Rita Faria’s journal round-up for 18th June 2018

Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot. If you’d like to write one of our weekly journal round-ups, get in touch.

Objectives, budgets, thresholds, and opportunity costs—a health economics approach: an ISPOR Special Task Force report. Value in Health [PubMedPublished 21st February 2018

The economic evaluation world has been discussing cost-effectiveness thresholds for a while. This paper has been out for a few months, but it slipped under my radar. It explains the relationship between the cost-effectiveness threshold, the budget, opportunity costs and willingness to pay for health. My take-home messages are that we should use cost-effectiveness analysis to inform decisions both for publicly funded and privately funded health care systems. Each system has a budget and a way of raising funds for that budget. The cost-effectiveness threshold should be specific for each health care system, in order to reflect its specific opportunity cost. The budget can change for many reasons. The cost-effectiveness threshold should be adjusted to reflect these changes and hence reflect the opportunity cost. For example, taxpayers can increase their willingness to pay for health through increased taxes for the health care system. We are starting to see this in the UK with the calls to raise taxes to increase the NHS budget. It is worth noting that the NICE threshold may not warrant adjustment upwards since research suggests that it does not reflect the opportunity cost. This is a welcome paper on the topic and a must read, particularly if you’re arguing for the use of cost-effectiveness analysis in settings that traditionally were reluctant to embrace it, such as the US.

Basic versus supplementary health insurance: access to care and the role of cost effectiveness. Journal of Health Economics [RePEc] Published 31st May 2018

Using cost-effectiveness analysis to inform coverage decisions not only for the public but also for the privately funded health care is also a feature of this study by Jan Boone. I’ll admit that the equations are well beyond my level of microeconomics, but the text is good at explaining the insights and the intuition. Boone grapples with the question about how the public and private health care systems should choose which technologies to cover. Boone concludes that, when choosing which technologies to cover, the most cost-effective technologies should be prioritised for funding. That the theory matches the practice is reassuring to an economic evaluator like myself! One of the findings is that cost-effective technologies which are very cheap should not be covered. The rationale being that everyone can afford them. The issue for me is that people may decide not to purchase a highly cost-effective technology which is very cheap. As we know from behaviour economics, people are not rational all the time! Boone also concludes that the inclusion of technologies in the universal basic package should consider the prevalence of the conditions in those people at high risk and with low income. The way that I interpreted this is that it is more cost-effective to include technologies for high-risk low-income people in the universal basic package who would not be able to afford these technologies otherwise, than technologies for high-income people who can afford supplementary insurance. I can’t cover here all the findings and the nuances of the theoretical model. Suffice to say that it is an interesting read, even if you avoid the equations like myself.

Surveying the cost effectiveness of the 20 procedures with the largest public health services waiting lists in Ireland: implications for Ireland’s cost-effectiveness threshold. Value in Health Published 11th June 2018

As we are on the topic of cost-effectiveness thresholds, this is a study on the threshold in Ireland. This study sets out to find out if the current cost-effectiveness threshold is too high given the ICERs of the 20 procedures with the largest waiting lists. The idea is that, if the current cost-effectiveness threshold is correct, the procedures with large and long waiting lists would have an ICER of above the cost-effectiveness threshold. If the procedures have a low ICER, the cost-effectiveness threshold may be set too high. I thought that Figure 1 is excellent in conveying the discordance between ICERs and waiting lists. For example, the ICER for extracapsular extraction of crystalline lens is €10,139/QALY and the waiting list has 10,056 people; the ICER for surgical tooth removal is €195,155/QALY and the waiting list is smaller at 833. This study suggests that, similar to many other countries, there are inefficiencies in the way that the Irish health care system prioritises technologies for funding. The limitation of the study is in the ICERs. Ideally, the relevant ICER compares the procedure with the standard care in Ireland whilst on the waiting list (“no procedure” option). But it is nigh impossible to find ICERs that meet this condition for all procedures. The alternative is to assume that the difference in costs and QALYs is generalisable from the source study to Ireland. It was great to see another study on empirical cost-effectiveness thresholds. Looking forward to knowing what the cost-effectiveness threshold should be to accurately reflect opportunity costs.

Credits

Sofosbuvir: a fork in the road for NICE?

