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Can the US Afford to Ignore Cost-effectiveness Evidence in Health Care?

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At a recent OHE Lunchtime seminar, Dr James Chambers of Tufts Medical School examined the role cost-effectiveness evidence plays in health care resource allocation in the US and the potential value of …

At a recent OHE Lunchtime seminar, Dr James Chambers of Tufts Medical School examined the role cost-effectiveness evidence plays in health care resource allocation in the US and the potential value of expanding that. Specifically for Medicare, Chambers discussed to what extent coverage decisions for medicines are consistent with cost-effectiveness evidence and what might be gained by explicitly including economic evidence in Medicare coverage policy--in terms both of aggregate health gains and cost-savings. His analysis also considered the challenges associated with incorporating cost-effectiveness evidence in coverage policy, including implications of the 2010 US health care reform legislation.

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  • 1. OHE Lunchtime Seminar Can the US Afford to Ignore Cost-effectiveness Evidence in Health Care? James D. Chambers Tufts Medical Center London • 24 July 2013
  • 2. Can the US Afford to Ignore Cost- effectiveness Evidence in Health Care? James D. Chambers PhD, MPharm, MSc Assistant Professor Center for the Evaluation of Value and Risk Institute for Clinical Research and Health Policy Studies Tufts Medical Center
  • 3. Outline 1. US health care in context 2. Existing role of cost-effectiveness 3. Challenging coverage and reimbursement environment 4. Use and potential value of cost- effectiveness evidence – Medicare as a case-study 5. Looking forward 3
  • 4. 4 US health care in context
  • 5. US health care system 1. Fragmented and decentralized 2. Public payers • Medicare, Medicaid, Department of Veterans Affairs, Department of Defense, and the Children's Health Insurance Program 3. Approximately 50 private payers • UnitedHealth Group, WellPoint, Kaiser Permanente, Aetna Group, Humana Group…….. 5
  • 6. 6 17.4 11.8 11.6 11.3 10.0 9.8 8.7 0 2 4 6 8 10 12 14 16 18 United States France Germany Canada Sweden United Kingdom Australia HealthCareSpending,%GDP Private expenditure on health Public expenditure on health Health expenditure as a share of GDP, 2010
  • 7. 7 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 HealthCareSpending,%GDP Australia Canada France Germany Sweden United Kingdom United States Health care spending growth
  • 8. 8 System performance Key health statistics 1. Fewer physicians/physician consultations than the UK 2. Fewer hospital beds per 1,000 population than the UK
  • 9. Mirror, Mirror, on the wall…… 9
  • 10. Health care system vs. health care Better access to medical technology More intensive care Shorter waiting times Greater choice 10
  • 11. Existing role of cost- effectiveness evidence 11
  • 12. Given apparent need to increase value of spending, US uses cost- effectiveness to a notably limited extent However, cost-effectiveness evidence is used in various aspects of the US health care 12
  • 13. AMCP value dossiers Recommendations for value dossier preparation 14 Communication of clinical, safety, economic and quality of life value proposition Recommendations on how cost- effectiveness analysis should be conducted and reported
  • 14. WellPoint One in nine insured through WellPoint Provide framework for submitting economic evidence Specific guidance for study conduct 3-year time horizon Analyses from WellPoint perspective 15
  • 15. Premera Blue Cross Cost-effectiveness evidence informs value-based insurance design Drugs tiered according to cost-effectiveness: Tier 1 – Highly cost-effective Tier 2 – Cost-effective Tier 3 – Somewhat cost-effective Tier 4 – Minimally cost-effective 16
  • 16. DoD Pharmacoeconomic center Conduct of pharmacoeconomic analyses Support formulary management, pharmaceutical contracting, and informing clinical practice guidelines 17
  • 17. Veteran Affairs Health Economic Resource Center Multiple functions Assists VA researchers in assessing the cost- effectiveness of medical care Evaluating the efficiency of VA programs and providers Conduct high-quality health economics research 18
  • 18. Washington State Health Care Authority Supports various state agencies, including Medicaid A stated goal: “To make state purchased health care more cost effective by paying for medical tools and procedures that are proven to work” HTA programme includes cost-effectiveness analysis within its remit 19
