Use of Cost-Effectiveness Analysis in Health-Care Resource Allocation Decision-Making: How Are Cost-Effectiveness Thresholds Expected to Emerge?

BACKGROUND: An increasing number of health-care systems, both public and private, such as managed-care organizations, are adopting results from cost-effectiveness (CE) analysis as one of the measures to inform decisions on allocation of health-care resources. It is expected that thresholds for CE ratios may be established for the acceptance of reimbursement or formulary listing. OBJECTIVE: This paper provides an overview of the development of and debate on CE thresholds, reviews threshold figures (i.e., cost per unit of health gain) currently proposed for or applied to resource-allocation decisions, and explores how thresholds may emerge. DISCUSSION: At the time of this review, there is no evidence from the literature that any health-care system has yet implemented explicit CE ratio thresholds. The fact that some government agencies have utilized results from CE analysis in pricing/reimbursement decisions allows for retrospective analysis of the consistency of these decisions. As CE analysis becomes more widely utilized in assisting health-care decision-making, this may cause decision-makers to become increasingly consistent. CONCLUSIONS: When CE analysis is conducted, well-established methodology should be used and transparency should be ensured. CE thresholds are expected to emerge in many countries, driven by the need for transparent and consistent decision-making. Future thresholds will likely be higher in most high-income countries than currently cited rules of thumb.     

The strategic interaction between firms and formulary committees: effects on the prices of new drugs

We study the strategic interaction between the pricing decisions of a pharmaceutical firm and the reimbursement decisions of a government agency which grants reimbursement rights to patients for whom new drugs are most cost-effective. If the reimbursement decision precedes pricing, the agency only reimburses some patients if the drug's private and public health benefits diverge. This is, there are consumption externalities and the variable cost of the drug exceeds the alternative's. Contrarily, if the firm can commit to a price before reimbursement, a strategic effect implies that by setting a sufficiently high price, the firm can make the agency more willing to reimburse than without commitment.     

Firm- and Drug-Specific Patterns of Generic Drug Payments by US Medicaid Programs: 1991–2008

Background

The entry of generic drugs into markets previously monopolized by patented, branded drugs often represents large potential savings for healthcare payers in the USA.

Objectives

Our objectives were to describe and explain the trends in drug reimbursement by public Medicaid programmes post-generic entry for as many drug markets and for as long a time period as possible.

Methods

The data were the Medicaid State Drug Utilization Data maintained by the Centers for Medicare and Medicaid Services. Quarterly utilization and expenditure data from 1991 to 2008 were extracted for 83 drugs, produced by 229 firms, that experienced initial generic entry between 1992 and 2004. A relative ‘price’ for a specific drug, firm and quarter was constructed as Medicaid reimbursement per unit (e.g. tablet, capsule or vial) divided by average reimbursement per unit for the branded drug the year before entry. Fixed-effects models controlling for time-, firm- and drug-specific differences were estimated to explain reimbursement.

Results

Twelve quarters after generic entry, 18 % of drugs had average per-unit reimbursement less than 50 % of the original branded-drug reimbursement. For each additional firm manufacturing the drug, reimbursement per unit, relative to the pre-generic-entry branded-drug reimbursement, was estimated to fall by 17 (p < 0.01) and 3 (p < 0.01) percentage points for generic and branded-drug companies, respectively. Each additional quarter post-generic entry brought a 2 (p < 0.01) percentage point drop in relative reimbursement.

Conclusions

State Medicaid programmes generally have been able to obtain relief from high drug prices following patent expirations for many branded-drug medications by adjusting reimbursement following the expanded competition in the pharmaceutical market.     

Objectives,Budgets, Thresholds,and Opportunity Costs—A Health Economics Approach: An ISPOR Special Task Force Report [4]

