USE OF ECONOMIC EVALUATION IN DECISION-MAKING

Question 1

Definition of Economic Evaluation?

Answer 1

Comparative analysis of alternative course of action, in terms of both the costs and outcomes (consequences)

• “Economic evaluation is the process of measuring cost effectiveness” (Goodacre, 2002)

Question 2

Why is economic evaluation needed for health-care decision making?

Answer 2

Decisions regarding funding/provisions/distribution for healthcare move in motion with the state of the economy … responses to healthcare are increasingly informed by economic ideas/analysis

“The primary objective of any health system, service or organisation is to maximise the health of the individuals and populations they serve, and to do so in an equitable way within budgetary parameters” (OECD, 2019)

Question 3

UK healthcare spending stats?

Answer 3

UK: 9.7% of GDP is spent on healthcare

In England alone, the budget for health and social careis £139.3 billion in 2019/20

Question 4

How do Health-Care bodies make decisions?

Answer 4

UK National Health Bodies use COST-EFFECTIVENESS ANALYSIS to guide their recommendations to health care system regarding the use of new and existing treatments/medicines/procedures

Question 5

What is NICE?

Answer 5

National Institute for Health and Social Care Excellence

- set up in 1999

Question 6

What is NICE’s aim?

Answer 6

Provide national-level guidance on the effectiveness and cost-effectiveness of new health technologies and interventions in the NHS

Maximise population health (NHS aim)

Question 7

How does NICE operate?

Answer 7

NICE is charged with appraising new and existing therapies with a view to ending postcode prescribing

One of the key objectives of NICE is to help the NHS to secure more health gain from available resources, by focusing on treatments with clear evidence of cost effectiveness – approve only cost effective treatment at given threshold

Question 8

In what circumstances are decisions regarding health care made?

Answer 8

1. INCOMPLETE INFORMATION
   - Evidence available for decision making is generally incomplete
   - Obtaining perfect evidence is not often not feasible in practice due to demands on time and other resources
2. UNCERTAINTY
   - Decisions are made in the face of uncertainty, both around the available evidence and the consequences of the decision

Therefore, economic evaluation can help to overcome these barriers

Question 9

What is the central question for healthcare decision makers?

Answer 9

Q: If a new potential healthcare interventions (e.g. a drug, a non-pharmacological treatment, or a diagnostic technique) becomes available, should it be provided?

Question 10

What do Rawlins and Culyer (2004) say about NICE’s decision-making?

Answer 10

Rawlins and Culyer (2004) state that NICE’s main decision-making criterion is cost-effectiveness, usually measured by ICERs

• The ‘threshold’ ICER that determines whether a technology is cost-effective is intended to represent the opportunity cost to a fixed-budget NHS of adopting a technology in terms of QALYs forgone (Dakin et al., 2014)

Question 11

Why does the UK use Cost-Effectiveness Thresholds?

Answer 11

Because the UK has a pre-existing health care system

• don’t need to start from scratch
• need a simplified rule to determine if an intervention is cost-effective or not

Question 12

Definition of Cost-Effectiveness League Table?

Answer 12

Gives decision maker some idea of how the ICERs of a given economic evaluation compare with those for other treatments/interventions … ranks the ICERs from lowest to highest cost/QALY

Question 13

What is the mathematical problem decision makers are trying to solve?

Answer 13

Maximise health subject to a budget constraint

Question 14

How do Cost-Effectiveness League Tables work?

Answer 14

‘League table of value for money’ where each line shows the ICERs produced for a given health care intervention by a cost-effectiveness survey

Ranks the Health Care Intervention ICERs [Cost per QALY gained] from lowest to highest

Question 15

How do Cost-Effectiveness League Tables help decision-makers?

Answer 15

Two possibilities:

1. Approve from lowest cost/QALY to most expensive until we run out of budget
2. Find/set some social value of a QALY [use as benchmark] and expand budget until we reach this level

Question 16

Advantages of Cost-Effectiveness League Tables?

Answer 16

Useful if we are starting a health system from scratch – full solution to central problem

Question 17

Disadvantages of Cost-Effectiveness League Tables?

Answer 17

Lack of consistency in the methods used to produce each reported ICER … ∴ cannot compare the ICERs produced from various economic evaluation studies

Use of league tables assumes that the original context of the study in each case is transferable to the specific context within which decisions are currently being made

Not clear how decisions makers are intended to the use the information

Question 18

Definition of Cost-Effectiveness Threshold?

Answer 18

Tells the most that will be paid for a QALY gain of 1

Health system should undertake all activities that produce a lower ICER than the threshold (ceiling ratio)

• In order to decide which treatment option(s) is deemed cost-effective … need to compare against a threshold
• This gives us some cut-off value beyond which we will not approve new healthcare interventions

Question 19

Definition of Cost Effectiveness Plane?

Answer 19

Plots the incremental cost and incremental effect (ICERS) of the next best new intervention vs. the existing intervention (existing/no treatment)

Question 20

What is the Decision Rule?

