Developing a Value Framework: The Need to Reflect the Opportunity Costs of Funding Decisions

Mark Sculpher, Karl Claxton, Steven D. Pearson 
Value in Health. 2017;20(2):234-239.

A growing number of health care systems internationally use formal economic evaluation methods to support health care funding decisions. Recently, a range of organizations have been advocating forms of analysis that have been termed “value frameworks.” There has also been a push for analytical methods to reflect a fuller range of benefits of interventions through multicriteria decision analysis. A key principle that is invariably neglected in current and proposed frameworks is the need to reflect evidence on the opportunity costs that health systems face when making funding decisions. The mechanisms by which opportunity costs are realized vary depending on the system's financial arrangements, but they always mean that a decision to fund a specific intervention for a particular patient group has the potential to impose costs on others in terms of forgone benefits. These opportunity costs are rarely explicitly reflected in analysis to support decisions, but recent developments to quantify benefits forgone make more appropriate analyses feasible. Opportunity costs also need to be reflected in decisions if a broader range of attributes of benefit is considered, and opportunity costs are a key consideration in determining the appropriate level of total expenditure in a system. The principles by which opportunity costs can be reflected in analysis are illustrated in this article by using the example of the proposed methods for value-based pricing in the United Kingdom.

The Probabilistic Efficiency Frontier: A Framework for Cost-Effectiveness Analysis in Germany Put into Practice for Hepatitis C Treatment Options 

Axel C. Mühlbacher, Andrew Sadler
Value in Health. 2017;20(2):266-272.

The German Institute for Quality and Efficiency in Health Care (Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen) adapted the efficiency frontier (EF) approach to conform to statutory provisions on cost-effectiveness analysis of health technologies. EF serves as a framework for evaluating cost-effectiveness and indirectly for pricing and reimbursement decisions.

To calculate an EF on the basis of single multidimensional benefit by taking patient preferences and uncertainty into account; to evaluate whether EF is useful to inform decision makers about cost-effectiveness of new therapies; and to find whether a treatment is efficient at given prices demonstrated through a case study on chronic hepatitis C.

A single multidimensional benefit was calculated by linear additive aggregation of multiple patient-relevant end points. End points were identified and weighted by patients in a previous discrete-choice experiment (DCE). Aggregation of overall benefit was ascertained using preferences and clinical data. Monte-Carlo simulation was applied. Uncertainty was addressed by price acceptability curve (PAC) and net monetary benefit (NMB).

The case study illustrates that progress in benefit and efficiency of hepatitis C virus treatments could be depicted very well with the EF. On the basis of cost, effect, and preference data, the latest generations of interferon-free treatments are shown to yield a positive NMB and be efficient at current prices.

EF was implemented taking uncertainty into account. For the first time, a DCE was used with the EF. The study shows how DCEs in combination with EF, PAC, and NMB can contribute important information in the course of reimbursement and pricing decisions.

Health Technology Assessment Case Studies: Factors Influencing Divergent HTA Reimbursement Recommendations in Australia, Canada, England, and Scotland

Nicola Allen, Stuart R. Walker, Lawrence Liberti, Sam Salek
Value in Health. 2017;20(3):320-328.

To evaluate the national regulatory, health technology assessment (HTA), and reimbursement pathways for public health care in Australia, Canada, England, and Scotland, to compare initial Canadian national HTA recommendations with the initial decisions of the other HTA agencies, and to identify factors for differing national HTA recommendations between the four HTA agencies.

Information from the public domain was used to develop a regulatory process map for each jurisdiction and to compare the HTA agencies’ reimbursement recommendations. Medicines that were reviewed by all four agencies and received a negative recommendation from only one agency were selected as case studies.

All four countries have a national HTA agency. Their reimbursement recommendations are guided by both clinical efficacy and cost-effectiveness, and the necessity for patient input. Their activities, however, vary because of different mandates and their unique political, social, and population needs. All have an implicit or explicit quality-adjusted life-year threshold. The seven divergent case studies demonstrate examples in which new medicine-indication pairs have been rejected because of uncertainties surrounding a range of factors including cost-effectiveness, comparator choice, clinical benefit, safety, trial design, and submission timing.

