Evidence-based purchasing - can we create buyers’ markets?
David Henry
WHO Collaborating Centre for Pharmacology and
Rational Use of Drugs
The University of Newcastle, NSW
Australia
Rising drug costs - possible reasons
- Diminishing returns for research investment - Increasing marginal cost for each marginal gain.
- Excessive pursuit of 'me too' drugs - inhibition of true innovation?
- Excessive regulation
- Regulatory capture
- Cost-recovery policies -> use of inferior data to expedite approvals of costly but modestly effective drugs
Flawed Markets (cont)
- Failure by funders of healthcare programs to wield their true market power in the interests of patients
- Doctor lobbying for increased expenditure rather than lower drug costs
- Secrecy and information asymmetry, leading to flawed decisions and prices
Flawed Markets (cont)
- Those with the greatest capacity to benefit are the least able to pay
- required to make decisions when they are least equipped to do so, with incomplete or biased information
- Industry's expectations of profit (with higher margins than other industries)
- Are they good at price fixing in ways that fool the competition agencies?
Flawed Markets (cont)
- The media tout every new drug story from a medical PR company as a 'breakthrough'
- The public who believe what they read - that new drugs are always better, - and suspend the judgements that they would apply to such claims were they applied to other (non-pharmaceutical) products?
Responses to flawed markets
Intervention by governments (as, or on behalf of, purchasers)
tendering
compulsory licensing
parallel importing
price controls
profit controls
insurance programs
therapeutic group premiums
variable co-payments
safety nets
evidence-based listing/pricing/purchasing
Increasing pressure on industry
- HMOs
- National Institute for Clinical Excellence (NICE)
- Australian Pharmaceutical Benefits Scheme
- Ontario Drug Benefits Plan
Increasing pressure on industry
- Drugs licensed but not listed on the Australian PBS:
- montelukast
- zafirlukast
- finasteride
- sildenafil (Viagra)
- losarten
- zanamivir (Relenza)
- donepezil
- tacrine
Evidence-based purchasing
- Evidence-based approach to assessing the comparative clinical effectiveness and costs of drugs -
- Cost-effectiveness analysis
- Can be used to determine ‘value for money’, indicative prices,
Australian drug subsidies (1)
- The Pharmaceutical Benefits Scheme
- Federal government program
- All Australian residents eligible
- In community, not in public hospital
- Subsidised indications may be restricted
Australian drug subsidies (2)
- In operation 50 years
- 588 different drugs (6/98)
- 125 million scripts (97/98)
- Au$2.8 billion cost to government (97/98)
- 9.7% growth from 96/97 to 97/98
The Evaluation
Phase 1: Evidence Based Medicine
Close examination of the clinical data comparing the new drug with the current therapy for the condition
Phase 2: Economics
The comparative clinical benefits of the new drug are compared with an agreed comparator
Trial-based comparison of benefits and costs
Then more extensive modelling is done to include other costs and to extrapolate effects over longer periods under Australian ‘conditions’
Outcomes
When drugs appear ‘equivalent’ the new drug gets offered the same price as the older agent - cost-minimisation analysis
When the new drug appears superior to the older agents (and more expensive) the incremental health gains are related to the incremental costs. The ‘value for money’ offered by this ratio is judged by the committee - cost-effectiveness/utility analysis
NSAIDs
Blended Pricing : using cost-effectiveness analysis to set the price of ACE inhibitors
- ACE inhibitors
- used in hypertension, CHF, post AMI, and diabetic retinopathy
- Clinical endpoint trials available for the last three, but not the first
- ‘Acceptable’ ICERs agreed to for these outcomes: approx $A30000/ life year gained
Using cost-effectiveness analysis to set a price: ACE inhibitors (cont)
- Based on the trial-based estimates of LYG, the equations were reversed to derive an ‘indicative’ price for that indication
- ACEI awarded the price of a thiazide diuretic for uncomplicated hypertension ($7-8/month)
- Drug utilisation data to estimate the relative use over the four indications
- A ‘blended’ price calculated from the acceptable prices for each indication and the relative use for that indication
Results of the exercise
Using cost-effectiveness analysis to set a price
- The use of ‘acceptable’ cost-effectiveness ratios can be used to deal with different indications
- However different thresholds can be used to determine indicative prices in different settings
- This provides a rationale for different prices in developing countries and argues against a global price
Conclusions (cont)
- The analyses can be used as a basis for price-setting in many different settings, including developing countries
- The costly selective and ‘leaky’ nature of modern drugs makes blended prices or price/volume trade-offs a necessity
- The alternative is more sophisticated methods for identifying the true ‘beneficiaries’