1. Balancing efficiency and equity in formal economic evaluation of health care. Erik Nord, Senior Researcher, Norwegian Institute of Public Health, Professor of Health Economics, University of Oslo

2. Efficiency Aggregate output relative to resource use. Health outputs typically measured in QALYs. Concern only for efficiency => maximize QALYs.

3. QALYs illustrated. Utility 1 0.8 B: 2 QALYs 0.6 A C: 6 QALYs 0 0 1 10 Years

4. Equity Vertical: Priority to those with greater needs. Horizontal: Equal treatment for equivalent needs. A B C Norwegian Priorities Commission 1987: –Severity –Realising potentials QALY-maximisation violates these two concerns.

5. Support in theory and preferences. Theories of justice: Brock, Daniels, Parfit and others. Government guidelines and practice: Norway, New Zealand, Netherlands, Sweden, France and others. Population preferences: Nord, Richardson, Ubel, Pinto, Abel Olsen, Dolan, Cookson, 1991-1999. Example, severity: –Utility of A = 0.6, utility of B = 0.8. –Implied trade off in QALY-calculations: Cure 1 A = cure 2 B –Actual person trade-off in societal preferences: 1 A = 3 to10 B

6. Further equity issues. Horizontal: Duration, different potentials. Life extension, different functional levels: Equal value of life. Vertical: Equity in life time health (including ’fair innings’). Problems: The past. QoL in old people.

7. How to balance efficiency and equity in formal economic evaluation? Don’t. Combine CEA with informal judgements of equity. Equal value of life: A gained year should count as 1. Cost-value analysis. –Add equity weights, or transform utilities for life years. –Strong discounting of years gained beyond a certain number. Varying limits to pay for a QALY. –Informal practice for instance in Norway and Sweden. –The UK: Double WTP for life extending in cancer. –The Netherlands: 10.000 – 80.000 euro depending on severity. Germany: Accepts large inter-area variation in cost- effectiveness. Focusses on intra-area efficiency.

8. CVA: Incorporating concerns for equity (based on PTO and other data, cfr. Nord, Richardson, Pinto et al, Health Economics 1999.) Values for valuing change from a societal viewpoint 1.0 Z B’ 0.95 X Y A’ 0.8 X Y Z Utilities from the viewpoint of healthy A:0.4 B:0.7 1.0

9. Weighing QALYs vs grading willingness to pay Assume cost / QALY < 10.000 euro for mild conditions. Assume WTP depends on severity. Value intervention for moderate condition with SW = 2. Weighing QALYs: Cost / (QALY x 2) < 10.000 Grading WTP: Cost / QALY < 10.000 x 2 Equivalent conditions. Same data requirements. Similar for concerns for realising potentials.

10. UK: Exception from the £ 30,000 limit, Life extending, end of life treatments Supplementary advice January 2009 Conditions: –Life expectancy < 24 months –Gain in LE = 3 months + –Robust data –Small patient populations Moral reason –Reflection of the ’severity argument’ (NICE, personal communication).

11. Details on 6 cancer drug decisions ICER Decision Sunitinib (1) 32’ + Lenalidomide 42’ + Sunitinib (2) 54’ + Sorafenib (1) 65’ - Sorafenib (2) 66’ - Temsirolimus 102’ -

12. Germany / IQWiG and the Efficiency Frontier Approach: Not for inter-area comparisons. Health Economics 2010,19, 1117-1127. Value of benefit L: price OK M? D ’Expected’ ICER C F J K: price too high B H New technologies A I E G Cost per person per year

13. Conclusions Too many health economists have thought that health care is like farming. In fact, health care is very different from farming. Several ways to account formally for concerns for equity. Considerable preference data are already available for implementing such formalisation. More data would nevertheless be helpful. Any formal, equitable valuation procedure is a potential aid to decision making in fair, democratic processes.