF

SE quadrant


ACCEPT


Decision-Making with Cost-Effectiveness

• Straightforward decisions

o Reject technology that is less effective and more costly

o Accept technology that is more effective and less costly

• Trickier decisions

o May fund technology that is slightly less effective but delivers large cost savings

o May fund technology that is more effective depending on how much you are able and willing to pay the additional cost


Decision-Making with Cost-Effectiveness (cont’d)

ΔC

ost

ΔOutcomes

NW quadrant


REJECT

NE quadrant


TRADE OFF

SW quadrant


TRADE OFF

SE quadrant


ACCEPT

• Health technology

assessment provides a

framework for making

decisions in the NE

quadrant

• How much extra

providers are willing

to pay for additional

benefits


Health Spending Needs to Maximize Health

ΔC

ost

ΔOutcomes

NW quadrant

Less of current patients and less of

other patients’ health

NE quadrant

More of current patients but less of

other patients’ health

SW quadrant

Less of current patients’ health but

more of other patients

SE quadrant

More of current patients’ health and

more of other patients


Approaches to Reimbursement and Pricing Strategies

• Reimbursement decisions in health care

• Procurement for non-drug health technology

• Health technology assessment and value-based health care

• Differing approaches to decision-making in HTA

• Cost plus and value-based pricing


Principles of Early Value Assessment

• Make assessments of potential value at the earliest

possible stage

• Series of methods that have varying resource

requirements and deliver varying certainty

• Add confidence to decisions made in the interests of the

SME

• Add confidence to investment decisions from partners


Early Value Assessment Cascade


Development Stages of Early Value Assessment

Development Stages of Early Value Assessment

• Number of stages that early value assessment can target

• Iterative use of early value assessment can be built into development process

• Create “gates” where appropriate decisions about development can be made

• Fail early and adapt


Development Stages of Early Value Assessment (cont’d)

Ijzerman and Steuten (2011), Appl Health Econ Health Policy 9, 331-47


Economic Evaluation

Important Steps in Economic Evaluation

• Define the decision problem

o patient groups

o comparators

o perspective

• Select type of economic evaluation

o trial- or model-based

o both

• Design trials and evidence synthesis


CADTH Guidelines

• CADTH provides guidelines on economic evaluation

• Recommendations on selecting population groups and comparators

• Suggests a societal perspective

• Use of quality and length of life


Trial-Based Economic Evaluation

• Information collected alongside trials

• Covers the time period of the trial

• Short-term estimate of effects and costs

• Suitable if cost and health gains occur over a short time period


Model-Based Economic Evaluation

• Used to extrapolate beyond the follow up of trials

• Project costs and effects over longer term

• Bring together information from a trial and synthesize with other available evidence

• Assumptions are used to create a long-term model and uncertainty needs to be tested


Vehicles for Model-Based Economic Evaluations

• Decisions trees

• Markov models

• Computational approaches


Different Strategies for Cost-Effectiveness

• Increased health gain

o immediate

o longer term

• Reduce procedure costs

• Reduced follow-up costs for health service

• Reduced follow-up costs for patients and carers

• Reduced costs in other areas of public spending


Designing Trials for Economic Evaluation

Designing Trials for Economic Evaluation

• Additional cost of conducting economic evaluation is not prohibitive

• Consult health economics experts in the design phase

• Include health economics information in existing systems for collecting data and analysis

• May be some extensions of trials that are more resource intensive (i.e., extended follow up and access to medical records)


Using Existing Evidence in Economic Evaluation

• Not all information needs to be collected afresh

• Health economics experts will be able to provide information on existing sources of information


Inputs

Three main types of inputs needed:

• Effectiveness

• Quality of life

• Resource use and cost


Inputs: Effectiveness

• Primary outcomes from clinical trials

o Efficacy

o Safety

• Important secondary outcomes

• Long-term health outcomes


Inputs: Quality of Life

• Growing databases and prior evidence of people’s quality of life in different health states

• Beneficial to collect data in your own population

• Reflects that quality of life is important to patients and life years lived alone does not provide enough information


Preference-based HRQL

(used to calculate QALYs)

Examples:

EQ-5D HUI3 15-D

Scoring function provides a

weighting score of health

status between 0-1.

0 represents death and 1

represents perfect health.

✓

✓

✓

✓

✓

Index Score = 1

If stayed in this health state

over 15 years = 15 QALY

Note that both quality of

life and time is incorporated

in a QALY

Inputs: Alternative Outcomes

• Non-HRQL/Monetary Natural Health Units

o reduced mortality

o life years saved

o additional correct diagnoses

o blood pressure

• Monetized Health Units

o health outcomes converted to $ through

willingness to pay methodology


Types of Economic Evaluation

Outcomes

Direct health

care costs

Indirect non-

health costs

Lost

productivity

Cost

Inputs

One-dimensional naturally occurring units = CEA

e.g., lives saved, blood pressure, life years gained

Costs of Services /

Programs / Technologies

Costs are treated the same in

principal.

What is included depends on

perspective!!!

Types differ in how output is

defined and used

Multidimensional health outcomes expressed in

health utilities = CUA

e.g., QALY, DALY, HYE

Health outcomes are expressed in dollars = CBA

e.g., value of one extra year of life is worth $50,000 to society


Measuring Service Use

“The researcher should identify all activities and resources that are likely to occur within the context of the decision problem (e.g., accounting for the target population, perspective, and time horizon). The conceptualization of the clinical or care pathway for the health condition will provide the basis for identifying relevant resources.”

