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Principles and Methods of Health EconomicsTheir role in the Evaluation of Medical Practice

Jean-Jacques Zambrowski MD, PhD

Istanbul – May 2007 © Jean-Jacques Zambrowski 1

JeanJean--Jacques Zambrowski Jacques Zambrowski MD, PhDMD, PhD

Health Law & EconomicsHealth Law & EconomicsRenRenéé Descartes University Descartes University -- ParisParis

Department of Internal MedicineDepartment of Internal MedicineBichat University Hospital Bichat University Hospital -- ParisParis

04 May 200704 May 2007

Principles and Methods of Health EconomicsTheir role in the Evaluation of Medical PracticePrinciples and Methods of Health Economics

Their role in the Evaluation of Medical Practice

Istanbul Istanbul PharmacoEconomyPharmacoEconomy MeetingMeeting

MARMARA MARMARA ÜÜNIVERSITESI REKTNIVERSITESI REKTÖÖRLRLÜÜĞĞÜÜAkilci Akilci ÍÍlalaçç Kullanimi ve Farmakoekonomi SempozyumuKullanimi ve Farmakoekonomi Sempozyumu

© JJ Zambrowski - May 2007 2Istanbul Istanbul PharmacoEconomyPharmacoEconomy MeetingMeeting

and thank you for your effortunderstanding my English !

Beni bağışlama

konuşmamak Türk !


Health has no price…

But it has a cost !Health Care and Health Cost

The Changing Paradigm Health Care and Health Cost

The Changing Paradigm



Health costs rise exceeds GDP growth

In emerging as well as in developed countries, healthcare expenditures are growing faster than the economy.Several reasons

continuous progress in healthcareboth for diagnostic and therapeutic tools and strategies,

aging of the population.All Health Insurance systems, private or public, have to face shortage in resources.This create the need for a better efficiency.


Health costs rise exceeds GDP growth

In emerging as well as in developed countries, healthcare expenditures are growing faster than the economy.Several reasons

continuous progress in healthcareboth for diagnostic and therapeutic tools and strategies,

aging of the population.All Health Insurance systems, private or public, have to face shortage in resources.This create the need for a better efficiency.

It is estimated that

increase in Health expenditures (%) = increase in GDP (%) + 1,5 points

It is estimated that

increase in Health expenditures (%) = increase in GDP (%) + 1,5 points

100

105

110

115

Year 1 Year 2 Year 3 Year 4 Year 5

GDPHRE





Today's challenge : find the good level of spending

(Values : 2000)


Turkey : x 12 in the last 30 years !Turkey Health Expenditures per capita

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US$

OECD - 2006


Turkey : x 12 in the last 30 years !Turkey Health Expenditures per capita

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US$

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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

% of GDP

OECD - 2006


Health related expenses / PIB : Turkey gets closer to OECD mean value


Pharmaceutical consumptionThe Turkish drug market is witnessing rapid growth

Country's recovery from the 2002 economic crisis picks up pace.

Pharmaceutical sales should reach US$11.1bn in 2010. Recent reforms of the country's social security system are set to have a dramatic impact on drug expenditure. This

will involve the introduction of a basic universal health insurance system, meant to cover 90% of the population. is expected to combine with other key reforms, such as the availability of more cost-effective pharmaceuticals (generics…).

0

1000

2000

3000

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6000

1992 1995 1998 2001 2004 2006

Millions US$


Pharmaceutical consumption

Turkey is in 3rd place for the Middle East & Africa The country's long term political and economic outlook is improving, as the government

toes the International Monetary Fund (IMF) line on economic policy and also looks towards EU accession.

However, the rigorous structural reform initiated by Turkish authorities following the 2001 economic crisis and the IMF advice, along with the reform of the healthcare system in line with the World Bank recommendations

may meanmay mean government health spending as a percentage of GDP is to be reduced.

!





Health Expenditures : big discrepancies

Total Health Expenditures - US$ - 2003WHO - Health Systems Financing - May 2006

France2500 €/p/y

Turkey500 €/p/y

Mali25 €/p/y

France2500 €/p/y

Turkey500 €/p/y

Mali25 €/p/y


Spend More does not mean Do Better !

