Cost effectiveness Analysis: Valuing Health; Valuing Research! Optimising a monitoring test for cost effectiveness Cost effectiveness Analysis: Valuing Health; Valuing Research! Christopher McCabe PhD AHS Endowed Chair in Emergency Medicine Research Department of Emergency Medicine

Overview Cost Effectiveness Analysis Value based health care 1. Cost Effectiveness Analysis 2. Value based health care 3. Value of further research 4. Implications for R&D

Overview Cost Effectiveness Analysis Value based health care 1. Cost Effectiveness Analysis 2. Value based health care 3. Value of further research 4. Implications for R&D

What is economic evaluation? Economic evaluation is the comparative analysis of alternative courses of action in terms of their costs and consequences

Why do we need economic evaluation? Scarcity, choice, opportunity cost Economic evaluation aims to ensure the benefits of programmes that are implemented exceed their opportunity costs Help target scarce resources to the greatest effect (World Bank 1993)

What is Cost Effectiveness Analysis? Method Cost Outcome Cost effectiveness Monetary value Natural Units (e.g. life years saved) Cost benefit Cost utility Utility values (e.g.Quality Adjusted Life Years)

Cost effectiveness Ratios CER = Cost/ QALYs Incremental Cost Effectiveness Ratio ICER = (C2 – C1) (E2 – E1)

Overview Cost Effectiveness Analysis Value based health care 1. Cost Effectiveness Analysis 2. Value based health care 3. Value of further research 4. Implications for R&D

Value based health care Health benefit per $1,000 Better value Worse value Worse Than Current Opportunity cost Current treatments covered by health care system Health care expenditures Treatments not covered by the health care system Budget

Value based health care Health benefits per $1,000 New opp cost Opportunity cost Health care expenditures Budget

Value based health care Health benefits per $1,000 Net Health Effect of changing how the health care $ is spent New opp cost Opportunity cost Health care expenditures Budget

Its not money; its somebody else’s health care Take home message Its not money; its somebody else’s health care

Overview Cost Effectiveness Analysis Value based health care 1. Cost Effectiveness Analysis 2. Value based health care 3. Value of further research 4. Implications for R&D

Uncertainty in decision making “Uncertainty as to the quality of the product is perhaps more intense here than in any other important commodity.” Kenneth Arrow (Nobel Laureate). Uncertainty and the welfare economics of medical care. American Economic Review 1963

Uncertainty in Value Based Decision Making 45% chance that trastuzumab displaced more health than it produced

It could have been worse…. @ 75% chance that beta interferon displaced more health than it produced

Uncertainty and Patient Access Schemes

Uncertainty in reimbursement decision making Health care systems are developing more sophisticated decision options: Yes – unlimited reimbursement for the new therapy for a specified patient group; Yes – reimbursement for a specified patient group but ‘Only with Research. Research data on effectiveness/safety…. must be collected to inform a future of the reimbursement decision; Yes – reimbursement for a specified patient group but ‘Only in Research’. Only patients recruited to the research study have the possibility of access to therapy. No – no reimbursement for the new therapy even within a research program. Two and Three can represent a significant loss of revenue for the manufacturers and often a real loss of access for patients on the edge of the licensed indication. These decisions are often accompanied by a de facto reduction in price. Ideally, manufacturers want to avoid further research at the point of market access.

Choosing between decision options – Value of Research   Treatment Health Benefit Optimal Choice Maximum health benefit Health Loss A B State of the world 1 9 12 State of the world 2 10 2 State of the world 3 14 20 State of the world 4 11 1 State of the world 5 13 Expectation 13.8 0.8 If we knew the right choice every time, we would expect to produce and average 0.8 units of health benefit (e.g. years of life) for every patient treated. This is the maximum value of additional research. Monetary value @ $100,000 per QALY = £80,000 per treated patient

Take home message Research has a value to the decision maker; and we can calculate what that is!

Value of investing in further research Research takes time…. Estimating the value of a research study requires consideration of: Costs and outcomes of patients involved in the study up to the time when the research reports; Costs and outcomes of patients not involved in the study up to the time when the research reports; Costs and outcomes of all patients after the research has reported; and The uncertainty in the time to the research reporting.

Value of investing in further research ‘Only in Research’ and ‘Only with Research’ will distribute the patient population between these boxes in different proportions. This drives total costs and outcomes whilst the research is on-going.

An Example – value of investing in further research on Bevacizumab in Triple Negative BC We wish to estimate the value of alternative research strategies (Only in Research vs Only with Research) for a trial of 2000 patients taking  .years to report

Simulation model for trial State A patient sample Start State B patients in Arm 1 (control) State C patients in Arm 2 (intervention) State D lost to follow-up State E patients with event

Cost Effectiveness Simulation model Start Disease Free Local Recurrence Distant Recurrence Disease Free after Local Recurrence The total costs and outcomes for all patients will reflect how many patients are on the new therapy during the research versus how many receive standard care, how long it takes for the research to report, the expected policy when the new evidence from the research is added to the existing body of knowledge to lead to a new decision and the subsequent costs and outcomes of all patients. Dead

Results The expected cost per life year gained from Bevacizumab was calculated as £89,700; The probability of displacing more health than it creates using the NHS threshold value @ 80%. Health loss of only with research vs. only in research 2400 years of life. Here we can see that only in research is considerably more efficient than only with research – unless the estimated ICER is close to the threshold value; patient access schemes are unlikely to be an efficient solution. Trials of new therapies are of unproven value from a health system/population perspective are increasing;…. And this is a rational use of limited resources by decision makers.

Overview Cost Effectiveness Analysis Value based health care 1. Cost Effectiveness Analysis 2. Value based health care 3. Value of further research 4. Implications for R&D

Implications for Research and Development Asking whether a proposed research study would reduce the risk of the wrong decision is a GOOD START. Asking whether the proposed design is the most efficient mechanism for reducing the risk of the wrong decision is a good second step. The real value of decision models is derived from their use at the start, not the end of the research process. These observations are pertinent from the moment an investigator has a ‘technology’ rather than a ‘hypothesis’.

THANK YOU mccabe1@ualberta.ca