How Can Cost Effectiven

How Can Cost Effectiven

Analysis Be Made MorAnalysis Be Made Mor

Relevant to U.S. Health C

Paul G. Barnett

, 

December 5, 201
T lk O i Talk Overview

 Review of Cost Effectiveness Ana

Review of Cost Effectiveness Ana

(CEA) 

 The role of CEA in the U.S. and o

countries countries 

 The barriers to implementing CEA  Overcoming the barriers to CEA  CEA & comparative effectiveness 
Cost-effectiveness analysis (

 Compare treatments, one of which is s

care 

 Measure all costs (from societal persp Id tif t Identify all ou

tcomes 

– Express outcomes in Quality Adjusted L

 Adopt long-term (life-time) horizon  Discount cost and outcomes to reflect 

Discount cost and outcomes to reflect 

value associated with delay 
Review CEA (cont.) 

 Test for dominance  Th ff ti l tl t 

The more effective, 

less costly 

tre

dominates 

– or if they are equal cost, the more ef– or if they are equally effective the l

or if they are equally effective, the l

costly 

 I th b In the a

bsence of d i fi d th dom

inance, fi

nd the 

Incremental Cost-Effectiveness Ratio 
-

_____________________ 

Incremental Cost Incremental Cost -Effective

Ratio (ICER)

CostEXP - CostCONTROL CONTROL 

QALYQALY EXP -QALYCONTROL

 D i i Decision maker compares ICER to 

“critical threshold” of what is concost-effective ($ per QALY) 
e dec s o s

Where can CEA be appli

 How does research influence heal

– I di id l d i i f h i i 

Individual decisions of physician an

– Sys tem decisions

 Coverage decision Practi ce guid eli nes
Use of cost Use of cost -effectiveness in o

effectiveness in o

countries

 Canada 

– Canadian Agency for Drugs and Technol

Health 

– Established 1989 to evaluate health techn

– Provincial organizations also study costeffectiveness

 U i d Ki United Kingdom 

– National Institute of Clinical Effectivene– Established 1999 to provide advice to Na

Health Service 
Use of CEA in other countries 

 Sweden, Australia, Netherlands 

– Re

quires manufacturer to submit evidenc

effectiveness to add new drugs to health formulary 



Germany 

– Institute for Quality and Efficiency in the 

C S (IQWiG) Care 

Sec

tor (IQWiG) 

 France 

– Uni i di i f i l 

ique per

i

odic rev

iews o

f prev

ious

ly ap

pharmaceuticals 
Use of CEA in other countries 

 Health plans of most developed countr

consider cost consider cost

-effectiveness effectiveness 

 Used for coverage decisions 

– Especially for new drugs and technologie– Cost 

-effectiveness findings not always fo

effectiveness findings not always fo

– Few cases of outright rejection based on 

 Nf l l i f f h 

No 

forma

l eva

luat

ions o

f use o

f tec

hno

assessment, however 
Use of cost-effectiveness in 

 Medicare proposed use of cost 

eff ti it i i 1989 ffectiveness criter

ia 

in 1989 

– Pro

posed re

gulation was withdrawn 

decade of contentious debate

 M di C Ad i M

edicare 

Coverage Ad

v

isory 

Commission 

(MCAC

) has no mech

to consider cost or value in its dec
Use of cost-effectiveness in U

 Patient Protection &Affordable Care A

Patient Protection &Affordable Care A

 Created Patient-Centered Outcomes Researc

Institute (PCORI) 

– assess outcomes

, effectiveness

, and 

appropriateness 

 Prohibited use of dollars per QALY thresho

Prohibited use of dollars per QALY thresho

 For PCORI recommendations  For HHS coverage decisions 
Use of cost-effectiveness in 

 Oregon Medicaid 

– 

Attempte

d to restr

ict expens

ive trea

of low benefit 

– Negative political consequence – M t h b l t t f 

May not 

have 

been a real 

tes

t o

f acc

of CEA 

– Oregon continues to prioritize Medi

services (Saha 2010) services (Saha, 2010) 
Surveys of coverage decision m

 Survey of 228 managed care plans 

(Gar

ber et 2004) t a

l, 2004)

– 90% consider cost 

– 40% consider formal CEA 
Question for discussion: 

What are the potential 

objections t CEA?o us

ing CEA?
’

Research on barriers to use o

 At least 16 different surveys of de

makers’ a ttitudes t lth o health econom

studies

 Identified decisions makers conce
Decision maker concerns abou

 Lack of understanding of CEA  Lack of trust in CEA methods 

– Lack of confidence in QALYs Lack of confidence in QALYs – Lack of confidence in extrapolation 

(modeling)
Decision maker concerns abou

Decision maker concerns abou

(cont.) 

 Not relevant to decision maker’s settin

perspective perspective 

– Decision maker has short-term horizon – Wants payer perspective, not societal per

 Lack of information on budgetary imp

Lack of information on budgetary imp

 Concern about sponsorship bias  See: (Drummond, 2003) 
U w o co cede esou ces 

Other concerns about CE

 American attitudes 

– Di fstrust o

f government and

corporat

– 

U

n

willin

g to co

ncede that resou

rces 

really limited 
What can researchers do 

What can researchers do 

improve acceptance of CE
b ac ?