400

500

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1100

0 1000 2000 3000 4000

GR

A

P GB

E

SI

DUSA

CH

FJ

CANNL

Health Expenditures ( $ PPA)

Mortality (100 000)

Adapted from E. Barral - 1999


Health Economics

Applying economic principles and theories

to health and to the health care sector

source : Prof. Lieven Annemans - Health economist - Ghent University (Belgium)


What are Economics ?

EconomyEconomy comes from two Greek wordsΟικοσ : the house, the place where one is livingΝοµια : the rule, the management

EconomyEconomy means""the management of the place the management of the place wherewhere wewe livelive““i.e. the way one makes the best possible use ofthe way one makes the best possible use ofthe available resourcesthe available resources

Human resourcesTechnical resourcesFinancial resources,…


Spend better, not spend less !

Economics is notnot primarily about saving money

It is about using scarce resources as efficientlyefficiently as possible


Health: costs are skyrocketing…

In all of the developed countries, health -related spending is growing faster than the overall economy.Governments and Health Insurance systems – private and public alike – are trying in vain to control this growing expenditure.The role of medico and pharmaco-economics is to enable healthcare organizations to offer

Better Care at Better CostBetter Care at Better Cost





Health: costs are skyrocketing…

In all of the developed countries, health -related spending is growing faster than the overall economy.Governments and Health Insurance systems – private and public alike – are trying in vain to control this growing expenditure.The role of medico and pharmaco-economics is to enable healthcare organisations to offer

Better Care at Better CostBetter Care at Better Cost

Medico and Pharmaco-Economics :

Not always spend lessbut always spend better !

Medico and Pharmaco-Economics :

Not always spend lessNot always spend lessbut always spend better !but always spend better !

thinking in terms of overall costsbeing constantly concerned with economic efficiencymaking no concessions regarding

the quality of care (medical outcome)the quality of life (individual and social outcome)

thinking in terms of overall costsbeing constantly concerned with economic efficiencymaking no concessions regarding

the quality of care (medical outcome)the quality of life (individual and social outcome)


Healthcare Costs…


Health Care as a Percent of GDP

0

5

10

15

1960 1965 1970 1975 1980 1985 1990 1995 2000Adapted from New England Healthcare Institute, 2004

Cost Increases Will Persist

2005 2010

Drugs

AgingMed Tech


Realistic approach to life’s problemsReliance on quantitative informationOften must make difficult choices in the face of uncertaintyGood decisions require comparing benefits and risks (costs)

Important Similarities Between Physicians and Economists


Big Difference Between Physicians and Economists

Physicians are usually concerned with an individual patient or small numbers of patientsEconomists are usually concerned with large aggregations:

organizations, industries, governments, society as a whole


PatientPatient--Clinical CureClinical Cure--Quality of lifeQuality of life--OutOut--ofof--pocket Costpocket Cost--Satisfaction with Satisfaction with treatment processtreatment process

Hospital / PhysicianHospital / Physician--Clinical CureClinical Cure--Profit from treatmentProfit from treatment--Ethical issuesEthical issues

3rd3rd--Party PayerParty Payer--Clinical CureClinical Cure--CostCost--Customer Customer perception of valueperception of value

Employer / SocietyEmployer / Society--Clinical CureClinical Cure--CostCost--ProductivityProductivity

Which perspective ?





ClinicalClinical

• Efficacy• Safety• Impact of therapy

on “natural history”of the disease

EconomicEconomic

• Cost Analysis • Cost-of-Illness• Cost-Minimization• Cost-Benefit• Cost-Effectiveness • Cost-Utility

HumanisticHumanistic

• Health Related Quality of Life

• Patient Satisfaction• Caregiver Impact• Patient Preferences• Functional Status

Health Services ResearchHealth Services Research•Policy Research •Access •Structure of Care

The assessment of technology The assessment of technology (drugs, devices, etc)(drugs, devices, etc)

Outcomes Research


DirectDirect

• Doctors, nurses,other personnel involved by case

•Lab, X-Ray, …• Medication• Op. rooms used

IndirectIndirect

• Transport• Time off work• Time of relatives

having to stay withthe patient

• Hospital fixed costs

IntangibleIntangible

• Value of pain anddisabilities

• Pretium doloris• Well-being losses• Morale

Hospital fixed costsHospital fixed costs• Administration • Education • Research

The various types of costs in HealthcareThe various types of costs in Healthcare

Costs : everything counts for !

