Shanlian Hu. MD. MSc. Professor of Health Economics, School of Public Health, Fudan University, Shanghai, China
The most common method used in pharmacoeconomic evaluations is to measure the incremental cost-effectiveness ratio (ICER), that is the ratio of the difference in costs and outcomes, respectively, between a new drug and an old drug. Effectiveness can be expressed in life year gains (LY) or quality adjusted life years (QALY) obtained by multiplying the utility values obtained after quality of life and drug-related side effects adjustment, and finally calculating the cost per QALY.
In the China setting, if the threshold is less than 1 GDP per capita, it is worth recommending and including in the medical insurance reimbursement positive list for compensation. If it is between 1 and 3 GDP per capita it can also be acceptable, especially for antitumor drugs. If it exceeds 3 GDP per capita (equal to less than ￥300,000 RMB per year), it should not be included in the reimbursement list. This is currently a more common standard in most low- and middle-income countries.
Issues of QALY threshold
However, there are also some problems with this cost per QALY method, as the level of economic development varies from country to country, Taking the United States as an example, according to the International Monetary Fund, the GDP per capita of the United States in 2021 was $69,231 USD, which about 1.4 times the $50,000/QALY standard in the United States. The UK’s GDP per capita in 2021 was $47,203 (£1=$1.3533 at the average pound sterling-to-US dollar exchange rate), which translated to £34,879 per capita in the British pound. If selecting the standard £20,000~30,000/QALY in the UK, it is equivalent to the GDP per capita level in UK from 1.16 to 1.74. At the meantime, taking China as an example, 1 GDP per capita in 2021 would be $12,359 USD (at the average exchange rate 1 USD=￥6.4512 RMB in 2021). The 1~3 GDP per capita should be between ￥79,730 and ￥239,190 RMB, respectively.
Under the current level of China’s economic development, the incremental cost-effectiveness ration of drugs is significantly higher than that of developed countries in the term of GDP per capita in the China’s medical insurance reimbursement list.
Explore other approaches
There may be two discriminatory scenarios for the QALY threshold approach: one is influenced by the baseline quality of life; the second is the impact of baseline patient age in clinical trial groups. Because in the QALY calculation, the weight of the patient’s quality of life and utility value should be considered, QALY = LY x QOL, so there is discrimination against patients with lower quality of life and shorter life expectancy. If the comparison between new drug group and control drug group is not in a randomized controlled double-blind trial, no equality determination done in terms of age distribution in two cohorts is not well matched, which will lead to wrong conclusions. Basu (2020) illustrates some comparative performances to show even the efficacy of two comparative drugs in extended year of life and the improvement of quality of life is the same, but the baseline quality of life of the old drug treatment group is worse than that of the new drug treatment, so that the QALY study is easily affected by the age and quality of life of the treated patient population . In recent years the international pharmacoeconomics community has raised such a question: can we go beyond the existing cost per QALY value-based pricing method and consider adopting other new value assessment methods to replace or supplement?
Common Assessment Tools
It is generally accepted that the HTA evaluation method of pharmaceutical products is mainly based on the added clinical value and the cost per QALY. Any product that is undervalued will affect the HTA assessment framework, market access and pricing decisions.
Are there other new valuation methods? In addition to the core value of QALY and cost, ISPOR wants to consider other factors in the value flower framework, such as the severity of the disease, equity, the value of health insurance, the value of hope and real option and the consideration of “innovation moderators”, such as the magnitude of added benefit, health equity and uncertainty.
Apply the New Metrics
Some scholars in the United States believe that equal value of (EVL) and total health years (HYT) may provide better indicators than QALY. The theory of total health years is based on the level of fairness. In accordance with the principle of horizontal level of equity, comparison between two groups (new drug treatment group and the control group) must be evaluated equally in terms of similar benefits in life expectancy or quality of life, otherwise different benefits should be evaluated differently. HYT can be considered the sum of life expectancy plus improved QALY. In any treatment comparison, both the increase in the average life expectancy of the patient and the actual improvement in the quality of life are taken into account, as well as the problem of dealing with disability.