  • 19. Centers for Medicare and Medicaid Services (CMS) Administers Medicare, the health insurance programme for the elderly Largest US payer, annual cost of approx. $600 billion, 21% of national health care spending Cost-effectiveness evidence used in a very limited way, restricted to the occasional use for preventive care 20
  • 20. - Guidance for the Public, Industry and CMS Staff “Cost-effectiveness is not a factor CMS considers in making NCDs. In other words, the cost of a particular technology is not relevant in the determination.” 21
  • 21. American exceptionalism “The government is best which governs the least” - Thomas Jefferson 22
  • 22. 23
  • 23. Coverage and reimbursement 24
  • 24. A product must clear two hurdles before patients have access to it. 25
  • 25. Hurdle 1: FDA approval
  • 26. Hurdle 2: Coverage & reimbursement
  • 27. FDA approval allows a medical technology to be sold in the US, but does not necessarily mean that payers will pay for it. 28
  • 28. FDA vs. CMS – Approves drugs and devices Versus – Administers Medicare 29
  • 29. Decision-making criteria –Safety and Efficacy versus – Reasonable and Necessary 30
  • 30. Are CMS national coverage determinations consistent with FDA indication? 31
  • 31. What are NCDs? Approx 10-15 national coverage determinations each year “Big-ticket” items Controversial Inconsistency among regional contractors Major impact on Medicare program 32
  • 32. Restrictiveness of CMS coverage vs. FDA approval 1.More restrictive 2.Equivalent 3.Less restrictive 33
  • 33. FDA approval pathway Devices 1. Premarket Approval (PMA) 2. 510(k) clearance Drugs and biologics 1. New Drug Application (NDA) 2. Biologics License Application (BLA) 34
  • 34. CMS coverage of FDA approved technologies 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Overall (n=69) 510(k) (n=34) PMA (n=21) NDA/BLA (n=13) Non- coverage 35
  • 35. For covered technologies 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Overall (n=55) 510(k) (n=23) PMA (n=19) NDA/BLA (n=13) CMS less restrictive Equivalent CMS more restrictive 36
  • 36. Restrictions on coverage Patient-related Certain comorbidities or disease severity Sequence in therapy Second-line therapy Technology-related A particular use of technology 37
  • 37. Nature of coverage restrictions CMS coverage restrictions (not mutually exclusive) Type of FDA approval All (n=32) 510(k) (n=18) PMA (n=11) NDA/BLA (n=3) Patient -related 25 12 10 3 Sequence in therapy 12 9 3 0 Technology- related 3 2 0 1 Multiple restrictions 11 7 3 1 38
  • 38. Carotid stents FDA approval Symptomatic patients with carotid artery stenosis >50% CMS coverage Symptomatic patients with carotid artery stenosis >70% CMS deemed uncertain evidence associated with less severe disease 39
  • 39. Extracorporeal immunoadsorption using protein A columnsFDA approval “Moderate to severe” rheumatoid arthritis (RA) CMS coverage Severe RA and failure of a minimum of 3 DMARDs Evidence limited to severe patients. Results could not be generalized to moderate disease 40
  • 40. Takeaways Challenging coverage environment for medical technology Different decision-making criteria Different evidentiary requirements = 41
  • 41. Is CMS coverage policy consistent with cost- effectiveness? 43
  • 42. Approach Medicare national coverage determinations from 1999-2007 Literature review to identify estimates of cost-effectiveness Selection of most relevant study 44
  • 43. 0 2 4 6 8 10 12 14 16 18 20 22 24 Cost-effectiveness Non-coverage (n=16) Positive coverage (n=48) 45 Results – Overview of findings 45
  • 44. Covered technologies with ICER >$100k/QALY Medical technology ICER (US$) Lung Volume Reduction Surgery - Severe upper lobe emphysema $172,852 Ocular Photodynamic Therapy with Verteporfin for Macular Degeneration - Predominately classic subfoveal CNV lesions $159,346 Liver transplantation in patients suffering from hepatitis B $160,373 Lung Volume Reduction Surgery - Non high risk patients suffering from non-upper lobe emphysema with low exercise capacity $337,521 Transmyocardial Revascularization for Severe Angina - patients with refractory to standard medical therapy $341,799 Insulin Infusion Pump $558,522 Ultrasound Stimulation for Nonunion Fracture Healing - Radius $603,374 Ultrasound Stimulation for Nonunion Fracture Healing - Scaphoid $798,587 VADs as Desintation Therapy - Chronic end-stage heart failure $820,967 46
  • 45. 47