• Permanence


Preliminary ConclusionsPreliminary Conclusions

Resources are limited while demand keep Resources are limited while demand keep increasing.increasing.The environment is changing in depth :The environment is changing in depth :

aging populationaging populationexponential scientific progressexponential scientific progresslegal and regulatory constraints increaselegal and regulatory constraints increase

safetysafetycostcost--containmentcontainment

This creates the need for pharmacoeconomicsThis creates the need for pharmacoeconomicsThe goal is to increase efficiencyThe goal is to increase efficiency

costcost--effectiveness effectiveness the best possible efficacy at the best possible the best possible efficacy at the best possible global global cost. cost.

Health Economics As Part Of The Relation Between Physicians and Payers

Health Economics As Part Of The Relation Between Physicians and Payers



Health Economic EvaluationsAre Just One Part of Health Economics

HealthHealthEconomicsEconomics

HealthEconomicEvaluation

other topics in health economics:optimal size of hospitals, optimal payment for physicians, optimal level of co-payment by patients,….


Definition of Health Economic Evaluation

The comparativecomparative analysis of alternative courses of action in terms of BOTHBOTH

their costsand health consequences

Pharmaco-economic evaluation=

if at least one drug is involved

Pharmaco-economic evaluation=

if at least one drug is involved





Why Health Economic Evaluation?

Budgets are limited, needs are “unlimited”Safety and efficacy do not suffice anymoreIn a world with scarce resources efficiencyefficiency= costcost--effectivenesseffectiveness becomes important

Goal = to allocate the limited budgets to those interventions that offer the most health gain per unit of money


What are Policy-makers trying to do ?

Protect and improve the health of the populationAssure access to medical careAchieve efficient use of health care resourcesControl the rate of growth of expenditures for medical care

But also : Avoid bad headlines in the Press…


The Different Steps of Evidence

Can it work ? EfficacyEfficacy

Does it work in reality ?EffectivenessEffectiveness

Is it worth doing it, compared to other things we could do with the same money ?

CostCost--effectivenesseffectiveness = EfficiencyEfficiency


Evaluating a new mode of care

More effective or Less Side-effects or More ConvenientIFIF

Less Physicians Consultations?Less or Shorter Hospitalisation?Less or Cheaper Interventions?

Less Other Drugs?Less Tests and Imaging?

THENTHEN

and only if…and and onlyonly ifif……


Sometimes little progress has a useless cost

BA

Average AcquisitionAcquisitioncost

New Drug B is more more expensiveexpensive but not a great progressAverage otherother treatment costs• physicians• hospital• surgery• other drugs• tests• ....

+BA


If not a real progress, why a useless cost ?

Average otherother treatment costs• physicians• hospital• surgery• other drugs• tests• ....

+ =BA


TOTAL COSTCOST

∆ = net cost∆ = net cost

New Drug B is more expensive; is it a REAL progress ?more expensive; is it a REAL progress ?

BA BA





TOTAL COSTCOST

∆ = net saving∆ = net saving

Sometimes real progress “more expensive”saves money

Average otherother treatment costs• physicians• hospital• surgery• other drugs• tests• ....

+ =BA


This happens if B is more more effectiveeffective and/or more convenientmore convenient

BA BA© JJ Zambrowski - May 2007 38Istanbul Istanbul PharmacoEconomyPharmacoEconomy MeetingMeeting

Only Global Costs make sense

The cost of a given treatment is not only the cost for the drug.One should also consider the cost for

the preparation (pharmacist and technician)the administration (nurse)the monitoring (laboratory tests)

but alsothe side effects (follow-up and delay in cure)…and the failure of the treatment


success

70 %

failure

30 %

drug A = 1000

success

90 %

failure

10 %

drug B = 2000

treat disease X

The cost of failure

40004000

30003000

10 0002 0001 000Primary cost

failurefailureBA

Real cost = 1 000 + (0.3 x 10 000 ) 2 000 + (0.1 x 10 000) cost for drug + cost of failure = 4 000 = 3 000