• Drug/technology

• Staff time

• Hospital beds, surgical theatres,

emergency department visits,

ambulance trips, outpatients

• Primary care

• Home care

• Additional medications used

• Disposables associated with

treatments

• Patient costs: lost salary, travel

costs, childcare costs


Measuring Service Use (cont’d)

“Resource use should be measured and quantified in as disaggregated a form as necessary for the economic evaluation. The required level of precision for quantifying resource use will guide the resource inputs for the economic evaluation. Where greater precision is required, individual-level costing may be appropriate; however, where resource use is unlikely to vary based on individual characteristics, resource quantities measured by event or case may be sufficient.”

Sources of data:

• Administrative data

• Patient self-report

• Trial CRFs

• Literature


Estimating Costs

• Published sources

o government (reference costs)

o physician billing (but be careful to distinguish between

costs and charges)

o previous research

o provider accounts

o drug formularies

• Direct valuation (e.g., patient out-of-pocket expenses – travel,

time, child care)

o questionnaires

o diaries


Determining Cost-Effectiveness

• Incremental cost-effectiveness ratios (ICERs)

o Change in cost required for a unit change in health

o Incremental cost per quality-adjusted life year

• Net benefit

o (incremental benefit x CE threshold) – incremental cost = ???

o Need to know threshold value

CostICER

Outcome

=

Assess against CE threshold


Interpreting Results

• Projected gains in health

o events

o QALYs

• Projected cost of intervention and subsequent services

• Incremental cost-effectiveness ratios

o cost required for health gains

o cost per quality-adjusted life year (cost / QALY)


If expected value falls here, B

DOMINATES A because it is more

effective and less costly.

If expected value falls here, B is

DOMINATED by A because it is

less effective and more costly.

If expected value falls here,

THERE IS NO DOMINATION. Must

apply a decision rule for cost

additions.

If expected value falls here,

THERE IS NO DOMINATION. Must

apply a decision rule for cost

savings.

Compared to status quo A, intervention B’s costs and

outcomes can fall in 1 of 4 quadrants

B B

B B

A (status quo)

NW quadrant NE quadrant

SW quadrant SE quadrant

ΔC

OST

SΔOutcomes

Interpreting Results (cont’d)

Straight line from origin

represents ICER

Most often, new health technologies produce greater

benefit but at greater costs

A (status quo)

B

Represents Societal WTP for

an additional outcome

But how do you know if

outcomes worth the cost?

ΔC

OST

SΔOutcomes

Costs this much more

To get this much more

benefit

CostICER

Outcome

=


A (status quo)

B

ICER < Societal WTP

Thus, compared to status

quo, should adopt B

ICER > Societal WTP

Thus, compared to status

quo, should not adopt B

Decision Rule for CEA

and CUA

Adopt if ICER < Societal WTP

ΔC

OST

SΔOutcomes

$50K per additional outcome




Straight line from origin

represents ICER

A (status quo)

B

In CEA and CUA, ICERs need to be

compared with an external threshold to

determine allocative efficiency (i.e.

whether intervention is cost effective)

Compare ICER with

Societal WTP

To summarize

ICER only tells you how much it costs

to produce additional effectiveness

ΔC

OST

SΔOutcomes


0 Health care

expenditures

Health benefit per $1,000

Current treatments

covered by health care

systemBudget

Treatments not covered by

the health care system

Worse

Than

Current

Better

value

Worse value

Opportunity cost

ICERs in Resource Allocation


0 Health care

expenditures Budget

Opportunity cost

New opp. cost


ICERs in Resource Allocation (cont’d)


0 Health care

expenditures


Budget

Opportunity cost

New opp. cost

Net Health Effect

of changing how

the health care $

is spent

ICERs in Resource Allocation (cont’d)


Assessing Uncertainty

Parameter uncertainty:

• Value of individual inputs to analysis not known with certainty

• In early evaluation, sample sizes likely to be small and uncertainty high

• Relevant to trials and model-based evaluations

• Dealt with through computational means: probabilistic analysis


Assessing Uncertainty (cont’d)

Acknowledgement: Edlin et al., Cost Effectiveness Modelling for Health Technology Assessment (2015). Adis.

Structural uncertainty:

• Model structure is a simplification of reality

• But do simplifications exclude important characteristics care processes?

• Risk that an excluded clinical pathway is associated with differences in costs and outcomes and could change the decision


Assessing Uncertainty (cont’d)

Methodological uncertainty:

• Uncertainty in process of producing evidence included in model and in choice of modelling methods

o How should the effectiveness data from the trial be analysed?

o How should survival curves be extrapolated beyond the trial period?

o How should utility values be estimated for each health state included in the model?

o What model form should be used to predict future resource use?


Acknowledgement: Edlin et al., Cost Effectiveness Modelling for Health Technology Assessment (2015). Adis.

Implications for Market Access

• Collected evidence on efficacy and quality of life can be used across jurisdictions

• Health economics partners can adapt analyses to account for different costs in different settings

• Investing in high-quality health economic input early on makes process smoother later


[email protected] 1.780.448.4881 www.ihe.ca

IHE HTIP Health Economics Educational Workshop€¦ · • Health economics has key role in...

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