How Can Cost Effectiven

How Can Cost Effectiven

Analysis Be Made MorAnalysis Be Made Mor

Relevant to U.S. Health C

Paul G. Barnett

, 

February 29, 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 

– Requires manufacturer to submit evidenc

effectiveness to add new drugs to health formulary 

 Germany 

– New institute “Institute for Quality and E

i th H lth C S t in the Health Care Sector” (IQWiG) (IQWiG)

 France 

– Uni i di i f i l 

ique periodic reviews of previously 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 

 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 
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
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