Evaluation of the efficiency of the treatments of Anaemia in Onco-Hematology

Evaluation of the efficiency of the treatments of Anaemia in Onco-Hematology

Example

28©Istanbul Istanbul OncologyOncology MeetingMeeting


The economic burden of anaemia in patients with cancer is significant

Patients with anaemia have significantly higher total healthcare expenditures than non-anaemic patients

Mean 6-month total healthcare expenditures (unadjusted):

For any given healthcare status, treating a patient who is anaemic is associated with considerably higher expenditures than non-anaemic patients

Lyman et al. Value in Health 2005;8(2):149–55

70% greater cost


The economic burden of anaemia in patients with cancer is significant

Patients with anaemia have significantly higher total healthcare expenditures than non-anaemic patients

Mean 6-month total healthcare expenditures (unadjusted):

For any given healthcare status, treating a patient who is anaemic is associated with considerably higher expenditures than non-anaemic patients


Anaemia

$ 62,499

No anaemia

$ 36,871

70% greater cost

The cost for Non TreatingThe cost for Non Treatingor Non Treating adequatelyor Non Treating adequatelycan be dramatically highercan be dramatically higherthan the cost of treatment !than the cost of treatment !





Anaemia has an immense cost

To healthcare systemsCost of management

And also to the patientImpaired QoL


What does blood cost per unit?

Blood transfusion costs: a multicenter study.Forbes JM, et al. Transfusion. 1991 May; 31(4):318–23

Global mean costs per unit transfused in oncology patients: 469 $ (360 €) Mean costs for 2 units transfused per session = 938 $ (720 €)

Cost of Outpatient Blood Transfusion in CancerPatients. J Clin Oncol 18;(14)2000:2755–61

Cost of blood37%

Blood bank13% Laboratory tests

43%

Administration7%


Blood is getting more expensive to transfuse safely

Donor supply is declining — each unit takes more effort to collectScreening tests needed — each new test costs more and rejects more donors

Patient screening:■ Reduces risk of exposure to infection (e.g.

variant CJD*)Blood screening:■ Blood groups — minor compatibility antigens■ Diseases — new variants of hepatitis and HIV

Screening for variant CJD* becoming necessary*Creutzfeldt–Jakob disease


The overall cost of treatment with rHuEPO is less than for transfusion

Costs of the moral consequences linked to iatrogenic complicationsCost of disturbance, loss of time

Costs of the moral consequences linked to iatrogenic complications

Intangible

Possible costs of carers and other professionalsPost of loss of productivity (patient and accompanying parties)Cost of donor’s time

Possible costs of carers and other professionals

Indirect

Preparation, treatment, tests, administration, premedication, iron supplementation, adverse events and possible complications, patient transport

Acquisition, administration,tests, iron supplementation, transfusion (if response is insufficient)

DirectTransfusionTransfusionEPOEPOCOSTSCOSTS


The cost of treatment with rHuEPO is less than that for transfusion

Coiffier et al.1 showed that for a comparable increase in QoL (FACT-F points gained)

treatment with rHuEPO cost 5–7 times less than transfusion

1. Coiffier et al. Blood 2000;96(11): Abstract 5440

0

0,2

0,4

0,6

0,8

1

Epoetin beta Transfusion

Relative cost for a similar gain in QoL

"€0.15–0.19 spent onepoetin beta are neededto reach the same improvements in qualityof life as €1 spent onstandard therapy."


A weekly rHuEPO regimen is cost-effective vs blood transfusion

Cost-effectiveness of EPO (Markov analysis)Two patient cohorts treated for lung cancerSecond cohort received EPO weekly if Hb <11 g/dlSignificant reduction in transfusions required (33.6% to 19.1%)

Decreased number of units transfused (2.97 to 2.11)

Cost-effectiveness ratio favourable for EPO : 7.02 vs 9.04This sensitive analysis confirms the advantage of EPO in the majority of situations.

EPO is more costEPO is more cost--effective than transfusion foreffective than transfusion forlung cancerlung cancer

Borget et al. Lung Cancer 2006;51(3):369–76





EPO therapy accounts for <2% of total expenditures in cancer patients with anaemia

Proportion of total cost for treating with rHuEPO

Based on a dosage of 30 000 IU/week and an average treatment length of 12 weeks per year, EPO therapy costs approximately €2500–3000/patient/year


How to Evaluate Costsand Benefits in Healthcare

issues ?


