The Official News & Technical Journal Of The International Society For Pharmacoeconomics And Outcomes Research

Priority Decisions - The Authority Challenge

Audun Hågå MSc, Deputy Director General, Ministry of Health and Care Services, Oslo, Norway

The following was presented during the First Plenary Session, “Health Technology Assessment (HTA) as a Reimbursement and Priorities in Health Care,” at the ISPOR 9th Annual European Congress, 29 October 2006, Copenhagen, Denmark


Figure 1 gives a short overview of the situation in Norway (see below). Norway is not a member of the European Union (EU), but is a member of the EU single market through the EEA agreement. When it comes to pharmaceuticals, we take part in the EMEA Corporation so in this respect we are more or less like a member of the EU. Seventy percent of the pharmaceutical costs are covered by public spending which again is financed through taxes.

Norway’s social security system, the Norwegian Labor and Welfare organization (NLWO), covers 85% of the 70% through two main reimbursement systems. First we have the general reimbursement system that has a positive list of pharmaceuticals that are included. Second, Norway also has a system of individual reimbursement where the physician can apply for reimbursement on a named patient basis. If the application is granted, then the patient has reimbursement as if the pharmaceutical was included in the general system. The split between general reimbursement through a positive list and reimbursement on a named patient basis is also approximately 85% and 15%. In addition to reimbursement by NLWO the hospitals and institutions cover 15% of the public spending on pharmaceuticals. The hospitals are organized in five regions as five Regional Health Authorities and are further divided into hospital trusts. They have separate budgets and they are responsible for covering all use of pharmaceuticals in the hospitals. It is important to note not being on the positive list for reimbursement in Norway does not necessarily implicate that the patient is cut off from public coverage, as the positive list is 85% of the 85%.

Let us now focus on the question how to make good decisions regarding which pharmaceuticals to include in the positive list for general reimbursement.

Ethics and Economics
Many of us may believe that it is somewhat unethical to take economics into consideration when it comes to illness and health. In Norway we have actually gone relatively far when it comes to accepting cost effectiveness as an important criterion in priority decisions, not only for pharmaceuticals but also for health care in general. Actually this is stated in Norway’s legislation.

The first quote in Figure 2 is taken from the act relating to patients’ rights and the right to necessary health care. This right only applies if the patient can be expected to benefit from the health care and if the costs are reasonable in relation to the effect of the measure. It has also been issued an official report stating what kind of criteria that should be used when making priority decisions. The criteria stated were severity of illness, expected benefits from the treatment, and finally cost effectiveness. The leader of the group that made this report is a professor in theology and also a member of our parliament and he has made the statement that “Cost is a relevant ethical argument”. Have we gone totally crazy at the Polar Circle? Has the snow and the ice gotten the best of our empathy, or is it just the opposite? Is it ethical to consider costs in relation to health or not? We on the authority side are very often accused of just being focused on saving money without taking the patient into consideration. This claim has been made many times. The goal is definitely not to save money to make the situation bad for the patients. All of us who are involved in the pharmaceutical field, we have a common goal: best possible health. But maybe we have slightly different interpretations of what “best possible” might mean or implicate. The individual patient will of course state that “best possible” means best possible regardless of cost. But from the society’s side, we have to see things differently because then we must be concerned with obtaining best possible treatment for all the patients within the limits of our available resources. If we accept the fact that available resources are limited, it changes a lot of things upside down.

Medical and technological possibilities are being developed and offered to us all the time, which is great. We need new treatments and new good drugs. We need important new possibilities to treat people. But these new possibilities are always offered at a higher cost as shown by the red line in Figure 3 on the following page.

Therefore in a system where the authorities are covering the major part of the costs, the problem arises when the availability of society’s resources (green line) doesn’t increase as rapidly as the cost of possibilities offered. This creates a problem because it develops a difference between the expectations of what should be covered and be available to all, and what society is actually able to cover. It develops into something we can call a “health gap” in the system. Norway can be considered a rich country. Norway has struck oil in the North Sea and has been able to build up an oil fund with a lot of money. Why can’t we just take some of that money and throw it in the health gap to close it and get it over with? Would it solve the problem? Only temporarily; it would soothe the symptoms for a while, but not cure the problem since this solution does not change the inclinations of the red and the green lines. Even if we spent all our savings, the problem would start to develop again the next day. It is not possible for society to cover what the individual patients’ regard as best possible treatment in all fields. It is simply not possible. Therefore it is the authorities’ duty to balance the needs to obtain best possible treatments for as many as possible; to maximize health in the nation within the limits of available resources. To be able to do this, you need to make good priority decisions. By doing so, you will generate more health within the available resources and better health care in total for the population. Given this line of arguments, the argument that it is unethical not to take economics into consideration when prescribing a pharmaceutical is questionable.

Priority Decisions at Different Levels

Figure 4 illustrates the difficult task that has to be done through priority decisions. The challenge is to obtain best possible health within the budget that is available.

We need to identify resources that can be of better use and resources that can have a better alternative use somewhere else in the system. And then identify where we ought to invest more resources because it will generate a lot of health. And then finally make the switch between these two through good priority decisions. In the process of trying to implement systems for good priority decisions, we have learned some important lessons. One of the most important is shown in Figure 5 below.

