1. Simon Walker Centre for Health Economics, University of York Appropriate perspectives for health care decisions

2. Acknowledgements Karl Claxton Susan Griffin Stephen Palmer Mark Sculpher

3. Overview Allocation of resources Public sector agency Economic evaluation Purpose of health care Fixed budgets and opportunity costs Health care costs displace other aspects of value too An example: Lucentis for diabetic macular oedema Accountable deliberation Policies with multisector impact Conclusions

4. Allocation of resources Basic economic problem: Resources scarce but wants infinite Economics is the study of the allocation of these scarce resources Market extolled as optimal method for allocation However, most societies allocate a proportion of resources to be allocated by the public sector. Key question- How should social choices about provision of goods in the public sector be made?

5. Public sector agency Within public sector, responsibility for resource allocation typically split between different departments Each department has a distinct budget and remit (set of objectives) However, public policies and interventions often impact beyond the main focus of activity Example 1: a new arthritis treatment which allows a patient to return to work has wider economic benefits Example 2: a school meals programme has health benefits but imposes costs on the education system Key- Impact on outcomes and costs which are beyond the remit of the decision maker involved

6. Economic evaluation “The comparative analysis of alternative courses of action in terms of both their costs and consequences” (Drummond et al) Two core questions: 1. What is of value? Normative- reflects what we consider to be “better” or “worse” 2. What is forgone? Fact- e.g. with a fixed budget if we fund a new more expensive treatment, something else must be displaced

7. What is purpose of health care? When considering value it is important to think about what is the purpose of the good being provided. For health care, is it: Health Welfare based on individual preferences Wider social welfare

8. Moving beyond health care If costs and benefits fall on different sectors, more outcomes than just health to consider However, there is no consensus on how to trade off different arguments How much consumption would we give up for a unit of health? How many units of health would we trade for a unit of education? Could impose a social welfare function (a function which defines what is “better” or “worse” across all possible states) But- possible that some important arguments cannot be specified.

9. Fixed budgets and opportunity costs Many sectors are subject to fixed budget constraints (at least in the short term) These have implications for what we forgo if new demands are made on those budgets (i.e. the opportunity cost). Cost-effectiveness thresholds are estimates of the cost at the margin of an output being displaced (question of fact)

10. Two sector example: Health and Wider social benefits Consider a new health care intervention Intervention will have: Impact on health of patients Impact on wider social benefits Costs to the health care budget 2 questions Question of value: What is our willingness to trade off health for wider social benefit Question of fact: What will be displaced if we fund the new treatment

11. The UK NHS- Health care costs displace other aspects of value too How much and what type of health and for whom? Life years and quality of life effects By age, gender and ICD code Wider social benefits Net production effects of a change in health Marketed and non market production Net of marketed and non marketed consumption

12. Health care costs displace health Cost per death averted Cost per life year Cost per QALY (mortality effects) Cost per QALY Qol associated with LYs-1NormsBased on burden Qol during disease-00Based on burden YLL per death averted-4.5 YLL QALYs per death averted-4.5 YLL3.8 QALY12.7 QALY 11 PBCs (with mortality)£105,872£23,360£28,045£8,308 All 23 PBCs£114,272£25,214£30,270£12,936 From Claxton et al

13. What are the expected health consequences of £10m? Change in spendAdditional deathsLY lostTotal QALY lostDue to premature deathQuality of life effects Totals 10 (£m)51233773150623 Cancer 0.453.7437.526.324.41.9 Circulatory 0.7622.78116.0107.873.734.1 Respiratory 0.4613.3716.1229.410.1219.3 Gastro-intestinal 0.322.6224.743.916.227.7 Infectious diseases 0.330.725.315.73.612.1 Endocrine 0.190.675.060.63.257.3 Neurological 0.601.216.5109.14.3104.8 Genito-urinary 0.462.253.310.62.18.5 Trauma & injuries* 0.770.000.0 Maternity & neonates* 0.680.010.40.2 0.1 Disorders of Blood 0.210.361.721.81.120.7 Mental Health 1.792.8312.895.38.387.0 Learning Disability 0.100.040.20.70.10.6 Problems of Vision 0.190.050.24.20.24.1 Problems of Hearing 0.090.030.114.00.113.9 Dental problems 0.290.000.06.80.06.8 Skin 0.200.241.11.90.71.2 Musculo skeletal 0.360.391.823.21.222.1 Poisoning and AE 0.090.040.20.80.10.7 Healthy Individuals 0.350.030.20.70.10.6 Social Care Needs 0.300.000.0 Other (GMS) 1.010.000.0