COST AND EFFECTS: the key graph

Tota

l cos

t (va

lue

per p

atie

nt)

Effect (LY, QALY, SFD, QoL …)

A

0

∆ effect

∆C

ost

LY = Life Years, QALY = Quality Adjusted LY, SFD = symptom free days, QoL = quality of life

ValueValue 2N2N / LY/ LYValueValue 5N / 5N / LYLY

Value N / LYValue N / LYB


Effectiveness /Outcomes

IV

Treatment Cost

C

: New Drug

C : Control

: New Drug

C : ControlII

I III

Adopt

RejectEvaluate

Evaluate

Value : Ratio Acceptability

LOW

LOW

HIGH

HIGH


The cost-effectiveness plane

adapted from Alastair Gray - Oxford Healtrh Economics Research Center


Cost myopia





How to Express Effectiveness ?

clinical parameters (efficacy)symptom free daysN of cured patientsevent free survivalavoided eventscured patients saved livessaved life yearsimproved QoLdays in good QoLquality adjusted life years


clinical parameters (efficacy)symptom free daysN of cured patientsevent free survivalavoided eventscured patients saved livessaved life yearsimproved QoLdays in good QoLquality adjusted life years

How to Express Effectiveness ?

QUANTITYOF LIFE

QUALITYOF LIFE


QALY = Quality Adjusted Life Years

No Drug

Drug B

death

INDEX (“utility level”)

TIME

1

0Drug A

Adding Life to Years….Adding Life to Years….© JJ Zambrowski - May 2007 58Istanbul Istanbul PharmacoEconomyPharmacoEconomy MeetingMeeting

QALY = Quality Adjusted Life Years1

adapted from Alastair Gray - Oxford Healtrh Economics Research Center


How to Interpret Results of cost-effectiveness studies?

WhatWhat is is costcost--effectiveeffective??


The Decision Maker’s View on PE Evaluation

1.1. SScepticismcepticism: : “Economic evaluation is a tool for obtaining higher prices, increased sales and hiding lack of effectiveness data. Anything can be proven with it.”

2.2. Keep on working in Keep on working in isolated budgetsisolated budgets ::““hospitalhospital savingssavings are are notnot interestinginteresting forfor meme””

3.3. DDilemmailemma of evaluating a drug when not yet all of evaluating a drug when not yet all knowledge is availableknowledge is available

4.4. IfIf allall the the aboveabove is is solvedsolved: : whatwhat is is costcost--effectiveeffectiveand and whatwhat is is notnot ??





Apply thresholds

NL: 20,000 €/LYUK: 25,000 £/QALYCanada: 25,000-75,000 Can$/QALYUS: 50,000 $/QALY….

Other way: compare with other interventions in same area

The hard reality

Health care budgets are limited


How to Spend the same amount of money ?

A* to G*: Different treatments in different disease areaAll compared to “next best alternative” in their own area (A to G).

23,8106,30021.00100%150 M300500,000G*

20,00010,0000.1050%200 M200,0001,000F*

16,66712,0000.60100%200 M20,00010,000E*

15,62516,0003.201%250 M500,000500D*

20,46817,10019.0090%350 M1,000350,000C*

22,22218,0009.002%400 M100,0004,000B*

28,57121,0001.4025%600 M60,00010,000A*

C/EQALYQALY/patpat. imprimpactpatcost


1 extra Billion, 7 different treatments and diseases1 extra Billion, 7 different treatments and diseases


Where to Draw the Line ? Choice 1Choice 1Rank from most costRank from most cost--effective to least costeffective to least cost--effectiveeffective

23,8106,30021.00100%150 M300500,000G*

20,46817,10019.0090%350 M1,000350,000C*

22,22218,0009.002%400 M100,0004,000B*

28,57121,0001.4025%600 M60,00010,000A*

20,00010,0000.1050%200 M200,0001,000F*

16,66712,0000.60100%200 M20,00010,000E*

15,62516,0003.201%250 M500,000500D*



D+E+F+C=

1 Billion

D+E+F+CD+E+F+C==

1 Billion1 Billion


Where to Draw the Line ? Choice 2Choice 2Rank from most costRank from most cost--effective to least costeffective to least cost--effectiveeffective

But : number of patients ! budget impact !

