Reimbursement were prices are negotiated based on value for the country as a whole, by using existing

health technology assessment : Case Study using Blood Glucose Test Strips

Chris Cameron, Health Economist, Canadian Agency for Drugs and Technologies in Health CHSRF iHEA Pre-Conference Symposium, July 11, 2011

Health Technology Assessment (HTA)

• HTA is a field of scientific research to inform policy and clinical decision-making around the incremental value, diffusion, and use of health technologies

• Does the technology work, for whom, at what cost, and how does it compare with alternatives?

• HTA can happen prior to widespread distribution (ex ante) or after the technology has been widely adopted (ex post)

Option: pan-Canadian HTA-based price negotiation

• HTA is widely practiced in Canada and reimbursement decisions in Canada are informed by HTA

• HTA-based processes (e.g., Common Drug Review) in Canada can lead to implicit price negotiation

• Some Canadian jurisdictions (e.g., British Columbia, Alberta, and Ontario) have implemented price negotiation processes linked to HTA

• No pan-Canadian HTA-based price-negotiation process but bulk-purchasing alliance has been discussed

• Other countries (e.g., United Kingdom) are considering adoption of HTA-based price negotiation (or value-based pricing)

Example – Blood Glucose Test Strips

• Over $330 million expended annually – 50% is for patients not using insulin

• Top five class in terms of total expenditure in drug plans

• Modest clinical benefits in patients not using insulin

• ~ $1/day in patients not using insulin

• Frequent use (>1 per day) not cost-effective in patients not using insulin - incremental cost per QALY of $113,643 per QALY

• Reduced price of strips or frequency (e.g., 1 or 2 per week) would improve cost-effectiveness

Example – Blood Glucose Test Strips

(c) VBP of test strips at cost-effectiveness

threshold of marginal sub-group (a)

(b) Current pricing of test strips in Canada

(dashed line)a) Diminishing marginal utility of SMBG

HTA-based price reduction from $0.76 to

$0.30 using would save drug plans >$150

million annually and not compromise the

health of Canadians

Benefits – pan-Canadian HTA-based price Negotiation

• Reduce unnecessary spending – At least $150 million would be saved annually on test strips alone

• Increased access and unnecessary pressure

• Improved health outcomes for Canadians

• Reduce inequity across jurisdictions by leveraging buying power

• Build-off existing HTA capacity

• Standard and coordinated pricing approach

• More capacity for stratified HTA assessments

• Handle uncertainty at time of launch - managed entry agreements

• Price can be tied to real-world assessment - ex post HTA

Challenges – pan-Canadian HTA-based Price Negotiation

• Healthcare is a provincial/territorial responsibility and a pan-Canadian approach would require coordination

• Population and health system heterogeneity

• HTA as currently practiced may not accurately reflect the full value (i.e. quality-adjusted life years (QALY) may not reflect full value)

• No empirical cost-effectiveness threshold - an explicit recognition of what constitutes good value in Canada is required

• International reference pricing – manufacturers may be unwilling to reduce list price to value based price for fear of global leakage

• Health technology assessment capacity in Canada

• Expensive drugs for rare diseases

• Impact on producers, innovation and spill over effects to the broader economy

Conclusion

• Reimbursement where prices of health technologies are based on the value they provide is desirable

• HTA based price negotiation has the potential to reduce unnecessary expenditure, increase access, reduce inequities, and improve health outcomes of Canadians

• Although there are challenges to overcome, a coordinated system of HTA-based price negotiation in Canada is feasible and could be built on existing processes, applied health research and HTA capacity in Canada

• The negotiation body must be linked to or embody a research entity that can:

• develop managed entry agreements (e.g., accommodate uncertainty around value of health technology prior to widespread adoption)

• perform or collect information regarding drug or health technology performance after adoption