Presentation on theme: "Health Economics for Prescribers"— Presentation transcript:
1 Health Economics for Prescribers Richard Smith (MED)David Wright (CAP)1
2 Lecture 3 recap (resources & costs) Identification (checklist 4)Indirect costsMeasurement (checklist 5)Fixed, variable and total costAverage, marginal and incremental cost (checklist 8)Discounting (checklist 7)Valuation (checklist 6)Cost versus priceInflationSources of unit cost data93
3 ‘Drummond’ checklistWas a well-defined question posed in answerable form?Was a comprehensive description of alternatives given?Was there evidence that effectiveness had been established?Were all the important and relevant costs and consequences for each alternative identified?Were costs and consequences measured accurately/appropriately?Were costs and consequences valued credibly?Were costs and consequences adjusted for differential timing?Was an incremental analysis performed?Was allowance made for uncertainty?Did presentation/discussion of results include all issues of concern?93
4 Types of economic evaluation Type of AnalysisResultConsequencesCostsCost MinimisationCost BenefitCost UtilityCost EffectivenessMoneySingle or multiple effects not necessarily common. Valued as “utility” eg. QALYDifferent magnitude of a common measure eg., LY’s gained, blood pressure reduction.Least cost alternative.Identical in all respects.Cost per unit of consequence eg. cost per LY gained.Cost per unit of consequence eg. cost per QALY.As for CUA but valued in money.Net £cost: benefit ratio.93
5 Lecture 4: Pharmaco-economic evaluation – benefits and outcomes IdentificationMortality, Quality of life etc.Cost versus benefitProductivity changesMeasurementIn natural physical units (eg. number of lives saved)Intermediate versus final outcomesValuation if appropriateUtility (for CUA)Money (for CBA)93
6 1. IdentificationWhich outcome measure is employed depends on the objective of the evaluationComparing within treatment area/diseaseCompare across health service (system)Societal evaluation - health care set against other alternative uses for the resourcesThis then determines the type of evaluationCost-effectiveness analysis (CEA)Cost-utility analysis (CUA)Cost-benefit analysis (CBA)93
7 Costs versus benefits C/E ratio = net cost/net benefits Net cost = positive cost and negative costNegative cost = cost saving (eg reduced LoS)Net benefit = positive benefit and negative benefitNegative benefit = reduced health (eg side-effect)Rule of thumb – anything related to resources on cost side, anything related to ‘health’ on benefits93
8 Should changes in productivity be included? Depends upon viewpoint (govt., societal, NHS)Main issues are level of ‘true’ loss/gain and comparabilityMeasurement of value (gross wage, friction cost)Double-counting, especially with CUA/CBAComparability with ‘health’ focus (viewpoint again)Comparability with other studiesSolution?Provide a good reason why they should be includedReport separately from other resultsDifferentiate measurement and valuation93
9 2. Measurement Measure effectiveness not efficacy Efficacy = measure of effect under ideal conditions (can it work?)Effectiveness = effect under ‘real life’ conditions (does it work?)Efficacy does not imply effectivenessMeasure (count) in natural physical unitsNumber of lives/life yearsChange in blood pressureChange in cholesterol levelsMeasure final not intermediate outcomesIntermediate outcomes reflect change in clinical indicatorsFinal outcomes reflect change in health status93
11 Sources of effectiveness data Clinical trials, esp RCTs, considered strongest evidence as minimal bias and few confounding factors (takes account of ‘unknown unknowns’) butoften establishes efficacyselective subjects, time horizon etcEpidemiological studies, cohort studies, real life setting so establish effectiveness, butpotential for bias and numerous confounding factorscausal links can be weak and disputedSynthesis methods, meta analysis/systematic review, allows for singular insufficient data to be combined, but‘heterogeneity’ in observations (apples and pears?)potential biases in searching and reviewingOnce we have identified what the most appropriate outcome is we need to see about measuring it.Before doing that want to highlight the general ways that this data is collected. This is similar to how we would collect cost data. As with cost data or resource use each has its merits.
