A Tale of Two Ratios: Assessing Value From the Perspectives of Cost-Effectiveness and Affordability

Cornerstone Research Group Inc. Disclosure Director of Evidence Synthesis & Health Technology Assessment at Cornerstone Research Cornerstone Research Group Inc. consults for various pharmaceutical and medical device companies Previously worked for CDR/pCODR and consulted for ICER in the United States Cornerstone Research Group Inc.

Cost effectiveness vs Budget Impact Analysis Cost effectiveness helps us assess whether a health technology is worth the cost – provides good value for money Cost effectiveness does not provide information on affordability, i.e., can we afford it A health technology might be cost effective but the financial impact to a drug plan may be such that it cannot list the drug Affordability decisions are made by the participating decision makers based on their budgets and priorities Cornerstone Research Group Inc.

Cost effectiveness vs Budget Impact Analysis CEA BIA Question Is it good “value for money”? Is it affordable? Goal Economic efficiency (max. health with resources) Plan financial impact (cost containment) Modelled patients Entire Population Individual or groups Scope of costs Usually broader (health system costs) Narrow perspective (decision-maker costs) Health Outcomes Included Excluded Measure Incr. cost per unit of outcome Total expenditure ($) Marketplace dynamics Usually not modeled Usually included Time Horizon Usually longer (lifetime?) Usually short (1 – 5 years)

Consideration of budget Impact ? Cornerstone Research Group Inc. Reimbursement Process in Canada and consideration of budget impact analysis Focus on role of budget impact by HTA groups in today’s presentation such as CDR/pCODR given process is more transparent Consideration of budget Impact ? Cornerstone Research Group Inc.

Role of Budget Impact Analysis at CDR/pCODR Budget Impact not considered by CDR BIMs and BIAs are Category 2 requirements and are not considered as part of the review or recommendation process of CDR (provided to CADTH at least 20 business days before the targeted CDEC meeting) Budget Impact considered by pCODR Part of pCODR Deliberative framework (Adoption Feasibility) Budget Impact not considered as part of CADTH Therapeutic Review Process Cornerstone Research Group Inc.

How is budget impact considered by pCODR? “The following budget impact analysis (BIA) information is required in the Submission to pCODR: one non-specific BIA model and report. The BIA should be non-specific in that the model it is based on should be flexible enough to be applied to the context of any of the participating Federal drug plans, P/T Ministries of Health or Provincial Cancer Agencies, which may differ with respect to funding of comparators or the design of the program responsible for drug funding. The following supporting documentation for the non-specific BIA: all market research information used in the BIA documents cited in the BIA Disease prevalence — the prevalence or incidence of the disease(s) or condition(s) for which the Drug is under review should be provided for the Canadian population. For Drugs which require reconstitution or dose preparation, the method of dose preparation, dose stability and specifics around potential drug wastage should be addressed.” Cornerstone Research Group Inc.

How is budget impact considered by pCODR? Cornerstone Research Group Inc.

Options for incorporating budget impact within CDR/pCODR deliberations Do not consider budget impact in submissions to CDR/pCODR Consider budget impact in submissions to CDR/pCODR without comparing against current (and forecasted) expenditures in Canada Consider budget impact in submissions to CDR/pCODR and compare against current (and forecasted) expenditures in Canada Consider budget impact in submissions to CDR/pCODR by comparing against a threshold Cornerstone Research Group Inc.

Option 1: Do no consider budget impact Cornerstone Research Group Inc.

Cornerstone Research Group Inc. Option 2: Consider budget impact but do not compare current (and forecasted) expenditures in Canada Cornerstone Research Group Inc.

Total Sales ($ millions) Cornerstone Research Group Inc. 6/2/2018 Option 3: Consider budget impact but compare current (and forecasted) expenditures in Canada 2013 Leading Pharmaceutical Products in Canada Rank Leading Products Therapeutic Subclass Total Sales ($ millions) 2012 Growth (%) Company 1 Remicade Anti-arthritic 694.9 23.1 Schering 2 Humira 434.9 18.2 AbbVie 3 Lucentis Vision loss 402.2 40.4 Novartis 4 Enbrel 332.9 5.4 Amgen 5 Cipralex Antidepressant 250.0 16.1 Lundbeck 6 Rituxan Autoimmune 217.6 8.7 Roche 7 Cymbalta Depression 204.7 19.2 Lilly 8 Advair Asthma Therapy 204.5 0.2 Abbott 9 Spiriva Brochodilators 204.3 6.3 Boehringer 10 Ezetrol Cholesterol reduction 185.0 6.4 Merck New Drug (Forecasted budget impact $190 million) Affordable? Reasonable value compared with other drugs with similar expenditure? Source: IMS Health Pharmafocus through 2018 & https://www.ic.gc.ca/eic/site/lsg-pdsv.nsf/eng/h_hn01703.html Cornerstone Research Group Inc.

Option 4: Consider budget impact by comparing against a threshold   Parameter Estimate (Drugs) Source 1 Growth in Canadian GDP, 2016 (est.) + 1% 2.40% Bank of Canada, 2016 2 Total health care spending ($) 219.1 billion CIHI 2015 3 Contribution of drug spending to total healthcare spending (%) 15.70% 4 Contribution of drug spending to total healthcare spending ($) (Row 2 x Row 3) 34.4 billion 5 Annual threshold for net healthcare cost growth for all new drugs (Row 1 x Row 4) 825.6 million Calculation 6 Average number of new molecular entities or approvals, 2009-2012 26 Canada’s Research-Based Pharmaceutical Report Companies (Rx&D) 2015 7 Annual threshold for average cost growth per individual new molecular entity (#5 divided by #6) 31.8 million 8 Annual threshold for estimated budget impact for each individual new molecular entity (doubling of row 7) 63.5 million Cornerstone Research Group Inc.

Advantages & Disadvantages of Each Option (Do not consider budget impact) Simple Requires limited resources by CDR/pCODR to appraise Allows payers to be responsible for consideration of budget impact Not transparent No consideration of affordability Option 2 (Simple budget impact analysis that does not compare with expenditure data) Considers budget impact, albeit against no expenditure data Simple budget impact model from manufacturer is sufficient Require limited resources by CDR/pCODR to appraise Not transparent consideration of budget impact Only allows crude budget impact statements to be made, e.g., “Drug A will be associated with high budget impact” Option 3 (Detailed BIA which compares against current (and forecasted) expenditures in Canada) Considers budget impact and current expenditures on drugs in Canada More precise budget impact conclusion can be made, e.g., “Drug A will be associated with a forecasted budget impact of 190 million per annum potentially ranking it among the top 10 expenditures by public drug plans ” Requires better access to up-to-date expenditure data Requires high quality budget impact analysis from manufacturer Requires additional resources by CDR/pCODR to appraise Does not link budget to price Option 4 (Detailed BIA which compares against a threshold) Mechanism to link budget impact to a maximum price Does not require better access to up-to-date expenditure data Relies on GDP Cornerstone Research Group Inc.

Breakfast Session Voting Which option do you think CADTH should use when it comes to considering budget impact of pharmaceuticals in Canada? Option 1: Do not consider budget impact – leave it to payers Option 2: Consider simple budget impact analysis but do not compare current (and forecasted) expenditures in Canada Option 3: Consider detailed budget impact and compare current (and forecasted) expenditures in Canada Option 4: Consider detailed budget impact analysis and compare against a threshold Cornerstone Research Group Inc.