The fourth section of our Special Task Force report focuses on a health plan or payer’s technology adoption or reimbursement decision, given the array of technologies, on the basis of their different values and costs. We discuss the role of budgets, thresholds, opportunity costs, and affordability in making decisions. First, we discuss the use of budgets and thresholds in private and public health plans, their interdependence, and connection to opportunity cost. Essentially, each payer should adopt a decision rule about what is good value for money given their budget; consistent use of a cost-per-quality-adjusted life-year threshold will ensure the maximum health gain for the budget. In the United States, different public and private insurance programs could use different thresholds, reflecting the differing generosity of their budgets and implying different levels of access to technologies. In addition, different insurance plans could consider different additional elements to the quality-adjusted life-year metric discussed elsewhere in our Special Task Force report. We then define affordability and discuss approaches to deal with it, including consideration of disinvestment and related adjustment costs, the impact of delaying new technologies, and comparative cost effectiveness of technologies. Over time, the availability of new technologies may increase the amount that populations want to spend on health care. We then discuss potential modifiers to thresholds, including uncertainty about the evidence used in the decision-making process. This article concludes by discussing the application of these concepts in the context of the pluralistic US health care system, as well as the “excess burden” of tax-financed public programs versus private programs.     

Pricing and reimbursement of drugs in Denmark

The Danish health care system is decentralized and tax financed.Reimbursable drugs are financed by the national health insurance, which despite its official name, is a taxfunded system for paying for drugs,practicing physicians outside hospitals, dentists, etc. Most issues related to pricing and reimbursement of drugs are placed centrally, however, with the Danish Medicines Agency, and in contrast to most of the health care system reimbursement is thoroughly grounded in legislation.Pricing in principle is free. In the 1990s a number of agreements between industry and government in practice introduced regulated price competition. Generic substitution at the pharmacy level and the agreements between government and industry have led to a decline in the overall price level for drugs from 1995 and onwards.The still increasing drug expenditures hence must be attributed to increasing volume and the introduction of new drugs. Reimbursement is divided into two: general reimbursement meaning unconditional reimbursement for a given drug or single reimbursement based on an application from the patient's physician on behalf of individual patients.The criteria for granting general reimbursement are relatively clear.Economic evaluations on a voluntary basis can be used to support documentation of a reasonable relationship between price and therapeutic effects.Reimbursement is calculated on the basis of an average European price level.     

Norway's pivotal role in regulatory health economics and pharmaceutical cost containment--what can other countries learn?

With an increasing trend in health care consumption--together with the introduction of an increasing number of new medical technologies-- governments, insurance companies and other third party payers seek new ways of limiting increases in consumption, as well as limiting the use of new medical technologies to the most efficient ones (clinically, economically). One particular area of focus in this context is the pharmaceutical sector, where the innovational rate of new technologies (drugs) has been high. One of the forerunners in the areas of health care cost containment and regulatory health economics is Norway. This country has succeeded in keeping drug prices and drug consumption at moderate levels, as well as keeping the number of new drugs to a relatively modest level. This study describes the Norwegian drug regulatory process, the Norwegian drug market, the Norwegian cost-containment policies and future regulatory perspectives. For many European countries and in North America, where stricter price and reimbursement regulations are considered, the Norwegian drug regulatory process presents an interesting example of how a strict regulatory environment may affect the availability of drugs, as well as drug prices, drug reimbursement and drug consumption.     

Reference pricing of pharmaceuticals

We consider a therapeutic market with potentially three pharmaceutical firms. Two of the firms offer horizontally differentiated brand-name drugs. One of the brand-name drugs is a new treatment under patent protection that will be introduced if the profits are sufficient to cover the entry costs. The other brand-name drug has already lost its patent and faces competition from a third firm offering a generic version perceived to be of lower quality. This model allows us to compare generic reference pricing (GRP), therapeutic reference pricing (TRP), and no reference pricing (NRP). We show that competition is strongest under TRP, resulting in the lowest drug prices (and medical expenditures). However, TRP also provides the lowest profits to the patent-holding firm, making entry of the new drug treatment least likely. Surprisingly, we find that GRP distorts drug choices most, exposing patients to higher health risks.     

Pricing and reimbursement of drugs in Sweden

The Swedish public health care system is financed mainly by taxes. The major part of drug costs is paid by the drug reimbursement system. Sweden has, as most other countries, seen a large increase in the expenditures on drugs in recent years. The responsibility for the cost of drugs in Sweden has recently been decentralized to the county council level. The reimbursement system of drugs currently covers all drugs with a price approved by the National Social Insurance Board, unless the government specifically decides against such coverage. Two groups of drugs were recently excluded from coverage: drugs for obesity and impotence. The price level of drugs in Sweden is close to the average of the European countries. Economic evaluations are currently not mandatory in Swedish price and reimbursement negotiations but are nonetheless important, particularly in negotiations for drugs expected to command large price premiums. The Swedish pricing and reimbursement system has recently been under investigation, and new reforms are expected in the near future.     