12 Example of cost-effectiveness analysis (CEA) Alternative dosage of lovastatin in secondary prevention of heart disease (Goldman et al 1991, JAMA 265: )Ages 65-74Daily doseCost ($bn)Life yearsCost/Life year20 mg.3.615348,27210,40040 mg.7.051477,20414,800Work through another example.They looked at the cost effectiveness of different treatment regimes for primary and secondary prevention of CHD. Used a computer simulation model to estimate the instances of heart disease and risk of recurrent events.In example increasing the dose of lovastatin saved lives and life years, but costs also increased.
13 Limitations of measurement (i.e. just CEA) Ambiguity in assessing overall improvement or decrement in health (addressed by CUA/CBA)Are limitations to how helpful cost effectiveness analyses are. All because of the outcome measure. Consider this example.Compared to B, A is more cost effective, costs less and gives greater benefit. So in dominates box.Cannot address the issue of allocative efficiency (addressed only by CBA)
14 3. ValuationValue is determined by benefits sacrificed elsewhere (see opportunity cost again)Valuation requires a trade-off between benefits - measurement does notValuation either in terms ofUtility (eg QALY)Money (eg WTP)There are two possible outcomes which place a value on health.One is to elicit a preference for a health state which is then used to weight time in that health state. The most common way to do this is the QALY, although we will discuss others.Alternatively you can place a monetary value on health and then compare money gained to money spent. This results in a cost benefit analysis and we will discuss this in full next week.
15 Types of economic evaluation Type of AnalysisResultConsequencesCostsCost MinimisationCost BenefitCost UtilityCost EffectivenessMoneySingle or multiple effects not necessarily common. Valued as “utility” eg. QALYDifferent magnitude of a common measure eg., LY’s gained, blood pressure reduction.Least cost alternative.Identical in all respects.Cost per unit of consequence eg. cost per LY gained.Cost per unit of consequence eg. cost per QALY.As for CUA but valued in money.Net £cost: benefit ratio.93
16 Example of ‘added value’ of CUA Laser assisted versus standard angioplasty (Sculpher et al, 1996)No matter what measure you use the important thing is what you do with them, use them to adjust the quantity of life in a health state to give an outcome measure which represents both quality and quantity.
17 Quality-adjusted life years (QALYs) Adjust quantity of life years saved to reflect a valuation of the quality of lifeIf healthy QALY = 1If unhealthy QALY < 1QALY can be <0No matter what measure you use the important thing is what you do with them, use them to adjust the quantity of life in a health state to give an outcome measure which represents both quality and quantity.
18 QALY procedureIdentify possible health states - cover all important/relevant dimensions of QoLDerive utility ‘weights’ for each stateMultiply life years (spent in each state) by ‘weight’ for that state.
19 Calculating QALYs example Weights:Good health = 1moderate health = 0.8poor health = 0.5LYs:Year 1 + year 2 + year 3 = 3LYs (1+1+1)QALYs:Year 1(x0.5), year 2(x0.8), year 3(x1) = 2.3 QALYs ( )Intervention may increase recovery such thatyear 1(x0.8), year 2(x1), year 3(x1) = 2.8 QALYs ( )No difference in LYs but gain in QALYs
20 Utility ‘weight’ Utility = satisfaction/value/preference Utility weights are necessarily subjectiveRepresent individual’s preferences for, or value of, one or more health states.MustHave interval propertiesBe “anchored” at death (0) and good health (1) [can be negative]
22 Choice of techniqueGenerally values/utilities elicited differ between the techniques, such that SG>TTO>RSIn general this is also preference order, but choice often contingent on timeDifferent generic scales use different scoring techniques (eg EQ-5D=TTO – see later)What is generally found in research that uses each method, is that standard gamble values will be larger than time trade-off values which are larger than rating scale values. This is because of different representations of risk, standard gamble is based on uncertainty, whereas time trade-off has certain outcomes. Difference between time trade-off and rating scaling is that one requires a choice, whereas the other is a ranking of all health states.So which is the best to use, what conforms closest to the theory? Standard gamble is based on expected utility theory and involves uncertainty, but obviously choice of technique can be contingent on time, easiest is surely the rating scale, whereas TTO and SG are more interview intensive.