ISPOR recommendations to imISPOR recommendations to im

acceptance of CEA 

 Describe relevant population and its si B du get i mpact , incl di u ng whi ch b d 

budge

be affected 

 Provide disaggregated cost and outcom Provide cost and outcome by sub Provide cost and outcome by sub-grou Provide key assumption, data sources, 

sensitivity analysis– which parameters biggest impact?
Other ways to improve accep

 Make sure CEA is relevant to decision 

– Support coverage decisions about expens

Support coverage decisions about expens

interventions 

– 

In ot

her countr

ies CEA ana

lyses are com

by decision makers 

– Decision makers are anxious for results 
Other ways to improve accep

Other ways to improve accep

(cont.)

 Provide findings that are timely 

– Easier to prevent adoption than to w

widely

-used technology used technology 

– Conduct preliminary studies 

 These represent pre-positioning of res
S e o ev de ce

U.S. coverage decision

 Coverage based on effectiveness 

– Size o

f effect 

– 

Str

e

n

gth 

of ev

ide

nce 
Implicit use of CEA in U

 Examples of behind the scenes rol

– D i i k i l ff 

Dec

i

s

ion ma

kers requ

ire 

large effec

treatment is expensive 

– Used by U.S. Preventive Services T

force recommendations for screeninforce recommendations for screenin

– American Managed Care Pharmacy 

“formu

lary guid ” eli nes

”

– See 

(Neumann

, 2004 )
CEA and comparative effectiv

 Comparative effectiveness researc

– Alternati ve 

t hi o CEA (

whi

ch is seen a

controversial)

– Study alternative treatments to find 

effective 

– The more effective treatment should 

– Placebo often not the appropriate Placebo often not the appropriate

comparator
-

Limits of comparative effectiv

 What if most effective treatment h

more sid ff hi h i k? ide effects or higher risk? 

 How to estimate long How to estimate long -term benefi

term benefi

short-term effectiveness, e.g., whavalue of successful identification o

disease? disease? 
Use of CEA methods in compa

Use of CEA methods in compa

effectiveness

 Balance benefits with risks 

– Convert to QALYs to find net benef

which treatment is “most effective” 

 Extrapolating beyond short-term 

effectiveness effectiveness 

– Use of Decision Models can estima

term 

benefi ts 

 See: 

(Russell

, 2001

) 
Other criticisms of compara

Other criticisms of compara

effectiveness

“A menu without prices.” 

- G b ar

ber 
Priorities for comparati

Priorities for comparati

effectiveness

 Institute of Medicine (IOM) set pr

for comparati ve eff ecti veness rese

funded b

y economic stimulus bill 

– “Cost-effectiveness analysis is a use

of comparative effectiveness researcof comparative effectiveness researc

 Cost was mentioned ex

plicitl

y in 1

100 priorities 
Exceptions to CEA 

 Even when treatment is not cost

-

effective, p

hys

i

c

ians an

d patien

ts 

priorit

y to certain 

p

g rou

ps:

– Life threatening conditions – Children – Disabled 
Exceptions to CEA 

 VHA can add to this list 

– 

Treatment 

for a serv

ice-connected i 

i

illness 
Public involvement in applica

Public involvement in applica

CEA 

 NICE citizen council  Experiment with individuals recru

f N Y k t t j l from 

New 

Yor

k s

t

a

te 

juror pool 

– Provision of cost-effectiveness infor

influenced coverage decisions 

 S (G ld 2007) See: (G

old, 2007) 
Unique role for VA 

 Global budget  Potential collaboration between de

makers and researchers makers and researchers 

 Identified constituenc

y of health s

users who can be (must be) involv
Examples of research partn

Operations partner Operations partner Potential Topics Potential Topics 

Pharmacy Benefits Management New pharmaceuticals 

Nati l C f l h ional Center for Health Promotion & Disease Prevention 

S icreen ng and 

preven

Office of Public Health Screening and treatme

HIV, Hepatitis C, toba

Office of Specialty Care Services New interventions eff

service service 

Chief Business Office Make or buy choice 
What have we learned
Review: How to choose a top

Review: How to choose a top

CEA

 Involve decision maker at the outs Consider if CEA finding will be re

to policy 

– Is treatment likely to be expensive? Is treatment likely to be expensive? – Is treatment targeted for one of the 

except

iona

l groups?
-

Review: How to prepare a 

 Transparency in reporting  Provide disaggregated cost and outcom Describe sub Describe sub -groups  Budget Impact Analysis may be an ess

adjunct to CEA 

– Describe size of pp o ulation affected– Consider short-term horizon, payer persp


Some further reading

 Drummond, M., et al., Use of Pharmacoeconomics Informati

the ISPOR Task Force on Use of Pharmacoeconomic/Health Information in Health-Care Decision Making. Value Health, 407-416. 

 Garber, A.M., Cost-effectiveness and evidence evaluation as 

coverage policy. Health Aff (Millwood), 2004. Suppl Web EW4-284-96. 

 Gold, M.R., S. Sofaer, and T. Siegelberg, Medicare and cost-

analysis: time to ask the taxpayers. Health Aff (Millwood), 21399 -406. 

 Neumann, P.J., Why don't Americans use cost-effectiveness a

Manag Care, 2004. 10(5): p. 308-12.Russell, L.B., Russell, L.B., The methodologic partnership of effectiveness 

The methodologic partnership of effectiveness 

cost-effectiveness analysis. Am J Prev Med, 2001. 20(3 Supp

 Saha S, Coffman DD, Smits AK. Giving teeth to comparative

research--the Oregon experience. N Engl J Med. 2010;362(7