Product safety spillovers and market viability for biologic drugs

When a pharmaceutical manufacturer experiences a safety problem, negative impacts on profitability can spread to its competitors. Reduced consumer confidence, product recalls, and litigation are limited to the responsible manufacturer only if that manufacturer can be clearly linked to the safety problem. We analyze the impact of “accountability” for safety problems on manufacturer entry decisions and investments to mitigate risk. Consistent with prior research, we find investment levels increase with accountability in a duopoly market, and that accountability can thus enhance market viability and improve consumer welfare. However, we also analyze the impact of accountability on entry of a competitor, after the originator’s exclusivity has expired. Accountability promotes the development of a robust market by raising expected profits, particularly for an entrant with a relatively low likelihood of a safety problem. Yet entry need not improve consumer welfare, and may benefit the incumbent in our model. In contrast to the traditional entry deterrence mechanism, when accountability is sufficiently low, increased incumbent investment encourages entry. Our analysis has important implications for biologic drugs, insofar as pathways for entry by “biosimilars” have been established in Europe and the United States, and informs pharmacovigilance and other accountability policies for biologics.     

Medical Device Reimbursement Coverage and Pricing Rules in Korea: Current Practice and Issues with Access to Innovation

The development of health funding policy in Korea has followed the country’s rapid economic development, with a comprehensive National Health Insurance (NHI) system in place by 1989. The funding of medical devices has followed this progression, with incorporation into the NHI reimbursement system in 2000 (several years later than pharmaceuticals), but important issues affecting patient access remain. Although the effect of devices on the NHI budget is relatively modest (only about 4%), because of concerns about NHI sustainability, attention has increasingly been paid to their management and funding. Unlike pharmaceuticals, however, it has been quite challenging to develop clear and fair criteria for reimbursement coverage and pricing of medical devices. The two key and longstanding issues around the reimbursement of medical devices in Korea are how to expedite market entry of improved or innovative medical devices at appropriate prices, and how to satisfactorily lower the reimbursement levels of older devices, thereby making headroom for new technologies to be reimbursed. Despite protracted discussions over the last decade, industry and government have been unable to reach full agreement. There has been some progress (e.g., introduction of the Value Appraisal and the Revaluation Systems), but there remains urgent need for productive discussion and consensus between government and industry regarding reasonable funding rules, transparency, and clarity in the reimbursement pricing process for medical devices.     

从国际视角看我国的药品定价、补偿和可及性问题

随着药品费用的快速增长,药品政策在我国显得愈发重要。药品政策出台的目的是有效控制药品费用,而截至目前为止,这些政策的实施效果仍不尽如人意。通过比较研究的方法,对我国药品定价、补偿和可及性等问题提出一些政策建议。这些建议不仅是针对药品费用问题,更多的是针对正在不断增长的卫生费用问题。     