23 Sources of ‘utility’ weights 1: Evaluation specific Develop evaluation specific description of relevant health state and then derive weight directly by survey using one of the previous techniquesAdvantagesSensitiveaccount for wider QoL (process, duration, prognosis)Disadvantagesresource intensivelack of comparabilityThose techniques just discussed, as well as some others, can be used to measure strength of preference, but there are two other ways that we can derive values or utilities to use in the denominator of a cost-utility analysis.As with clinical effectiveness we can use previously published data or we can use valued judgement.
24 Sources of ‘utility’ weights 2: ‘Generic’/‘multi-attribute’ instrument Predetermined weights (using one of techniques above) for specified combination of dimensions of health yielding a finite number of health state valuesAdvantagesSupply weights “off the shelf”Comparable across studiesDisadvantagesinsensitive to small changesdimensions may not be sufficiently comprehensiveweights may not be transferable across groupsThose techniques just discussed, as well as some others, can be used to measure strength of preference, but there are two other ways that we can derive values or utilities to use in the denominator of a cost-utility analysis.As with clinical effectiveness we can use previously published data or we can use valued judgement.
25 Generic instrument example: EQ-5D 5 dimensions, 3 levels = 245 health states (35)Example values:Health state = 1.00Health state = 0.82Health state = 0.2693
26 Monetary Valuation / CBA CUA still does not address:Allocative efficiency: is health gain ‘worth’ more than benefits those resources could yield elsewhere (health or non-health)?Valuation of non-health benefits eg process, information, convenienceValuation of non-use benefits ie externalities, option value
27 Methods of Monetary Valuation Assess individual ‘willingness-to-pay’ for (the benefits of) a good through either:Observed wealth-risk trade-off (revealed preference)Advantage – ‘real’ preferences/valuesDisadvantage – difficult control for confoundersDirect survey (stated preference)Advantage – direct valuation of goodDisadvantage – hypothetical/survey problemsVast majority of CBA use direct survey
28 Process of calculating monetary value of benefits using survey WTP Provide ‘scenario’ describing benefits and all aspects of ‘market’ (eg payment vehicle)Ask for respondents valuation using specific technique:open-ended question - maximum WTPpayment card – chose from range of valuesclosed-ended/binary questionCalculate mean/median WTP for sample (cf ‘price’ in competitive market)Those techniques just discussed, as well as some others, can be used to measure strength of preference, but there are two other ways that we can derive values or utilities to use in the denominator of a cost-utility analysis.As with clinical effectiveness we can use previously published data or we can use valued judgement.
29 Simplified WTP question for VPF Suppose the risk of a car driver being killed in a car accident is 20 in 100,000. You could choose to have a safety feature fitted which would halve the risk of the driver being killed, down to 10 in 100,000.What is the most you would be willing to pay to have this safety feature fitted to your car?
30 Simplified WTP calculation Reduction in risk (dR) = 10 in 100,000Mean WTP (dV) = £100Implied value of prevented fatality (dV/dR) = £1m (£100/0.0001=£1,000,000)Issues of context – VPF differs for road accident, rail accident, health care etc
31 WTP and ATP (ability to pay) WTP is (partly) determined by incomegenerally regarded as important factorequal income not a goal in western societyCan and should it be ‘solved’WTP as a % of incomerequires specification of alternative SWF ie what alternative distribution of income?
32 SummaryAny evaluation must distinguish between identification, measurement and valuation of benefits/outcomesIdentificationOnly non-resource use (cost-savings on cost side of equation)Treat productivity savings carefullyMeasurementFinal not intermediate outcomesAll that is needed for CEAValuationFor CUA expressed as QALYsFor CBA expressed as WTPMove from CEA→CUA→CBA increases the complexity and difficulty of evaluation so needs justifying93