Adrian Towse ISPOR 2015 / Issues Panel Philadelphia • Monday 18th May 2015

Paying for cures, affordability, and lessons from Hepatitis C

Paying for “cures”: lessons from Hepatitis C

Sovaldi in the UK: Cost effective, but not affordable?

• In the UK NICE found Solvaldi to be cost-effective (in some populations) despite a high price

BUT

• NHS England estimate that Sovaldi could cost £1bn a year if all eligible patients are treated

• Funding has been delayed – NHS England need more time to develop the infrastructure to support expected demand for Solvaldi

• A delay of this kind is unprecedented.

Paying for “cures”: lessons from Hepatitis C

Lessons on affordability from the rest of Europe

• General pattern has been to seek very substantial discounts

• In addition:

• To impose budget caps (treatment caps, price volume deals)

• Introduce patient population restrictions driven by affordability rather than value

• A small number of responder PBRSAs used

Paying for “cures”: lessons from Hepatitis C

Ways Forward – from Amsterdam

(i) address outcome uncertainty via PBRSAs (ii) social impact bonds (iii) need to amortise

Garrison, L.P., Towse, A., Briggs, A., de

Pouvourville, G., Grueger, J., Mohr, P.E.,

Severens, J.L., Siviero, P. and Sleeper, M.

(2013) Report of the ISPOR Good Practices

for Performance-based Risk-sharing Task

Force. Value in Health. 16(5), 703-719.

Gottlieb, S., & Carino, T. (2014).

Establishing new payment provisions for

the high cost of curing disease. America

Enterprise Institute.

Paying for “cures”: lessons from Hepatitis C

Where does this get us to?

• Outcome uncertainty is not the main issue in Hepatitis C, it is affordability

• Four different ways of thinking about affordability

• Absolutely unaffordable as the cost exceeds all available current and potential future resourcing

• Time to adjust to a different spending pattern – need to disinvest, get efficiency improvements, or obtain higher budgets;

• Not paying “too much” Discounts, revenue caps are implicitly capping returns on R&D to “reasonable” or “affordable” levels

• Annualisation - need for a way of matching payments over the time during which benefits are realize

Paying for “cures”: lessons from Hepatitis C

Not paying “too much”

• Discounts, revenue caps are implicitly capping returns on R&D to “reasonable” or “affordable” levels

• Trade off is the signal payers want to send about R&D

• Higher is the share of the social return going to the innovator in the patent period, the stronger are the incentives to find additional “cures”

• Having the same maximum revenue cap across different diseases where the social value of a cure may be very different sends the signal that payers are indifferent between them. Is this an acceptable consequence?

Paying for “cures”: lessons from Hepatitis C

Annualisation

• Payment models that spread the potentially high upfront costs over the time during which benefits are realized:

• Amortisation – pay upfront but charge to the

expenditure account over the benefit period • Drug innovator makes an annual charge for the

flow of services • Financing arrangements which enable the payer /

patient to match repayments to benefits

Paying for “cures”: lessons from Hepatitis C

Anirban Basu’s HealthCoins proposal

• Conceptualise “churn” as a “free-rider” problem

• Tradeable “HealthCoins” issued by the public sector to those paying for cures

• “when a patient decides to enroll in a new health plan, private or public, that new plan must purchase these..”

• Needed in disaggregated US system. Not needed in either: (i) single payer system or (ii) competing insurer with risk adjustment funds

Basu, A.

(2014).

Financing

cures in the

United

States. Expert

review of

pharmaco-

economics &

outcomes

research,

(0),1-4.

Paying for “cures”: lessons from Hepatitis C

Conclusion – lessons on affordability

• The fundamental issue of paying for cures is not being addressed

• In Europe the approach has been “muddling through”, largely with aggressive discounting and budget capping

• The consequences of budget capping on incentives to innovate have not been thought through

• We need to look at options for annualisation

• We also need to understand dynamic competition. It is unlikely that competitors will allow an innovator to keep earning a large social surplus for the duration of the patent.

• Use of dynamic competition together with options for annualisation are more efficient routes to pay for cures than budget caps

Paying for “cures”: lessons from Hepatitis C

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