Comparing Patient Access to Pharmaceuticals in the UK and US

Background: The debate on access to new drugs has focused on the time lag between applications for approval and granting of marketing authorisation. This delay was identified as the first barrier with respect to patient access to new drugs, encompassing the hurdles of safety, efficacy and quality. Additional barriers have since been identified. These pertain to reimbursement and pricing of approved drugs, the so-called fourth and fifth hurdles. Methods: We reviewed 38 National Institute for Health and Clinical Excellence (NICE) guidance appraisals carried out between April 1999 and April 2005. These appraisals included 71 recently approved drugs considered to have either high clinical or cost impact. For each drug we first determined its marketing approval date by the British Medicines Healthcare Products Agency (MHRA) or European Medicines Evaluation Agency (EMEA). Secondly, we determined if each drug was approved by the US FDA for marketing and, if so, the date when it was approved. Thirdly, we considered whether and when each drug was recommended for reimbursement and use by NICE, and whether conditions of reimbursement applied. Fourthly, for the subset of FDA-approved drugs, we examined formulary placement, cost sharing and conditions of reimbursement on three-tier formularies used by seven leading US third-party payers serving Medicare beneficiaries. Fifthly, we reviewed each NICE recommendation to determine if cost-effectiveness data were referred to either in the appraisal documentation or in the final recommendation. Sixthly, we asked a spokesperson from each US payer whether cost-effectiveness assessments or rebates played a role in determining formulary placement of drugs in our sample, and whether there was a lag between marketing approval and reimbursement for any of the covered drugs. Results: Of the 71 drugs contained in 38 NICE guidance appraisals, the US FDA approved 64. On average, the subset of 64 drugs received marketing authorisation in the US prior to the UK. On average, US plans covered 87% of the 64 drugs, the same percentage of drugs recommended for NHS reimbursement and use. Cost sharing in the US was significantly higher than in the UK, with wider variation across plans. On average, drugs covered in the US had fewer conditions of reimbursement (15%) than the percentage of drugs given conditions by NICE (46%). US plans were quicker to decide to reimburse drugs following marketing approval than NICE. Conclusions: The US provides faster, more flexible access to most, but not all, of the UK-approved pharmaceuticals in our sample. However, US patients have higher cost sharing than the UK and coverage is less evenly spread across the population. From a policy perspective, our study findings confirm the need to bolster the NICE fast-track initiative to decrease the amount of time it takes to appraise certain new pharmaceuticals. Also, the study findings point to the need in the US for careful monitoring of plan compliance with regulations pertaining to the Medicare drug benefit, particularly with respect to formulary restrictions and limits on cost sharing.     

Reimbursement of pharmaceuticals: reference pricing versus health technology assessment

Reference pricing and health technology assessment are policies commonly applied in order to obtain more value for money from pharmaceuticals. This study focussed on decisions about the initial price and reimbursement status of innovative drugs and discussed the consequences for market access and cost. Four countries were studied: Germany, The Netherlands, Sweden and the United Kingdom. These countries have operated one, or both, of the two policies at certain points in time, sometimes in parallel. Drugs in four groups were considered: cholesterol-lowering agents, insulin analogues, biologic drugs for rheumatoid arthritis and “atypical” drugs for schizophrenia. Compared with HTA, reference pricing is a relatively blunt instrument for obtaining value for money from pharmaceuticals. Thus, its role in making reimbursement decisions should be limited to drugs which are therapeutically equivalent. HTA is a superior strategy for obtaining value for money because it addresses not only price but also the appropriate indications for the use of the drug and the relation between additional value and additional costs. However, given the relatively higher costs of conducting HTAs, the most efficient approach might be a combination of both policies.     

英国价值定价理念对我国医保药品报销政策的启示

本文在梳理英国医保药品报销政策的基础上,通过对价值定价理念的深入研究和理解,系统探讨其在报销政策制定过程中对药品目录遴选、价值测算、支付标准确定、医保基金平衡和报销效益评估的作用机制,并深入思考通过价值定价理念建立起的药物警戒体系与药品报销政策间的衔接机制。在此基础上总结价值定价理念的特点、应用阶段和具体操作方法,以期为我国提供借鉴。     

Do policy changes in the pharmaceutical reimbursement schedule affect drug expenditures? Interrupted time series analysis of cost, volume and cost per volume trends in Sweden 1986-2002

The last decades increasing pharmaceutical expenditures in Sweden and other western countries have created a need for reforms to reduce the trend. The aim was to analyse if reforms concerning the pharmaceutical reimbursement scheme in Sweden during the years 1986-2002 were associated with changes in cost, volume and cost per volume of pharmaceuticals. Effects of changes in the reimbursement schedule during the study period were evaluated for all registered pharmaceuticals in Sweden and for five indicator drug groups. Five policy changes during the study period were assessed. Three concerned increased patient co-payment (January 1, 1991; January 1, 1995 and June 1, 1999), one the introduction of reference based pricing and increased co-payment (January 1, 1993) and one a new structure of the reimbursement schedule (January 1, 1997). The National Corporation of Swedish Pharmacies provided pharmaceutical delivery data for all Swedish pharmacies. Possible breaks in the trend associated with the investigated reforms were analysed with linear segmented regression analysis. This showed that increased co-payments were not associated with changed level or slope of cost and volume. The new reimbursement schedule was associated with a decreased level of cost and volume, both for all drugs combined and for several of the indicator drug groups. It was also associated with an increased slope for both volume and cost in some indicator drug groups and for all drugs. Introduction of reference based pricing was associated with a reduced slope of cost/defined daily doses (DDD) in all of the indicator drug groups and for all drugs. The analysis showed that major changes in the reimbursement system such as the introduction of a new reimbursement schedule and reference based pricing were associated with reductions in cost and volume for the new reimbursement schedule and cost per volume for reference based pricing.     