NICE recently completed their appraisal of the hepatitis C drug sofosbuvir. However, as has been reported in the media, NHS England will not be complying with the guidance within the normal time period.

The cost of a 24 week course of sofosbuvir is almost £70,000. Around 160,000 people are chronically infected with the hepatitis C virus in England, so that adds up to a fair chunk of the NHS budget. Yet the drug does appear to be cost-effective. ICERs differ for different patient groups, but for most scenarios the ICER is below £30,000 per QALY. In the NICE documentation, a number of reasons are listed for NHS England’s decision. But what they ultimately boil down to – it seems – is affordability.

The problem is that NICE doesn’t account for affordability in its guidance. One need only consider that the threshold has remained unchanged for over a decade to see that this is true. How to solve this problem really depends on what we believe the job of NICE should be. Should it be NICE’s job to consider what should and shouldn’t be purchased within the existing health budget? Or, rather, should it be NICE’s job simply to figure out what is ‘worth it’ to society, regardless of affordability? This isn’t the first time that an NHS organisation has appealed against a NICE decision in some way. Surely, it won’t be the last. These instances represent a failure in the system, not least on grounds of accountability for reasonableness. Here I’d like to suggest that NICE has 3 options for dealing with this problem; one easy, one hard and one harder.

The easy option

The simplest option involves the fewest changes to the NICE process. Indeed, it would involve doing pretty much what it does now, only with slightly different (and more transparent) reasoning. In this scenario NICE would explicitly ignore the problem of affordability. Its remit would cease to be the consideration of optimality on a national level and it would ignore the budget constraint. NICE’s remit would become figuring out which health technologies are ‘worth it’; i.e. would the public be willing to purchase a given technology with a given health benefit at a given cost. To some extent, therefore, NICE would become a threshold-setter. The threshold should be based on some definition of a social value of a QALY. This is the easy option for NICE as setting the threshold would be the only additional task to what they currently do. Its threshold might not change all that much, or may be a little higher.

However, even if NICE denies responsibility, clearly someone does need to take account of affordability. Given the events associated with sofosbuvir it seems that this could become the work of NHS England. NHS England could use a threshold based on the budget and current QALY-productivity in the NHS. One might expect NHS England to be in a better position to identify the local evidence necessary to determine appropriate thresholds, which would likely be much lower than NICE’s. It would also be responsible for disinvestment decisions. Given the nationwide remit of NHS England, this would still prevent postcode lotteries. The implication here, of course, is that NICE and NHS England might use different thresholds. Any number of decision rules could be used to determine the result for technologies falling between the two. Maybe this is where considerations for innovation or non-health-related equity concerns belong. It seems probable to me that NICE’s threshold would be higher than NHS England’s, in which case NICE would effectively be advising increases in the health budget. This is something that I quite like the sound of.

The hard option

Personally, I believe that NICE’s failure to justify their threshold(s) is quite a serious failing and undermines the enterprise. The hard option will involve them defining it properly, informed by current levels of QALY-productivity in the NHS. Thus properly adopting a position as a threshold-searcher, and doing the job prescribed to NHS England in the ‘easy option’. NICE guidance would therefore be informed by the current health budget and affordability, and therefore must include guidance on disinvestment. The first stage of this work has already been done. The disinvestment guidance would be the hard part. This argument has already been much discussed, and seems to be what many economists support.

I don’t find this argument entirely compelling, at least not as a solution to the affordability problem. To solve this issue NICE would need to regularly review the current threshold and revise it in light of current productivity and the prevailing health budget. It has no experience of doing this. I believe the task could be more effectively carried out by commissioning organisations (such as NHS England), who are in a better position to oversee the collection of the appropriate data and would have a public responsibility to do so. It might also be politically useful if decisions about affordability were made independently of decisions about value.

The harder option

The harder option is for there to be a paradigm shift in the way NICE – and health economics more generally – operates. It could involve programme budgeting and marginal analysis, or the Birch and Gafni approach. This might just be the best option, but it seems unlikely to happen nationally any time soon.

It’s possible that more cost-effective but unaffordable drugs are in the pipeline. Failure to address the affordability problem soon could seriously undermine NICE.

DOI: 10.6084/m9.figshare.1291123