The four HTA agencies selected for inclusion in this study share common factors, including a focus on clinical efficacy and cost-effectiveness in their decision-making processes. The differences in recommendations could be considered to be due to an individual agency's approach to risk perception, and the comparator choice used in clinical and cost-effectiveness studies.

Challenges in Measuring Cost and Value in Oncology: Making It Personal

Peter P. Yu
Value in Health. 2016;19(5):520-524.

Oncology patients often find themselves facing an incurable disease with limited treatment options and increasing patient fragility. The importance of patient preferences and values increases in shared decision making especially when the cost of cancer care is continuing its steep rise. As our understanding of cancer systems biology increases, we are justifiably optimistic about therapeutic improvements but recognize that this has complicated the traditional Food and Drug Administration approval of drug indications based on organ-specific cancer for a particular drug. Dynamic and agile clinical guidelines that reflect a rapidly changing knowledge base for decision-making support are needed. The American Society of Clinical Oncology (ASCO) has been working on three initiatives to tackle these complex issues. The first initiative is ASCO's collaboration with other international organizations to create a framework to assess drugs for the World Health Organization's Essential Medicines List, including nongenerics. The second initiative aims to define clinically meaningful outcomes as precision medicine expands the definition of cancers, leading to increased demand for the use of targeted drugs as single agents or in combination. The third initiative is ASCO's value framework, published in 2015, focusing on patient-physician shared decision making. The framework incorporates three parameters: 1) the meaningfulness of the clinical benefit, 2) the toxicity of the treatment, and 3) the patient's financial out-of-pocket cost. ASCO is concerned about the rising cost of cancer care when the clinical complexity and the pace of change in oncology are accelerating, and it is committed to help improve patient outcomes and value in cancer care as well as to engage the broader health care community in a process of collaborative improvement.

The Use of Economic Evidence to Inform Drug Pricing Decisions in Jordan

Eman A. Hammad
Value in Health. 2016;19(2):233-238.

Drug pricing is an example of a priority setting in a developing country with official requirements for the use of cost-effectiveness (CE) evidence.

To describe the role of economic evidence in drug pricing decisions in Jordan.

A prospective review of all applications submitted between November 2013 and May 2015 to the Jordan Food and Drug Association's drug pricing committee was carried out. All applications that involved requests for CE evidence were reviewed. Details on the type of study, the extent, and whether the evidence submitted was part of the formal deliberations were extracted and summarized.

The committee reviewed a total of 1608 drug pricing applications over the period of the study. CE evidence was requested in only 11 applications. The submitted evidence was of limited use to the committee due to concerns about quality, relevance of studies, and lack of pharmacoeconomic expertise. There were also no clear rules describing how CE would inform pricing decisions.

Limited local data and health economic experience were the main barriers to the use of economic evidence in drug pricing decisions in Jordan. In addition, there are no official rules describing the elements and process by which the CE evidence would inform drug pricing decisions. This study summarized accumulated observations for the current use of economic evaluations and evidence-based decision making in Jordan. Recommendations have been proposed to applicants and key decision makers to enhance the role of economic evidence in influencing health policies and evidence-based decision making across priority settings.

Toward a Hedonic Value Framework in Health Care

Anirban Basu, Sean D. Sullivan
Value in Health. 2017;20(2):261-265.

In well-functioning markets, a hedonic pricing scheme can reflect the marginal valuation of various attributes of a differentiated product at market equilibrium. It serves as an important tool to inform pricing of a new product with a specific combination of attributes. Because health cannot be bought and sold in a market setting, and health care markets are distorted by insurance or government subsidies, direct valuation of a health intervention as a differentiated good through observed market prices is difficult. In this article, we discuss the rationale of using stated preference methods for developing a hedonic value framework for health insurance products to inform the decision on whether a product should be covered or subsidized by insurance, given its price. This value index will not reflect marginal value at market equilibrium, as in a hedonic pricing scheme, but would capture the distribution of marginal value in the population. We discuss how affordability concerns can be integrated into the development of a hedonic valuation model. We compare this framework with traditional cost-effectiveness analysis and also the existing value frameworks put forth by various organizations. The framework can be adopted to inform other decisions such as pricing. We argue that developing such a comprehensive and decision-theoretic value framework is feasible and, if successful, can serve to inform health care resource allocation in this country for decades to come in a systematic manner.

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