Transcript opportunity cost

Onco-Pharmacoeconomy Training Course
Turkey ISPOR Training Course
Introduction
Dr Alan Haycox
Reader in Health Economics
Health Economics Unit
University of Liverpool Management School
Course objectives
The two course objectives are:

Understanding the basics of health
economics and the underlying rationale

Understanding the application of health
economics to oncology especially the
concept of opportunity costs
Course timetable
11.00 – 12.00
 Rationale behind health economics including
opportunity costs
13.00 – 15.00
 Understanding health economics, health
benefit of current cancer drugs and end of life
concepts
15.30 – 17.30
 Workshop around the concept of
opportunity costs based on HERCEPTIN in
adjuvant breast cancer in the UK
Rationale for Health Economics
Brian Godman
University of Liverpool
Mario Negri Institute, Milan, Italy
Karolinska Institute, Stockholm, Sweden
Why growing use of Health Economics?

Healthcare represents a significant
proportion of national expenditure

New initiatives needed to maintain
comprehensive and equitable healthcare
with increased volumes and new expensive
drugs – especially new oncology drugs

Health economics provides a basis for
evaluating different options when resources
are scarce – concept of opportunity costs
New specialist drugs key cost driver in
Sweden requiring additional measures
Total drug expenditures in Stockholm County
(prescriptions, hospital, OTC) 1977-2007
8
7
Specialist drugs
6
Billion SEK
Non-specialist drugs
5
4
3
2
1
Ref: Godman and Wettermark 2009
20
07
20
05
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
19
79
19
77
0
The cost of new oncology drugs in Sweden
is accelerating matching UK concerns
Ref: Specialist drug project Stockholm, Godman 2009
The cost of new cancer drugs is a growing
concern in other EU countries

One UK cancer expert (Professor Sikora at the
Hammersmith Hospital) recently estimated that the
next generation of cancer drugs could cost the UK
alone up to £50billion a year within four years equivalent to raising the basic tax rate by 15% (15p
in the £)

New expensive products (especially new cancer
drugs) now account for over 50% of the in-patient
hospital drug budget in Marseilles hospitals, with sales
growing at over 20% per year. This is leading to a
reduction in other services

As a result, use of health economics and concept of
opportunity costs will grow especially in cancer
Ref: Sikora 2008, Sermet, Andrieu and Godman et al 2010
The Basis of Health Economics

Demand for healthcare is infinite
◦ Increased expectations, ageing populations and
technological change

Resources are scarce
◦ Doctors, nurses, hospitals, pharmaceuticals

Choices are necessary
◦ Do we increase the drug budget, pay for more
surgeons, increase radiotherapy services or improve
pain managements?

Prioritisation is required
◦ On what basis? Who should make decisions?

Costs and benefits must be compared
◦ How do we measure benefits?
Cost measurement: 3 Stages

Resource identification

Resource measurement

Resource valuation
Resource Identification

Typically all relevant resource (cost )
items that are used (consumed) during
the care process are identified in any
health economic evaluation

These are recorded and subsequently
costed during the course of undertaking
the HE evaluation
Resource Measurement

The amount of each resource consumed
(used) is measured:
◦ Capital Items (items that provide services
over more than 1 year), e.g.
 Equipment
 Buildings
◦ Recurrent Items (items consumed within 1
year or less)
 Materials/ supplies/consumables such as
pharmaceuticals
 Labour, Utilities (gas, electricity, water, etc.)
Resource Valuation
A value is attached to each resource consumed
Resources can be valued differently…
Average costs
 Marginal costs
 Opportunity costs

Health economists and policy makers emphasise
the importance of ‘opportunity costs’ in valuing
overall expenditure as budgets are finite
The most important concept:
Opportunity Cost