23,8106,30021.00100%150 M300500,000G*

20,46817,10019.0090%350 M1,000350,000C*

22,22218,0009.002%400 M100,0004,000B*

28,57121,0001.4025%600 M60,00010,000A*

20,00010,0000.1050%200 M200,0001,000F*

16,66715,0000.60100%250 M25,00010,000E*

15,62548,0003.201%750 M1,500,000500D*



Solutions: societal willingness to pay = constant ? Budget increase ? price reduction ?; Better selection of patients ?…

Solutions: societal willingness to pay = constant ? Budget increase ? price reduction ?; Better selection of patients ?…

D+E=

1 Billion

D+ED+E==

1 Billion1 Billion


Discussion

There is more than just cost-effectivenessHealth economic evaluations do not replace decision making, they are just an extra element.Not only drugs, but also medical management can be assessed this way.In countries with a state-controlled health insurance, decisions will often still remain driven by political choices, even if they are based on technical issues .




How to Conduct Economic Evaluation Studies?


Economic Evaluation Design

Models (decision trees, Markov models)Prospective: alongside clinical trial

Phase IIIa = “Superposed*”: artificial environmentPhase IIIb, IV: “Observational”: real environment

Retrospective: real costsRetrolective: physician estimatesCombining different sources

E.g. a model, based on input from clinical trials, retrospective data, expert opinion.

* : "Piggy-back" evaluations


Prospective research for economic evaluation: different aspects

Environment, protocol requirementsEnvironment, protocol requirementsResultsResultsComparatorComparatorTime horizonTime horizonPatientsPatientsDropDrop--outsoutsStatistical analysisStatistical analysisValidityValidity


Major differences clinical vs economic trial

ControlledControlledRegistrationRegistrationStrict protocol ordersStrict protocol ordersProtocol induced Protocol induced resource useresource useCompared to placebo or Compared to placebo or to to ““golden standardgolden standard””Avoid coAvoid co--morbiditiesmorbiditiesLimited timeLimited timeDropDrop--outs not outs not analysedanalysedHigh internal validity, low High internal validity, low external validityexternal validity

Real lifeReimbursement“Do what you normally do”Real resource use

Compared to relevant practiceInclude co-morbiditiesDrop-outs crucialTime should include all relevant costs and effectsHigh external validity, low High external validity, low internal validityinternal validity


Pharmaco-economy today and tomorrow

Pharmaco- economic models are easy to conduct, fast, and relatively cheap.

Challenge: Make them Transparent, Make them as Credible as Clinical evidence.


Pharmaco-economy today and tomorrow

Pharmaco- economic models are easy to conduct, fast, and relatively cheap.

Challenge: Make them Transparent, Make them as Credible as Clinical evidence.

WHO BMJ series - 2005

Follow the policy suggested by WHOFollow the policy suggested by WHOCHOICECHOICE

CHOoCHOosese IInterventions that are nterventions that are CCost ost EEffectiveffective





ConclusionsConclusions

Medical Care should be based on evidences.Medical Care should be based on evidences.Evidence Based Medicine should also include Evidence Based Medicine should also include an economic constituent.an economic constituent.Choices in daily practice should be based Choices in daily practice should be based

first, on relevant clinical evidencefirst, on relevant clinical evidencethen, if efficacy, safety and quality of care are equal, then, if efficacy, safety and quality of care are equal,

on theon the globalglobal cost cost from the patient's perspectivefrom the patient's perspectivefrom the health insurance perspectivefrom the health insurance perspectivefrom the community's perspectivefrom the community's perspective


ConclusionsConclusions

Finally, the issue is simple :Finally, the issue is simple :Since there is a shortage in resources Since there is a shortage in resources when compared to a fast increasing demand,when compared to a fast increasing demand,the choice is limited between 2 options :the choice is limited between 2 options :

To To rationalizerationalize healthcare offer and practiceshealthcare offer and practicesToTo rationration access to healthcareaccess to healthcare

Medical ethics dictate the choice for health Medical ethics dictate the choice for health professionals :professionals :

Offer and practices should be rationalized, Offer and practices should be rationalized, i.e. managed so as to ensure i.e. managed so as to ensure

better care better care at better cost. at better cost.


Merci de Merci de votrevotre attention !attention !

[email protected]@univ-paris5.fr

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