Steps of economic evaluation Decision rule & sensitivity analysis Zoltán Kaló Professor of Health Economics Department of Health Policy and Health Economics Eötvös Loránd University Syreon Research Institute Steps of economic evaluation Decision rule & sensitivity analysis kalo@tatk.elte.hu

Decision rule: incremental cost-effectiveness ratio hatékonyság comparator is dominant: rejection grey zone investigated technology is dominant: acceptance Δcosts Δeffectiveness

Incremental Cost-Effectiveness Ratio 1 2 QALY C Cost ICER - = D

QALY League Table Cost/QALY (£’90) Cholesterol testing and diet therapy only (all adults, aged 40-69) 220 Neurosurgical intervention for head injury 240 GP advice to stop smoking 270 Neurosurgical intervention for subarachnoid haemorrhage 490 Anti-hypertensive therapy to prevent stroke (ages 45-64) 940 Pacemaker implantation 1,100 Hip replacement 1,180 Valve replacement for aortic stenosis 1,140 Cholesterol testing and treatment 1,480 CABG (left main vessel disease, severe angina) 2,090 Kidney transplant 4,710 Breast cancer screening 5,780 Heart transplantation 7,840 Cholesterol testing and treatment (incrementally) of all adults aged 25-39 years 14,150 Home haemodialysis 17,260 CABG1 (1 vessel disease, moderate angina) 18,830 CAPD2 19,870 Hospital haemodialysis 21,970 Erythropoietin treatment for anaemia in dialysis patients (assuming a 10% reduction in mortality) 54,380 Neurosurgical intervention for malignant intracranial tumour 107,780 Erythropoietin treatment for anaemia in dialysis patients (assuming no increase in survival) 126,290 Source: Maynard A.K. (1991): Developing the health care market. Economic Journal, 101, 1277-1286.

Verifiable criteria for cost-effectiveness criterion What is the fair price for producing one life year in full health? WHO recommendation: if a new technology produces one life year in full health at lower price than 1xGDP per capita, it is highly cost-effective (very good value for money) at higher price than 3xGDP per capita, it is not cost-effective (not good value for money) Some European countries lower threshold: 2xGDP per capita (or similar economic reference point) upper threshold: 3xGDP per capita (or similar economic reference point) Other options for setting threshold: how much you already pay for dialysis? thresholds in relevant countries experience based threshold (e.g. 20’000 – 30’000 Ł/QALY in UK)

Determining cost/QALY threshold How to establish threshold GDP ?? ask taxpayers (WTP) ?? experienced thresholds ?? benchmark (e.g. dialysis ??) How many thresholds single two (lower and upper) moving threshold relating to disease severity

Revealed NICE threshold

Relationship Between Social Value and Incremental Cost per QALY Source: Drummond M

Moving threshold related to disease severity As the severity of disease increases, so does the threshold for cost-effectiveness! Source: Redekop K, 2007 9

Pros and cons of an explicit threshold Advantages: Encourages consistency in decision-making. More transparent. An implicit threshold would be inferred anyway. Disadvantages: Hard to determine what the threshold should be. Does not tell us the opportunity cost of adopting a new technology. Other considerations may come into play Caveat: new technologies are priced up to threshold

Verifiable criteria for cost-effectiveness criterion Declare this threshold explicitly or use it only implictly? Political attitude in several LMICs is based on implicit decision-making Explicit cost-effectiveness improves the consistency of decisions, provides clarifications for decisions Do we know what is good result in cost-effectiveness analyses? Enforcement of cost-effectiveness evidence Option #1: rule - mandatory criterion Option #2: tool - non-mandatory reference point Option #3: non-transparent hurdle – cost-effectiveness analysis is mandatory chapter of reimbursement dossiers, but noone knows how it is taken into account in policy decisions

Cost effectiveness results   cost life years old therapy 12 000 € 0,6 improved therapy 24 000 € 1,5 Cost effectiveness threshold: 30’000 €

ICER Results ICER Comparator Δcost / Δyear improved therapy old therapy 13 333 €

ICER

Cost effectiveness results   cost life years old therapy 12 000 € 0,6 standard therapy 24 000 € 1,5 new therapy 36 000 € 1,8 Cost effectiveness threshold: 30’000 € / life year