The opportunity cost of using resources to
produce a good or service is the benefits
foregone from those resources not being
used in their next best alternative. The
concept of opportunity cost lies at the heart
of all economic analyse
The health policy goal is to maximise patient
outcomes with available resources. This
means some benefits will be foregone – but
these should be minimised
Opportunity cost in practice - The
opportunity cost of one course of IVF
One-third of a cochlear implant
1 heart bypass operation
11 cataract removals
150 vaccinations for Measles,
Mumps and Rubella
One-third of a junior school teaching
assistant for a year
2000 school dinners
Case History – Adjuvant HERCEPTIN in
Breast Cancer in one UK Hospital
Currently 355 patients receive adjuvant treatment
in Norfolk and Norwich at GB£0.503mn/ year
(16 cured at a cost/ cure ranging from £23000 £137,000)
 Treating 75 patients with early stage breast
cancer with HERCEPTIN would cost
GB£1.94mn/ year rising to GB£2.3mn with
testing, monitoring and administration at a cost/
cure of £650,000
 Finite budgets mean tough decisions need to be
made on which treatments should be funded and
which should be terminated or reduced

Ref: Barrett et al BMJ 2006
Costs and potential benefits of adjuvant
cancer treatments in Norfolk Hospital
Treatment and number of patients
Drug cost
(GB£000)
Cost/cured patient
(GB£000)
Adjuvant chemotherapy for lung cancer (15
patients)
23
23
Oxaliplatin as adjuvant therapy for colon cancer
compared with fluorouracil alone (20 patients)
137
137
8
2.67
Rituximab in addition to CHOP for non-hodgkin
lymphoma in patients over 60 (25)
215
71.67
Adjuvant aromatase inhibitors in postmenopausal
breast cancer (270 patients) [NB drug costs will fall
substantially in Europe once generics routinely
available]
120
15
Total – 355 patients and 16 cured
503
Neoadjuvant chemotherapy for oesophageal
cancer (25 patients)
Ref: Barrett et al BMJ 2006
Possible lessons for Turkey

Other countries have approached the fact of
finite resources through a variety of
initiatives including:
o Setting value criteria for funding new drugs, e.g.
cost/ QALY and minimum effectiveness criteria
o Establishing pre-launch the potential budget
impact of new drugs along with potential savings,
e.g. new generics becoming available.
Subsequently agreeing patient characteristics/
prescribing criteria ahead of launch with key
clinicians and monitoring their effectiveness and
utilisation post launch
Minimum effectiveness criteria for funding
new drugs in UK cancer hospitals
3 Levels of effectiveness and data quality chosen
Effectiveness
Criteria
A
Median survival improved > 9months + improved QoL
B
Median survival improved 3 - 6 months + improved QoL
C
Improved QoL, no impact on survival
D
Minimal impact QoL, no impact survival
Data Quality
Criteria
alpha +
Meta analysis or two high quality RCTs
alpha -
One high quality RCTs and supporting Phase II data
beta
One poor quality RCT and/or several Phase II studies
Key stakeholders including leading cancer clinicians agreed
only new cancer products with A and B effectiveness criteria
and alpha data quality should be funded and prescribed at
premium prices in view of resource constraints
Ref: Ferguson et al 2000
Survival data important as limited additional
benefits for most cancer drugs
Primary efficacy end point in
main studies
Number
%
Overall survival
2
7%
Time to progression (TTP)/
Progression free survival (PFS)
11
41%
Response rate, e.g. OR, PR
13
48%
Other
1
4%
• Survival data (when available – overall 13 trials):
o Range: 0 – 3.7 months additional survival versus
comparator
o Mean: 1.5 months, Median: 1.2 months
Ref: Apolone et al 2005
There are 4 Methods of economic
evaluation

The four methods are
◦ Cost Minimisation Analysis (CMA)
◦ Cost Effectiveness Analysis (CEA)
◦ Cost Utility Analysis (CUA)
◦ Cost Benefit Analysis (CBA)

These four approaches will be discussed after
the coffee break

Any questions?