Transcript PERSPECTIVES ON PHARMACOECONOMICS

The Pharmaceutical Benefits Scheme
and the Australian Guidelines;
Implications for the United States
Deborah A. Freund, Ph.D., MPH
Vice Chancellor and Provost
Office of Academic Affairs
Professor of Public Administration
Syracuse University
June 10, 2003
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Plan
The Australian Health Care System and
Coverage of Pharmaceuticals in Australia.
 The Regulatory Structure for Pharmaceuticals
in Australia and the use of
Pharmacoeconomics.
 What is the Pharmaceutical Benefits Scheme?
 The Australian Guidelines.
 Implications of Pharmacoeconomics for the
U.S.

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The Australian Health Care System in Brief
Medicare: Natural Health Insurance
 Universal Coverage.
 Comprehensive Benefit Package.
 General Practitioners refer to Specialists.
 Public Hospitals financed by State;
access to Private Hospitals is through
purchase of Private Insurance.
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Medicare: Continued
Financed through income taxes and state
general revenues.
 Covers all drugs listed on PBS:

outpatient drugs on PBS;
 inpatient drugs are reimbursed by states;
 $20 per prescription for workers until threshold
is reached, then free;
 pensioners, unemployed, social security
beneficiaries pay $2.60 per prescription until
threshold is reached, then free.

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Regulatory Environment
5 Steps for Licensing Drugs and Listing
Them:
 TGA
 ADEC
 PBS
 PBAC
 PBPA
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Pharmaceutical Benefits Scheme (PBS)

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A comprehensive, publicly funded insurance
program that reimburses pharmacists for the
costs of a selected range of prescription drugs.
There is a system of co-payments, and drugs
are placed in different categories of access,
based on evidence of their comparative effective
and cost-effectiveness in defined patient
groups. Decisions to place new drugs in the PBS
are made by the federal health minister on the
advice of a statutory committee, the PBAC.
Hill, Suzanne R., Mitchell, Andrew S., Henry, David A. “Problems With the Interpretation of
Pharmacoeconomic Analyses: A Review of Submissions to the Australian Pharmaceutical
Benefits Scheme.” JAMA 2000 283: pp. 2116-2121.
Pharmaceutical Benefits
Advisory Committee (PBAC)
Makes independent judgement on what
drugs to include on PBS.
 Comprised of clinicians, pharmacologists
and pharmacists.
 Reviews company application and ADEC
recommendation.
 Application to PBAC must include price
suggested to Pharmaceutical Benefit
Pricing Authority (PBPA).

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Pharmaceutical Benefits
Advisory Committee (cont’d)


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The PBAC receives advice from a technical
economics subcommittee comprising
individuals with expertise in the fields of health
economics, decision analysis, clinical
epidemiology, and biostatistics.
The economics subcommittee reviews
applications of the “Australian” Guidelines.
The methodology underlying the Australian
Guidelines is Pharmacoeconomics.
Hill, Suzanne R., Mitchell, Andrew S., Henry, David A. “Problems With the Interpretation of
Pharmacoeconomic Analyses: A Review of Submissions to the Australian Pharmaceutical
Benefits Scheme.” JAMA 2000 283: pp. 2116-2121.
The Australian Guidelines
The requirement that in addition to
companies providing that drugs are safe
and efficacious, they also prove the
drugs are cost-effective at the suggested
reimbursement price [nicknamed the
Fourth Hurdle].
 Thus, all drugs that are licensed are not
listed with the PBS.
 Non-listing means drugs are not
prescribed.

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The Australian Guidelines: Purpose
Rationalize use.
 Contain cost (not at first).
 Provide a vehicle for arguing for higher
prices:

focus on benefits and not just on “launch
price”;
 results in greater Health Outcomes.

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Australian Guidelines: Criteria
Adequate Direction but Preserve Flexibility:
 generalizable but detailed;
 permits all forms of economic evaluation
as clinical trials are more prevalent for
some areas than others.
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Australian Guidelines: Key Provisions
Justify Technique:
 cost minimization;
 cost-effectiveness;
 cost utility;
 cost-benefit not recommended.
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Australian Guidelines: Key
Provisions (cont’d)
Include All Direct Benefits and Costs.
 Analyze Indirect Costs Separately.
 Societal and Governmental Perspective.

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Australian Guidelines: Key
Provisions (cont’d)

Subcommittee of PBAC Reviews:


Pharmacoeconomic analysis.
Comparator:
market leader (version 1);
 replaced in practice (version 2).


Data:
clinical trials preferred;
 other countries permitted;
 retrospective permitted;
 modeling, administrative data permitted.

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Australian Guidelines: Key
Provisions (cont’d)
Final Outcomes preferred, Intermediate
permitted.
 Open Door to Discuss Listing Decisions.
 Burden of Proof is on Company not
Government.

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Australian Guidelines: Experience

Approval only for restricted indications
for which cost effectiveness can be
demonstrated:
Theory: greater benefits for a smaller group
justify higher price;
 Example: Norfloxacin for Urinary Tract
Infection. PBAC required authority and use
went down; relaxed authority and use went
up.

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Experience: Review Time
No Delays because PBAC meets 4 instead
of 3 times per year.
 ADEC and PBS submissions can be made
simultaneously.
 PBAC decisions in 13 weeks.
 Deferrals or rejections on some uncertain
drugs.
 Delays come with marketing decision not
listing decision.

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Problems

Relationship Between Cases and
Effectiveness:


Estimating Incremental Benefit in
Comparison to a Comparator:

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dose prescribed in community does not
match clinical trials.
must go beyond a statement of benefits
exceeding health risks to quantify this
amount.
Problems in Australia

Shortage of Experts:


would not be true in U.S.
Appropriate Comparator:

what is replaced in practice vs. market leader.
Rarely is a Comparison Made to a Non-Drug.
 Drug Development Dead Due to Low Prices.
 Access to Appropriate Medicines?
 Unsuccessful in Containing Costs?

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Similar Activities in Other Countries
Guidelines in Ontario, British Columbia, New
Zealand.
 NEJM (2000) statement.
 U.S. “Guidelines” - Hillman and others
(Annals of Internal Medicine); USPHS report.
 CCOHTA Canadian Coordinating Office for
Health Technology Assessment - guidelines
for guidelines.
 Positive lists (formularies) in: Portugal,
Sweden, U.K., Japan, Canada.

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Users in U.S. and Other Countries
Negative Lists: Netherlands.
 U.S. Managed Care Companies.
 U.S. Pharmaceutical Benefits in three tier
PBM.
 Medicaid (Florida).
 UK: National Institute for Clinical
Effectiveness.

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Application to United States

Imagine we passed a Medicare Drug
Benefit. We would have to decide:
what drugs would be reimbursable;
 what Medicaid would pay;
 what, if any, co-pay there would be.

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We might have to adopt a similar
scheme.
Application to United States

Now most managed care company plans
include three tiers of pharmaceutical
coverage:
generics, with no co-pay;
 brand name drugs at a small co-pay;
 new drugs with a large co-pay.

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The three tiers are often determined
based on “deals” or price, but not on
cost-effectiveness, or based on evidence
of outcome.
Reflections Based on Possible
Uses in United States
Fastest growing employment area in
companies.
 No cost containment.
 Beyond patients and physicians? Good for
patient?
 Improperly used by triple tier pharmaceutical
benefits; no one understands triple tier.
 Improper advertising of cost-effectiveness
claims.

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Reflections Based on Possible
Uses in United States
Benefits of new drugs/breakthroughs
poorly understood and measured.
 Industry claims process is unfair.
 Possibility that drug development would
be impeded.

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