14. Wider Social Benefits (net production) M05Rheumatoid arthritis£30,034 E11Diabetes£27,421 M45Ankylosing spondylitis£26,190 F30Depression£23,489 F20Schizophrenia£22,697 J45Asthma£20,100 M81Osteoporosis£17,910 G35Multiple sclerosis£15,482 J43Emphysema and COPD£14,525 G40Epilepsy£14,245 L40Psoriasis£11,890 DisplacedAverage of displaced QALYs£11,611 E66Obesity£8,138 C53Cervical cancer£6,912 K50Irritable Bowel Syndrome£6,284 J30Allergic rhinitis£5,234 G20Parkinson's disease£3,102 C50Breast cancer£2,888 G30Alzheimer's disease£351 A40Streptococcal septicaemia-£513 F03Dementia-£2,430 I64Stroke-£6,949 C18Colon cancer-£8,061 C61Prostate cancer-£10,602 C64Kidney cancer-£13,211 I21Acute myocardial infarction-£14,395 I26Embolisms, fibrillation, thrombosis-£16,752 J10Influenza-£21,568 C90Myeloma-£23,382 C92Myeloid leukaemia-£24,813 C22Liver cancer-£32,709 C34Lung cancer-£36,067 C25Pancreatic cancer-£53,860 Other aspects of value gained and displaced

15. An example Appraisal of ranibizumab (Lucentis) for diabetic macular oedema 2011 Retinal thickness ≥ 400 subgroup before PAS Additional costs = £3,506 per patient Incremental cost-effectiveness = £25,000 per QALY 23,000 eligible patients each year AttributesInvestmentDisinvestmentNet effects Lucentis for diabetic macular oedema (£80m pa) Expected effects of £80m pa Deaths0-411 Life years0- 1,864 QALYs3,225- 6,184-2,959 Burden of disease QALY loss2.682.070.61 Wider social benefits Consumption QALY equivalent (£60,000 per QALY) £85.2m 1,420 - £49.8m - 830 £35.4m 590

16. How should we decide? Restrict to health and health care Net health benefits = 3,225 – 6,184 = - 2,959 QALYs A single societal perspective Ignore the constraint Net costs = £80m - £85.2m = - £5.2m Account for the constraint (but not displaced WSB) Net health loss = -2,959 QALYs Wider social benefits = £85.2m Worthwhile if consumption value of health < £28,800 per QALY Account for displaced wider social benefits Net health loss = -2,959 QALYs Net wider social benefits = £85.2m – £49.8m = £35.4m Worthwhile if consumption value of health < £11,900 per QALY

17. Accountable deliberation Multi sectoral perspective Identify where cost fall and benefits accrue Any particular SWF will be disputed e.g., use of market prices Other arguments difficult to specify Reflect the implications of current constraints Where opportunity costs will actually fall Social values implied by current arrangements Account for other aspects of value displaced Approve technologies that reduce health and wider social benefits Health care perspective Excludes some aspects of value But also excludes the opportunity cost too Could be zero sum or worse

18. Policies with multi sector impact What if another government sector is also impacted Need to account for opportunity costs on their budget as well For example, free school meals Impact of policyWhat is displaced? Better educational performance? Better health? Wider social benefits?

19. Conclusions What we gain and lose as a result of the introduction of a good are questions of fact: Direct benefits of the good Benefits of other things which are displaced How we then go about valuing those benefits to see whether the introduction of the good is beneficial is much more challenging and controversial.