中国药品定价和补偿政策及其效果

背景:近年来,中国药物政策存在着药品费用快速增长,以及质量、定价和提供能力等方面的问题,其解决的关键在于理清其中的定价和补偿问题。方法:本文较为系统收集了药物领域的学术文献和灰色文献,以及中国政府的官方统计数据,并结合中国国务院发展研究中心举办的研讨会信息,概述了中国的药品定价和补偿情况。结果:通过一个融合了供应方、代理方和需求方多方政策的框架,分析了定价与补偿政策。在目前药品政策的相互影响下,出现了药品价格高、质量低、不合理开药等问题。分立的监管环境也不利于药品政策的改革。结论:提高药品质量标准、市场集中度、政府补贴,以质量为导向的招标、扩大零差率政策的实施范围、建立补偿与合理开药的联动机制以及促进卫生技术评估与比较效能研究来改善定价和补偿政策。另外,整合广泛的监管分立体制、改善透明度和打击腐败等问题将有助于确保制定出具有一致性的、循证的政策。     

Medical problems associated with the national reference pricing system in Hungary

The author analyses the medical problems associated with the proposed reference pricing system prepared for the 2004 pharmaceutical price and reimbursement negotiations by the Hungarian National Health Insurance Fund (HNIF). In case of drugs containing identical active ingredients the author does not consider it acceptable that from the criteria of reference grouping bioequivalence was omitted, since bioequivalence is the basic clinical pharmacologic principle underlying the safe utilization of generic drugs. The proposal introduces in Hungary the therapeutic reference pricing for drugs belonging to the same ATC 5 level group, having different chemical structures but identical mechanisms of action. The products are listed according to their defined daily dose (DDD) and the arithmetic mean of the cheapest products giving together 50% market share is calculated. Each ATC 5 group has a given per cent reimbursement level and the fixed amount paid by the HNIF for all drugs in the group is defined as the given percentage of the mean price. This sum is reimbursed irrespective whether the products are patent protected or not, furthermore those drugs whose price is three times higher than the fixed mean price are excluded from the reimbursement system. As a result the patients' co-payment for the more expensive drugs will be significantly increased in the future. The basis of the therapeutic reference price is the assumption that the outcome of the treatment will be the same using drugs with the same mechanism of action. However, this assumption lacks valid scientific proof. According to the author, the proposed budget centric reference pricing system, which does not take into account the differing clinical pharmacologic profiles of the drugs, will significantly inhibit the use of new, innovative drugs, the establishment and continuous improvement of truly cost-effective patient care. Several alternative approaches are proposed for controlling drug budget. Finally the author recommends that a Committee should be established to develop a comprehensive proposal for the reorganization of the pricing and reimbursement system of the drugs available for general and/or hospital use, and for the follow-up of the health care effects of these measures.     

Access to orphan drugs – comparison across Balkan countries

The aim of this study was to compare orphan drug access in a sample of Balkan countries: five EU Member States (Bulgaria, Croatia, Greece, Romania, Slovenia) and two EU Candidates (Serbia, Montenegro). The comparative analysis was based on a cross-sectional study and included medicinal products with an active orphan designation and market authorisation on January 1, 2017.Access to orphan drugs is an ongoing challenge in these countries. Three clusters of countries were identified in terms of orphan drug access: Greece and Slovenia, making the top tier, Romania, Bulgaria, and Croatia, being in the middle, and EU Candidates, Serbia and Montenegro, forming the bottom tier, where a substantial number of EU market approved orphan drugs was not even registered. Available public health resources and market size are probably among the contributing factors for such inequalities. Sizeable part of EMA market authorised orphan medicinal products is not even priced in the Balkan countries. This is a serious issue, which is putting rare disease patients from this region in a particularly vulnerable situation.There is a need for further improvement in accessibility of orphan drugs in the Balkan countries. Cross-border collaboration in the field of pricing, health technology assessment, and reimbursement negotiation of orphan drugs may help to address these challenges.