Evaluating the socio-economic benefits of innovation in healthcare

AN INCONVENIENT AN INCONVENIENT TRUTH (no 2):TRUTH (no 2):

Rationing in Healthcare and the role Rationing in Healthcare and the role of pharmacoeconomics.of pharmacoeconomics.

Prof. Tienie StanderProf. Tienie Stander

17 July 201017 July 2010

TODAY’S AGENDATODAY’S AGENDA

• HIV in contextHIV in context

• Illustrative pharmacoeconomics (PE)Illustrative pharmacoeconomics (PE)

• The theory of PEThe theory of PE

• The practice of PEThe practice of PE

• Case studiesCase studies

• Q & AQ & A

HIV in contextHIV in context

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10

20

30

40

1980 1985 1990 1995 2000 2005 2010

0

10

20

30

40

1980 1985 1990 1995 2000 2005 2010

Death

s (M

/yr)

Pre

vale

nce

(M

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25 years$150 billion50k papers

www.unaids.org

Illustrative PEIllustrative PE

Meet the Simpsons …Meet the Simpsons …

Angela JoshMary

How on earth am I going to feed these kids?

Illustrative PEIllustrative PE (cont.) (cont.)

Mary has the following concernsMary has the following concerns::

• I only have €200 to feed the familyI only have €200 to feed the family

• What is the best food to buy given my What is the best food to buy given my financial constraints?financial constraints?

• How should I allocate the food once bought?How should I allocate the food once bought?

Q & aQ & a

Illustrative PEIllustrative PE (cont.) (cont.)

What is the best food to buy given my financial constraints?

Illustrative PEIllustrative PE (cont.) (cont.)

What is the best food to buy given my financial constraints?

Illustrative PEIllustrative PE (cont.) (cont.)

How should I allocate the food once bought?

Illustrative PEIllustrative PE (cont.) (cont.)

How should I allocate the food once bought?

Illustrative PEIllustrative PE (cont.) (cont.)

• The Simpsons X 50 million = a country called The Simpsons X 50 million = a country called

DRD (Democratic Republic of Dilemma)DRD (Democratic Republic of Dilemma)

• Mother Mary = Minister of Health of DRDMother Mary = Minister of Health of DRD

• Suffering from the same dilemmas:Suffering from the same dilemmas:• Limited resourcesLimited resources• Unlimited needs and expectationsUnlimited needs and expectations• What healthcare to buyWhat healthcare to buy• How to distribute itHow to distribute it

Illustrative PEIllustrative PE (cont.) (cont.)

• Technical efficiencyTechnical efficiency: Should we invest in drug A or drug : Should we invest in drug A or drug BB

• Allocative efficiencyAllocative efficiency: Should we allocate resources to : Should we allocate resources to disease A or B or even to healthcare or educationdisease A or B or even to healthcare or education

Practical questionPractical question: If you, as the MoH of DRD, was given : If you, as the MoH of DRD, was given a healthcare budget of DRD$50 billion …a healthcare budget of DRD$50 billion …

Knowing that there is shortfall of DRD$20 billion …Knowing that there is shortfall of DRD$20 billion …

How will you allocate the money? Will you rather invest How will you allocate the money? Will you rather invest in cheaper lower quality drugs just to make sure in cheaper lower quality drugs just to make sure everybody gets access to some form of medicine, or …everybody gets access to some form of medicine, or …

The theory of peThe theory of pe

1. 1. Clinical FilterClinical Filter

2. Economic Filter

3. Financial Filter

4. Funding Filter

5. Marketing Filter

DECISION MAKING MODEL TO ALLOCATE SCARCE HEALTHCARE RESOURCES

The theory of pe The theory of pe (cont.)(cont.)

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60708090100

1 2 3 4 5 6 7 8 9 10 11 12 13

Time

Importance

Marketing and Sales vs. Market Access and Reimbursement

The theory of pe The theory of pe (cont.)(cont.)

• Rationing in healthcareRationing in healthcare

• Unfolding role of PEUnfolding role of PE

• Tool for access and reimbursementTool for access and reimbursement

• Rational scarce resource allocationRational scarce resource allocation

• Cost vs. benefit tradeoffCost vs. benefit tradeoff

The theory of pe The theory of pe (cont.)(cont.)

Types of PE analysesTypes of PE analyses::

• Cost effectiveness analysis (CEA)Cost effectiveness analysis (CEA)

• Cost utility analysis (CUA)Cost utility analysis (CUA)

• Cost benefit analysis (CBA)Cost benefit analysis (CBA)

The theory of pe The theory of pe (cont.)(cont.)

• Economic modeling: attempting to mimic the natural of Economic modeling: attempting to mimic the natural of complex diseases in mathematical and epidemiological complex diseases in mathematical and epidemiological models.models.

• Example: FluExample: Flu

The theory of pe The theory of pe (cont.)(cont.)

• Example: Flu Example: Flu (cont.)(cont.)Cohort Cost Probabilit

y of death

Vaccinate 10,000 $1.50 .001

No vaccine 10,000 $0.00 .101

Total cost Deaths

Vaccinate $15,000 10

No vaccine $0 1,011

Incremental $15,000 -1,001

Incremental cost-effectiveness ratio ($15,000 / 1,001)

$15/death avoided

The practice of peThe practice of pe

• Research questionResearch question: are the new WHO ART : are the new WHO ART treatment guidelines cost effective?treatment guidelines cost effective?

• PE model comparing d4T, AZT and TDF in first PE model comparing d4T, AZT and TDF in first line treatmentline treatment

• Model structure: Model structure: Decision tree

Case study 1Case study 1

Results d4T vs. TDFResults d4T vs. TDF::

Less effective

Less costly

More costly

More effective

3x

2x

1x

Not cost-effective

$2,792

$6,179

$12,358

-$856

Cost: Effectiveness

TDF $20,426 17.68x QALY

d4T $19,008 17.18 QALY

Incremental effect $1,418 0.51

ICER = $2,792

Case study 2Case study 2

• Results AZT vs. TDFResults AZT vs. TDF

Less effective

Less costly

More costly

More effective

3x

2x

1x

Not cost-effective

$6,179

$12,358

$9,161

$2,686

Cost: Effectiveness

TDF $22,903 17.87x QALY

AZT $22,128 17.79 QALY

Incremental effect $775 0.08

ICER = $9,161

ROLE OF CBAROLE OF CBA

• Aimed at financiers of healthcareAimed at financiers of healthcare

• Provides ROI answers. Such as:Provides ROI answers. Such as:• What is the monetary value of economic What is the monetary value of economic

benefits compared to the economic costs (the benefits compared to the economic costs (the investment)?investment)?

• What is the Net Present Value of the What is the Net Present Value of the investment?investment?

• When will we reach breakeven?When will we reach breakeven?

summarysummary

• Think of the Simpson family when confronted Think of the Simpson family when confronted with tough healthcare choiceswith tough healthcare choices

• Pharmacoeconomics assist decision makers to Pharmacoeconomics assist decision makers to allocate scarce healthcare resources in a allocate scarce healthcare resources in a rational wayrational way

• Price is not the same as costPrice is not the same as cost

• The best way to help the poor is not to The best way to help the poor is not to become part of them become part of them (A Lincoln)(A Lincoln)