Priority decisions can be made at different levels. Example: If you have a reimbursement application for a new drug lowering cholesterol, you usually compare the new drug to other measures that lower cholesterol. By doing this you can decide whether you regard the new pharmaceutical as a good investment or not. But doing this is actually not sufficient. You also have to evaluate the investment in reimbursing the new pharmaceutical against other measures in health care, like psychiatric care or many other possibilities. In the process of deciding a new budget, the Minister will be faced with many very good suggestions for new investments. Some of them might be pharmaceuticals, but there will also be a lot of other suggested measures within the health care field. To make a responsible budget, the Minister knows that only a few of the suggestions can be selected and brought further. It is not possible to select them all, even though they can be regarded as cost effective. This is a second level of priority decisions. As a next step the Minister has to bring the selected measures to the government level and have the healthcare investments compared against all the other investments suggested by the other ministries, for instance schools and transportation. This will be the third level of decisions. The outcome in each level may vary - and still be totally correct. If we have a pharmaceutical on the first level which is regarded as cost effective and suggested as an investment, it might still be that there are other measures on the next decision level that are even more cost effective or preferred for other reasons. So a “yes” decision on the first level might be totally correct, and a “no” decision on the next level might also be totally correct even though it involves the same pharmaceutical with the same documentation. This illustrates that a positive cost effectiveness evaluation of a pharmaceutical at the first decision level doesn’t necessarily implicate that it should be given priority and be reimbursed. If reimbursement should be granted solely on the basis of the first level decision, it would in reality mean that we gave right of way to pharmaceuticals compared to other measures in society.

How do we try to put this experience into practice when it comes to uptake on the positive list for reimbursement of pharmaceuticals in Norway?

As shown in Figure 6, the applications for reimbursement are made by the industry and assessed by the Norwegian Medicines Agency, NoMA.

We have developed guidelines for these applications and we are using four main criteria when assessing: Serious illness, need for long term treatment, well documented effect, and cost effectiveness. For new chemical entities, the NoMA might consult an external Reimbursement Committee to get guidance in all the difficult questions you usually are facing when you assess an application. This committee does not recommend or decide upon reimbursement, they just give guidance regarding questions associated to the documentation. The scope of the assessments is most of the times “Level one” decisions, which means that a new pharmaceutical is compared to alternative measures within the same diagnosis or condition. NoMA has a strict time limit of 180 days for deciding maximum price and making a reimbursement decision. This restriction in time makes it rather difficult to use HTA input from external sources. The assessments by NoMA may lead to three possible outcomes. First possibility: The new drug is not considered to fulfill the four criteria mentioned earlier. In this case the application will be rejected. Second: It might fulfill the criteria at the same or lower cost as the comparators. In this case it is granted reimbursement and put on the positive list. Third: It might fulfill the criteria, but reimbursement will implicate an extra investment from society. The pharmaceutical can be considered as cost effective, but reimbursing it will lead to higher costs. In this case it is automatically rejected, but the NoMA makes a recommendation and forwards this to the Ministry for priority decision on the next level.

In the Level 2 decisions made by the ministry, investment in the new pharmaceutical is compared to other measures within the healthcare budget as shown in Figure 7 below.

This typically happens during the budget processes. Maybe the suggested investment is taken further to Government and Parliament and compared to all other proposed measures within the total budget (Level 3). And maybe it is not, because somewhere in the process it did not make it in competition with other good measures proposed.

We are often faced with the claim that drugs are reimbursed very late in Norway, and that this is due to this system. It has been in place since the summer of 2003 and five pharmaceuticals have been brought forward to Level 2 priority decisions to this date-only five. To put this figure into perspective, NoMA handled in total 232 applications for reimbursement in the years 2004 and 2005 only. Twenty-eight of these were for new chemical entities and as mentioned only five of them were brought further to Level 2. Of those who were brought further, two were granted reimbursement during the first budget process, two have been rejected one time, and then we are left with one pharmaceutical that has been rejected several times. Based on this, it is fair to claim that only a fraction of the reimbursement applications ends up in the system for Level 2 decisions.

HTA and CEA in Reimbursement Decisions
BIt is not meant that it is quite meaningless to use HTA and CEA in Norway since it does not give any sort of guarantee for reimbursement even if the documentation makes it through the assessment by NoMA. It is still is very important. As shown in Slide 8 it is of course used as a central criterion when NoMA is doing their assessment and granting reimbursement, but the documentation is also needed if the application is taken further to the next levels of decisions.

HTA is done by the Norwegian Knowledge Centre for the Health Services, and they of course give their input to NoMA in many respects. It is very important for the Knowledge Centre to keep an independent and transparent position and not to be associated too closely to the priority decisions that includes budgets and economic considerations. The reimbursement decisions are always taken by NoMA and not by the Knowledge Centre. The centre does not even give recommendations in the matter. Guidelines in Norway are made by the Directorate for Health and Social Affairs. This represents the authority’s guidelines which should reflect the priority decisions.

