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Operationalising Value-based Pricing: Do we know what we value and what we are giving up to get it?


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Adrian Towse presentation at HTAi, Toyko - May 2016

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Operationalising Value-based Pricing: Do we know what we value and what we are giving up to get it?

  1. 1. Adrian Towse Director of the Office of Health Economics Visiting Professor London School of Economics HTAi Tokyo May 2016 Operationalising Value-based Pricing: Do we know what we Value and What we are giving up to get it?
  2. 2. HTAi Tokyo May 2016 Background In UK, decisions to approve/reject new health care technologies taken by Health Technology Assessment (HTA) agencies: • National Institute for Health and Care Excellence (NICE) in England • All Wales Medicines Strategy Group (AWMSG) in Wales • Scottish Medicines Consortium (SMC) in Scotland
  3. 3. HTAi Tokyo May 2016 England – NICE Threshold Question asked by Claxton et al. (2015): • On average, across PCTs in England, how much does it cost to produce one QALY? • Argued to represent opportunity cost of HTA recommendations • E.g. if NICE recommends new technology which requires more NHS funds per QALY gained than this average  overall decrease in QALYs produced by health service (displacement effect) “Best estimate” = £12,936 per QALY gained
  4. 4. HTAi Tokyo May 2016 England: Data limitations Key issue = substantial data limitations 1. Absence of quality of life (QoL) data  authors use mortality data and make series of transformations to adjust for QoL 2. Incomplete mortality data – good quality data available for only 4/23 Programme Budget Categories; poorer quality data available for additional 7 3. Absence of time-series data  authors forced to use estimated differences across PCTs as proxy for differences within PCTs over time Key consequence of data limitations = strong assumptions  high degree of uncertainty
  5. 5. HTAi Tokyo May 2016 England: Key assumptions Key assumptions: 1. Duration of effect of expenditure on mortality 2. Future mortality risk of patients saved due to increased expenditure 3. Future quality of life of patients saved due to increased expenditure Best estimate of £12,936 is product of particular combination of “conservative” and “optimistic” options for these assumptions Different combinations give very different answers Additional key assumption not tested: PCTs are as good at achieving QoL gains as at achieving LYGs (DALY disease burden used to pro-rata QoL gains based on LYGs) DH is commissioning the Claxton team to collect new data and test assumptions 1-3 OHE has a report of possible future research option (see Karlsberg Shaffer et al., 2016b)
  6. 6. HTAi Tokyo May 2016 England: Combinations of three key assumptions In my view the £30,270 estimate is the most plausible, rather than the £12,936
  7. 7. HTAi Tokyo May 2016 Scotland: OHE Study Data Two sources of data for identifying ‘marginal’ services: 1. NHS Budget Scrutiny (2012/13) • Performed by Health and Sport Committee of Scottish Parliament • Data available for all 14 NHS Boards 2. Semi-structured interviews with Directors of Finance of 12/14 Boards (89% of Scottish population)
  8. 8. HTAi Tokyo May 2016 Scotland: Data (2) Relevant budget scrutiny questions: • 4(b): “Please identify the three main areas in which … savings will be made … in 2012-13” • 5(a): “Please give three examples of service developments that you have been able to fund in 2012-13” • 5(b): “Please give three examples of service developments that you would consider priorities, but have been unable to fund in 2012-13” Threshold upper bound Threshold lower bound Threshold upper bound
  9. 9. HTAi Tokyo May 2016 Scotland: Results
  10. 10. HTAi Tokyo May 2016 Scotland: Implications • Huge variation in £/QALY estimates – both within and between services • If take median estimate across services, threshold = £1,516–1,017,844 per QALY  Not possible to obtain reliable estimate of threshold in Scotland • Cost per QALY evidence never used to justify marginal spending decisions • Decisions driven by range of other factors, e.g.: • Scottish Government initiatives • Patient convenience • Waiting time targets • Benchmarking against other NHS Boards • Explicit disinvestment occurs very rarely • Savings generally sought from efficiency improvements
  11. 11. HTAi Tokyo May 2016 Wales: Methods Semi-structured interviews with Medical and/or Finance Directors of all 7 Local Health Boards (LHBs) in NHS Wales Key interview sections: 1. Procedures, policies & guidelines for prioritisation at LHB 2. How in practice LHBs found funds to comply with NICE TAs issued in study period (Oct 2010- March 2013) 3. How LHBs accommodated other financial “shocks”
  12. 12. HTAi Tokyo May 2016 Wales: Discussion/conclusions Implicit in displacement assumption is that: • LHB budgets are fixed and fully deployed • Providers are not x-inefficient Evidence in this paper that opportunity cost is not wholly felt in terms of displacement of other NHS services Opportunity cost falls at least in part: • Outside the NHS (other areas of public spending) • By increased efforts to improve efficiency
  13. 13. HTAi Tokyo May 2016 References Barnsley, P., Towse, A., Karlsberg Schaffer, S. and Sussex, J (2013). Critique of CHE Research Paper 81: Methods for the Estimation of the NICE Cost Effectiveness Threshold. OHE Occasional Paper at: research-paper-81-methods-estimation-nice-cost-effectiveness- threshold#sthash.xFhhxHHK.dpuf Claxton K, Martin S, Soares M, Rice N, Spackman E, Hinde S, et al. (2015). Methods for the estimation of the National Institute for Health and Care Excellence cost- effectiveness threshold. Health Technol Assess;19 (14) Karlsberg Schaffer, S., Sussex, J., Devlin, N., & Walker, A. (2015). Local health care expenditure plans and their opportunity costs. Health Policy, 119(9), 1237-1244 Karlsberg Schaffer, S., Sussex, J., Hughes, D., & Devlin, N. (2016a). Opportunity costs and local health service spending decisions: a qualitative study from Wales. BMC Health Services Research, 16(1), 1. Karlsberg Schaffer, S., Cubi-Molla, P., Devlin, N. and Towse, A. (2016b) Shaping Research Agenda to Estimate Cost-effectiveness Thresholds for Decision Making. OHE Consulting. Available at: estimate-cost-effectiveness-thresholds-decision-making#sthash.OuKI6Wjl.dpuf
  14. 14. Adrian Towse The Office of Health Economics Registered address Southside, 7th Floor, 105 Victoria Street, London SW1E 6QT Website: Blog: Email: THANK YOU FOR YOUR ATTENTION