Answer 20

• ICER < RC … the activity is cost effective … adopt the new treatment
• ICER > RC … the activity is not cost effective … reject the new treatment
• ICER = RC … the activity is same cost effective … indifferent between existing (no) treatment and new treatment

Question 21

What is the Cost-Effectiveness Threshold in the UK?

Answer 21

NICE in the UK has a threshold of £20,000/QALY (up to £30,000)

Question 22

How is NICE’s Cost-Effectiveness Threshold determined?

Answer 22

In the UK: main goal of the NHS is to maximise health … ∴ need a threshold that represents how cost-effectively the health service produces health

So the threshold should therefore represent how much it costs the NHS to produce 1 QALY, at the margin
- A comparison of the ceiling ratio to the ICER means that we directly compare whether more health can be produced from spending on the new treatment than is “displaced” from existing spending

Question 23

Does NICE’s £20,000 threshold work?

Answer 23

Best estimate is that NHS produces health at the margin at £12,936 per QALY … so when NICE approves a new treatment at £20,000 it is damaging population health (Claxton et al., 2015)
• Ultimately, this figure of £20,000-£30,000 is relatively arbitrary – never been formal justification published for why NICE approves treatments at £20,000-£30,000 per QALY

Question 24

What happens if the cost-effectiveness threshold is too high?

Answer 24

If we use threshold too high in our economic evaluation … causes negative damage to population health because spending too much money on new treatment which displaces money spent on existing treatment

Question 25

Is NICE’s £20,000 threshold set in stone?

Answer 25

Circumstances where the threshold changes:

1. End-of-life healthcare
   - NICE may pay up to £50,000 per QALY [if remaining life expectancy is short and new treatment which could extend your life for a few months]
2. Uncertainty
   - if we think threshold lies between a range, can approve at lower threshold until have more information

Question 26

How does the budget affect NICE’s cost-effectiveness threshold?

Answer 26

Several recent cases where a new intervention has been found to be cost-effective by NICE but deemed “unaffordable” by NHS England, due to size of budgetary impact

• producing health at under threshold but at millions of pounds – can lead to displacing other more cost effective treatments
• NICE generally is only allowed to approve or reject an intervention in full, rather than only partially approve for everyone with equal capacity to benefit.

Question 27

Strengths of NICE’s approach of economic evaluation to guide decision making?

Answer 27

Explicit
- If NICE makes a guidance – CCGs have to enforce

Formal
- Guidelines for practice

National
- Avoidance of postcode lottery issues

Enforceable
- 2002: the implementation of NICE’s decisions was made mandatory in the NHS in England and Wales

Transparent
- accountable to the public

Resource allocation decisions are based on evidence and values that stakeholders (clinicians, economists, patient population) agree are relevant

Resource allocation decisions are revisable
- in response to new evidence, individual considerations, lay panels

Question 28

Limitations of NICE’s approach of economic evaluation to guide decision making?

Answer 28

Every appraisal will upset someone
- approving treatment for one patient means another cannot have it

Methodology is still under development & contested

Resources too small for the scale of the task?
- NICE can be up against the pharmaceutical industries

Appeal process – strong on procedural justice but delays implementation

Question 29

Why is Economic Evaluation used to guide decision-making?

Answer 29

(1) : To overcome regional variations in access
(2) : Maximise benefits from health care spending
(3) : Provide payers with bargaining power in health care markets

Question 30

What is Postcode prescribing/lottery?

Answer 30

Geographic variations in health care provisions

- one of the primary reasons NICE was set up in 1999

Question 31

Why is Postcode prescribing bad?

Answer 31

Geographical variations in access to healthcare violate horizontal equity in healthcare use

Inefficient – variations in medical practice that are unjustified by clinical evidence, or by epidemiological or cost differences between regions

Question 32

How does National guidance improve patient bargaining power?

Answer 32

Pharma companies protected by TRIPs – gives them high level of health care bargaining power … monopoly power

NICE gives the public some bargaining power against this … bargaining tool with pharma industries to negotiate lower prices for patients

Question 33

What is Value Based Pricing?

Answer 33

Prices that NHS pays to drug manufactures for new medicines will be regulated by linking pricing to the estimated value of the treatment

• evidence on incremental effectiveness will be used to establish the maximum price that NHS should be willing to pay for the technology

Question 34

Is it just economic efficiency that matters?

Answer 34

1. NEED … decide priorities on the basis of need
   - :( unethical
2. EQUITY … achieving equity and fairness across the healthcare system
   - Fairness with regards to: age, wealth, income, geography, ethnicity or gender
3. PROCESS-OF-CARE CONSIDERATIONS … considerations of characteristics of healthcare products, services or delivery modes that may be the subject of patients’ preferences
4. ETHICAL IMPERATIVES … availability of ‘controversial healthcare treatments’

Question 35

What is NICE’s rationale for keeping the threshold at £20,000?§

Answer 35

Dilion, 2015

• At the £20,000 threshold, NICE currently recommends 8 out of 10 drugs or other technologies that it appraises, including 6 out of 10 cancer drugs.
• So we are careful about protecting the interests of those who don’t benefit from the newest treatments.