Introduction

Dr Alan Haycox

Reader in Health Economics

Health Economics Unit

University of Liverpool Management School

Onco-Pharmacoeconomy Training Course

Turkey ISPOR Training Course

Course 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 timetable

11.00 – 12.00

Rationale behind health economics including

opportunity costs

13.00 – 15.00

Understanding health economics, health

benefit of current cancer drugs and end of life

concepts

15.30 – 17.30

Workshop around the concept of opportunity

costs based on HERCEPTIN in adjuvant

breast cancer in the UK

Rationale for Health Economics

Brian Godman

University of Liverpool

Mario Negri Institute, Milan, Italy

Karolinska Institute, Stockholm, Sweden

Why growing use of Health 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 in

Sweden requiring additional 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 S

EK

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 growing

concern in other EU countries

The Basis of Health Economics

Demand for healthcare is infinite ◦ Increased expectations, ageing populations and

technological change

Resources are scarce ◦ Doctors, nurses, hospitals, pharmaceuticals

Choices 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 Stages

Resource identification

Resource measurement

Resource valuation

Resource 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 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 Valuation

Average costs

Marginal costs

Opportunity costs

A value is attached to each resource consumed

Resources 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:

Opportunity Cost

The 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 of one course of IVF

Case History – Adjuvant HERCEPTIN in

Breast Cancer in one UK Hospital

Currently 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 adjuvant

cancer treatments in Norfolk 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 503

Ref: Barrett et al BMJ 2006

Possible 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 funding

new drugs in UK cancer hospitals

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

comparator

o Mean: 1.5 months, Median: 1.2 months

Survival data important as limited additional

benefits for most cancer drugs

Ref: Apolone et al 2005

There are 4 Methods of economic

evaluation

The 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?