  • 46. 48 Coverage decision Often multiple decisions in a single decision memo Coverage with restrictions Positive coverage Patient population who meet restrictions Non-coverage Patient population who do not meet restrictions
  • 47. Analysis – Logistic regression Coverage decision (dependent variable) Quality of supporting evidence Availability of an alternative intervention Type of technology Coverage requestor Incremental cost-effectiveness ratio Date of decision 49
  • 48. *** = p<0.01; ** = p<0.05; * = p<0.1 Multivariate analysis – All variables Variable Effect on coverage Alternative available No Reference Yes 7x Less likely** Quality of evidence Good 6x more likely*** Poor No more or less likely Insufficient Reference 50
  • 49. *** = p<0.01; ** = p<0.05; * = p<0.1 Variable Effect on coverage Cost-effectiveness No estimate 5x less likely Cost saving Reference ICER <$50 000/QALY No more or less likely ICER >$50 000/QALY No more or less likely Date of decision 1999-2001 Reference 2002-2003 3x less likely* 2004-2005 3x less likely* 2006-2007 10x less likely*** 51
  • 50. CMS coverage More likely if: Good quality clinical evidence Less likely if: Availability of alternative Recent coverage decision No available cost-effectiveness estimate 52
  • 51. 54 What is the potential value of using cost-effectiveness evidence in Medicare?
  • 52. 55 Approach What gains in health are achievable from using cost-effectiveness evidence to inform resource allocation? League table approach Medicare outpatient and inpatient claims data Prioritize use of resources to cost- effective care
  • 53. 140 Decision memos 203 coverage decisions - no relevant CEA 267 individual coverage decisions 64 coverage decisions with a relevant CEA 49 positive coverage decisions 20 decisions excluded 29 positive coverage decisions in analysis 15 non- coverage decisions 8 decisions excluded 7 non-coverage decisions in analysis 56
  • 54. Assumptions League table assumptions Comparator included in CEA was only true alternative Net present value of future commitments Supply of organs not a limiting factor 57
  • 55. Analyses Increase utilization of dominant technologies only Reallocate existing expenditures using cost-effectiveness evidence from less cost-effective to more cost-effective care 58
  • 56. 59 Reallocation Additional beneficiaries receiving care (millions) (50% [10-90%]) Cost savings (millions) (50% [10- 90%]) QALY gain (millions) (50% [10- 90%]) Increase utilization of dominant interventions 5.54 (1.11 – 9.96) $12,000 ($2,500 - $22,000) 0.27 (0.05 – 0.48) Maintaining budget neutrality 11.16 (2.23 - 20.10) NA 1.90 (0.38 – 3.40) Results
  • 57. 60 Potential to improve aggregate health from existing resources Few interventions are principal drivers of cost-savings and health gains Major study limitation is the quality of available evidence
  • 58. 61
  • 59. 62 Looking forward Unlikely that US health care will fully embrace cost-effectiveness Fragmented nature of US health care system Aversion to limits remains Resistance from many quarters Increased use of prospective payment systems
  • 60. 63 “The Patient-Centered Outcomes Research Institute . . . shall not develop or employ a dollars per quality adjusted life year as a threshold to establish what type of health care is cost effective or recommended. The Secretary shall not utilize such an adjusted life year as a threshold to determine coverage, reimbursement, or incentive programs under title XVIII.” (emphasis added) — The Patient Protection and Affordable Care Act
  • 61. 64 Cost-effectiveness in Medicare? Two previous failed attempts Continued exclusion of cost- effectiveness evidence for treatments Some limited use for preventive care Provenge
  • 62. 66 Summary Irregular use of cost-effectiveness evidence in the US Cost-effectiveness evidence is used across a variety of private and public payers While cost-effectiveness offers many potential benefits, much resistance remains and seems likely to endure
  • 63. The Office of Health Economics conducts research and provides consultancy services on health economics and related policy issues that affect health care and the life sciences industries. To keep up with the latest news and research, subscribe to our blog, OHE News. Follow us on Twitter @OHENews, LinkedIn and SlideShare. Office of Health Economics (OHE) Southside, 7th Floor 105 Victoria Street London SW1E 6QT United Kingdom +44 20 7747 8850 www.ohe.org OHE’s publications may be downloaded free of charge for registered users of its website.