Division of Responsibilities
It is important that it is clearly stated which bodies have the responsibility to convey the priority decisions (which inevitably must take economics into consideration), and which body should only deal with the evidence basis.

In Norway we have put in place a system for information regarding pharmaceuticals as shown in Figure 9:

NoMA give information regarding the authority decisions - the priority decisions, economic considerations included. The Directorate for Health and Social Affairs is giving the authority guidelines for disease areas. Use of pharmaceuticals might constitute an important part in these. The guidelines should also reflect the priority decisions that have been made. Finally we have the Knowledge Centre which is an independent and transparent unit that provides information needed in the system. When we have different entities involved in information, it is important to have good coordination. The system must give messages that are consistent, and at the strategically right time. We have therefore established a point of cooperation between these three entities and also included the Labour and Welfare Organisation who represents the payer in the system.

Re-Evaluation of Reimbursement Decisions
Cost effectiveness evaluation must be regarded more or less as fresh goods. Results are constantly changing. This might for instance be due to new generic competition that brings dramatic price changes, publication of new studies that change the basis for the evaluations or the introduction of new competing measures. To keep a system based on cost effectiveness fairly up to date means that you have to constantly re-evaluate. This is a process that can be pre-scheduled and you do not need to have formal time limits. For this reason it is easier to implement HTA by the Knowledge Centre. There are many steps in a process like the re-evaluations, and the country specific economic aspects are considered only towards the end. This means that the main part of the first steps will be very similar for all the Nordic countries. We are hoping for a Nordic corporation in this aspect and a suggestion for corporation and facilitation of the process has been presented to the Nordic Council of Ministers. The proposal is currently under evaluation and I hope that this can come into place.

In a re-evaluation, we will have four possible outcomes in Norway. First, it can be a status quo for the reimbursement status of a pharmaceutical. The pharmaceutical stays in the list. Second, we can have new products accepted. If a pharmaceutical is not regarded cost effective for its total indication in Norway, we are trying to focus reimbursement towards subgroups of patients for which the pharmaceutical can be regarded as cost effective. Instead of only assessing the whole indication and maybe having to reject the application, we are trying to define subgroups of patients who fulfill the criteria. These restrictions are mediated as product specific conditions for reimbursement. Third, there might be a change of the conditions for reimbursement for the product. And finally fourth: If NoMA concludes that the pharmaceutical no longer fulfills the criteria for any important subgroup of patients, it is excluded from the list.

Condition for Reimbursement: “Preferred Product”
We have a system called preferred product which can be regarded as a special condition for reimbursement. It can be used for therapeutically equivalent products. Instead of going into therapeutic reference pricing and all the problems that might occur in association with that, we have conditions set for reimbursement under the system of preferred product. NoMA defines which of the therapeutically equivalent pharmaceuticals is preferred. The condition for reimbursement is that the preferred products are prescribed unless there is a valid medical reason for using other products. If such reason exists, the reason should be stated in the patient record. We have introduced this for statins.

On the X axis in Figure 10 you have time, on the Y axis is market share measured in defined daily doses.

Remaining Challenges
The red line is atorvastatin, Lipitor, and the blue line is simvastatin. It is easy to identify from the graph when generic competition occurred and marketing activities for simvastatin stopped, while the marketing for atorvastatin kept on. The graph also clearly illustrates the change that occurred when the system of preferred product was introduced. More than 90% of new prescriptions of statins in Norway today are for simvastatin. But still we have a lot of patients left on 10 and 20 mg atorvastatin, so we have to obtain better results when it comes to switching.

Up to this point, only reimbursement of pharmaceuticals through the social security system has been mentioned. But we also have a hospital sector where a lot of new and very expensive pharmaceuticals are being introduced. It is the same basis of knowledge that is needed for making good priority decisions in this sector as it is for general reimbursement. We do not currently have a system in place to take care of this in the hospital sector. Setting up a general system for making good priority decisions is probably even more complex in hospitals because priorities should be made within the hospital’s existing budget, but you also have to address the question of when it is correct to introduce additional resources from the central health care budget. A new National Health Plan was introduced last month. A National Board on Quality and Priority Issues is proposed established to give advice in difficult priority questions, especially when it comes to new technologies like pharmaceuticals. Another challenge is to avoid prescribing influenced by the wish to shift costs from hospital budgets to pharmaceuticals covered by the social security. A typical example has been the TNF inhibitors. One of them is a typical hospital product that has to be covered by the hospital, while the others can be prescribed on the social security. This resulted in a prescribing pattern that was influenced by the different budget situations. Therefore, it was recently decided to take all financing of these drugs into the same system and give the responsibility for financing to the hospitals.

As shown in Figure 12, in our opinion, the health care budget is definitely a limited resource and priority decisions will of course become tougher and tougher. The health gap will increase. This will make the need for good priority decisions stronger and stronger. HTA and CEA are very important tools to help us in making the right decisions, but documentation of a positive cost effectiveness ratio is not necessarily enough to secure uptake in the reimbursement system. We have to compare investment in reimbursement of new pharmaceuticals to investments in other measures in society. But good pharmaceuticals will always be needed and welcomed, and there has never been more resources spent on pharmaceuticals as today.

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