Buehrer compared the use of QALY and HYT indicators in the treatment of HER2+ breast cancer with conventional treatment with trastuzumab-metansin conjugate (TDM1) (trade name Kadcyla) as a control. And also compared with various chemotherapy regimens, including lapatinib, trastuzumab, capecitabine, vinorelbine combination or monotherapy . The findings suggest HYT as an alternative indicator of value evaluation to avoid discriminatory characteristics of the QALY indicator for patients with low quality of life. Incremental QALY is susceptible to patient baseline utility, while HYT is relatively stable and less susceptible to disease severity and older age populations of patient baseline status, but with lower sensitivity.
The HYT framework calculates changes in life expectancy separated from changes in additional quality of life. HYT and QALY have the same principle bases, with the former performing better at discrimination than QALY. The relationship between the two is very simple to calculate in the CEA model, and the thresholds of $34,000/HYT, $74,000/HYT and $89,000HYT are corresponded to the USA thresholds of $50,000/QALY, $100,000/QALY and $150,000/QALY, respectively.
Recently, Professor Jing Wu presented a paper “How to determine the cost-effectiveness threshold in China” at 2020 ISPOR Asia Pacific conference to illustrate there are three methods demonstrating in the literature. Ochalek et al estimated the marginal productivity of the health care system to provide an estimation of the cost per DALY averted for China. The authors use marginal productivity approach to estimate the elasticity of health outcomes with respect to health expenditure, then, calculated cost per DALY averted from the estimate elasticity. The cost per DALY averted is 63% of GDP per capita. It seems the cost-effectiveness category of the WHO-CHOICE method, i.e., the value of averted 1-3 DALY per capita is much less than that of 1-3 QALY per capita.
Cai et al (2021) analyze the cost-effectiveness threshold in China by using the value of statistical life approach, the results of which amount to the value of a statistical QALY through an established mathematical process. Under the base case analysis, the results show that the value of statistical QALY is 1.45 times of GDP per capita, and within the range of 1.08 and 1.98 times.
Ye ZP et al (2022) reported a willingness-to-pay survey for one additional QALY in 2008 individuals. The results demonstrated the mean of WTP is ￥113,120 RMB in base case, which is equal to 1.75 GDP per capita. However, the cost-effectiveness threshold used by China Healthcare Security Administration in the national drug price negotiation is usually set on 0.5 to 1.5 GDP per capita.
Although the cost-effectiveness ratio recommended by 2020 China’s Guidelines for Pharmacoeconomic Evaluations is 1-3 GDP per capita per QALY, several papers used different methods suggested the threshold could be set within 1.45-2.0 times GDP per capita. In the reality, during the price negotiation in China, several methods are used together, such as the cost per QALY is set <1 ~1.5 GDP per capita for non-oncology drugs, <3 GDP per capita for oncology drugs; selecting the price lower than the lowest international reference price or capping the annual treatment cost in a given threshold, etc.
How to set the cost-effectiveness threshold in the government sector and the HTA community is still more confusing and lack of unified understanding in China so that it is need to introduce more methods and learn more good practice from the price negotiation.
The HYT framework provides a viable alternative to QALY and EVL for assessment of different healthcare technologies and stakeholders and needs to be further promoted for their development and evaluation in later use.
- Basu A et al: Health Years in Total: A New Health Objective Function for Cost-effectiveness Analysis. Value Health. 2020: 23(1):96-103.
- Buehrer C et al: Quo Vadis Health Years in Total (HYT): A Comparison of HYT and QALYs in HER2+ Breast Cancer. POSB 304
- Ochalek J et al: Informing a Cost-Effectiveness Threshold for Health Technology Assessment in China: A Marginal Productivity Approach. PharmcoEconomics 2020:38(12) 1319-1331.
- WHO: Preventing Chronic Diseases: a vital investment. Annexes 5. The WHO-CHOICE method. 2005, pp 172-173.
- Cai D et al: Estimation of the Cost-Effective Threshold of a Quality-adjusted Life year in China Based on the Value of Statistical life. European J. Health Economics. 2021: 16
- Ye ZP et al: Willingness to pay for one additional Quality Adjusted Life Year: A Population Based Survey from China> Appl. Health Econ Health Policy. 2022 (8):1-12.
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