Incremental cost-effectiveness ratio (ICER) Results ICER Comparator ∆cost / ∆life years standard therapy old therapy 13 333 € new therapy 40 000 €

Incremental cost-effectiveness ratio (ICER) life years gain

Incremental cost-effectiveness ratio (ICER) Results ICER Comparator ∆cost / ∆life years standard therapy old therapy 13 333 € new therapy 40 000 € 20 000 €

Optimisation cost-effectiveness to local needs Narrow target patient groups risk status: only high-risk patients positioning: only second-line therapy Reduce price (transparent price reduction) confidential rebate / discount financial risk-sharing  price volume agreement, etc. volume related rebate Guarantee outcomes pay for performance outcomes based risk-sharing

Pharmaceutical Policy Framework (1) Widespread use of evidence-based pricing and reimbursement 1) establishment and 2) joint work of health technology assessment agencies mandatory cost-effectiveness and budget impact criteria in increasing number of countries quantification and management of payers’ uncertainties

Sensitivity analysis calculation of cost and health outcomes in case of different values of uncertain variables impact analysis on decisions

Types of sensitivity analysis 1. deterministic: input variables with certian numbers univariate bivariate (e.g. confidence box) several variables 2. probabilistic (stochastic) – the model calculates outcomes based on random values of variables, therefore the variables are selected by chance based upon their distrubition bootstrap method Monte Carlo simulation confidence ellipse cost-effectiveness acceptability curve

Tornado diagram

Two-way sensitivity analysis Comparator New therapy diff. QALYs 5,97 8,52 2,54 treatment costs (Euro) 117 882 168 531 50 649 ICER   19 906 Impact of discount rates on ICER QALYs 19 906 0% 1% 2% 3% 4% 5% 6% 7% Costs 13 653 15 174 16 799 18 530 20 363 22 299 24 334 26 465 13 238 14 713 16 290 17 967 19 745 21 622 23 595 25 661 12 896 14 332 15 868 17 502 19 234 21 062 22 984 24 997 12 613 14 018 15 520 17 118 18 812 20 600 22 480 24 449 12 379 13 759 15 233 16 802 18 465 20 220 22 065 23 997 12 188 13 546 14 997 16 542 18 179 21 723 23 625 12 031 13 371 14 804 16 328 17 944 19 650 21 443 23 321 11 903 13 229 14 646 16 155 17 753 19 441 21 215 23 072

Confidence Box Δcosts hatékonyság Δeffectiveness

Probabilistic sensitivity analysis ΔQALYs ΔCosts ICER 2,60 52 867 20 299

Probabilistic sensitivity analysis ΔQALYs ΔCosts ICER 2,60 52 867 20 299 x

Confidence ellipse ΔQALYs ΔCosts ICER 2,60 52 867 20 299 x

Cost-Effectiveness Acceptability Curve ΔQALYs ΔCosts ICER 2,60 52 867 20 299 x

Cost-Effectiveness Acceptability Curve ΔQALYs ΔCosts ICER 2,60 52 867 20 299

Uncertainty of payers related to new technologies efficacy effectiveness (adherence and persistence) relative effectiveness to competitor technologies risks (e.g. rare serious adverse events) surrogate outcomes  hard endpoints cost-effectiveness number of patients (eligible patients + market penetration) risk of off-label use (i.e. inappropriate targeting; longer therapy; etc.)

Answer to uncertainty of payers: risk-sharing (1) efficacy outcome guarantee effectiveness Manufacturer-funded treatment initiation – probation period conditional treatment continuation relative effectiveness coverage only with research - patient registry funded by manufacturers rare serious adverse events coverage only with research - patient registry funded by manufacturer

Answer to uncertainty of payers: risk-sharing (2) surrogate outcomes coverage only in research cost-effectiveness revision of previous policy decisions (coverage only with research) number of patients (eligible patients + market penetration) mandatory budget impact analysis price-volume agreement risk of off-label use (i.e. inappropriate targeting; longer therapy; etc.) financial risk-sharing based on market share utilization cap

risk sharing agreements financial based outcome based conditional coverage performance linked reimbursement / outcomes guarantee market share utilization or price cap manufacturer funded treatment initiation price volume patient level population level coverage with evidence development conditional treatment start or continuation only in research only with research Ref: Sullivan S, ISPOR Paris, 2009