1. Evaluating the socio-economic benefits of innovation in healthcare AN INCONVENIENT TRUTH (no 2): Rationing in Healthcare and the role of pharmacoeconomics. Prof. Tienie Stander 17 July 2010

2. TODAY’S AGENDA HIV in contextHIV in context Illustrative pharmacoeconomics (PE)Illustrative pharmacoeconomics (PE) The theory of PEThe theory of PE The practice of PEThe practice of PE Case studiesCase studies Q & AQ & A

3. HIV in context Deaths (M/yr) Prevalence (M) 25 years $150 billion 50k papers www.unaids.org

4. Illustrative PE Meet the Simpsons … Angela Josh Mary How on earth am I going to feed these kids?

5. Illustrative PE (cont.) Mary has the following concerns: I only have €200 to feed the familyI only have €200 to feed the family What is the best food to buy given my financial constraints?What is the best food to buy given my financial constraints? How should I allocate the food once bought?How should I allocate the food once bought?

6. Q & a

7. Illustrative PE (cont.) High quality? High quantity? What is the best food to buy given my financial constraints?

8. Illustrative PE (cont.) High quality? High quantity? What is the best food to buy given my financial constraints?

9. Illustrative PE (cont.) Josh Angela How should I allocate the food once bought?

10. Illustrative PE (cont.) Josh Angela How should I allocate the food once bought?

11. Illustrative PE (cont.) The Simpsons X 50 million = a country calledThe Simpsons X 50 million = a country called DRD (Democratic Republic of Dilemma) Mother Mary = Minister of Health of DRDMother Mary = Minister of Health of DRD Suffering from the same dilemmas:Suffering from the same dilemmas: Limited resourcesLimited resources Unlimited needs and expectationsUnlimited needs and expectations What healthcare to buyWhat healthcare to buy How to distribute itHow to distribute it

12. Illustrative PE (cont.) Technical efficiency: Should we invest in drug A or drug BTechnical efficiency: Should we invest in drug A or drug B Allocative efficiency: Should we allocate resources to disease A or B or even to healthcare or educationAllocative efficiency: Should we allocate resources to disease A or B or even to healthcare or education Practical question: If you, as the MoH of DRD, was given a healthcare budget of DRD$50 billion … Knowing that there is shortfall of DRD$20 billion … How will you allocate the money? Will you rather invest in cheaper lower quality drugs just to make sure everybody gets access to some form of medicine, or …

13. The theory of pe 1. Clinical Filter 2. Economic Filter 3. Financial Filter 4. Funding Filter 5. Marketing Filter DECISION MAKING MODEL TO ALLOCATE SCARCE HEALTHCARE RESOURCES

14. The theory of pe (cont.) Marketing and Sales vs. Market Access and Reimbursement

15. The theory of pe (cont.) Rationing in healthcareRationing in healthcare Unfolding role of PEUnfolding role of PE Tool for access and reimbursementTool for access and reimbursement Rational scarce resource allocationRational scarce resource allocation Cost vs. benefit tradeoffCost vs. benefit tradeoff

16. The theory of pe (cont.) Types of PE analyses: Cost effectiveness analysis (CEA)Cost effectiveness analysis (CEA) Cost utility analysis (CUA)Cost utility analysis (CUA) Cost benefit analysis (CBA)Cost benefit analysis (CBA)

17. The theory of pe (cont.) Economic modeling: attempting to mimic the natural of complex diseases in mathematical and epidemiological models.Economic modeling: attempting to mimic the natural of complex diseases in mathematical and epidemiological models. Example: FluExample: Flu OutcomeInterventionFlu season HealthyVaccinateSurviveDeathNo vaccineSurvive

18. The theory of pe (cont.) Example: Flu (cont.)Example: Flu (cont.) OutcomeInterventionFlu season HealthyVaccinateSurviveDeath No vaccine Survive CohortCostProbability of death Vaccinate10,000$1.50.001 No vaccine10,000$0.00.101 Total costDeaths Vaccinate$15,00010 No vaccine$01,011 Incremental$15,000-1,001 Incremental cost-effectiveness ratio ($15,000 / 1,001) $15/death avoided

19. The practice of pe Research question: are the new WHO ART treatment guidelines cost effective?Research question: are the new WHO ART treatment guidelines cost effective? PE model comparing d4T, AZT and TDF in first line treatmentPE model comparing d4T, AZT and TDF in first line treatment Model structure: Decision treeModel structure: Decision treeDecision treeDecision tree

20. Case study 1 Results d4T vs. TDF: Less effective Less costly More costly More effective 3x 2x 1x Not cost-effective $2,79 2 $6,179 $12,358 -$856 Cost:Effectiveness TDF $20,426 17.68x QALY d4T $19,008 17.18 QALY Incremental effect $1,4180.51 ICER= $2,792

21. Case study 2 Results AZT vs. TDFResults AZT vs. TDF Less effective Less costly More costly More effective 3x 2x 1x Not cost-effective $6,179 $12,358 $9,161 $2,686 Cost:Effectiveness TDF $22,903 17.87x QALY AZT $22,128 17.79 QALY Incremental effect $7750.08 ICER= $9,161

22. ROLE OF CBA Aimed at financiers of healthcareAimed at financiers of healthcare Provides ROI answers. Such as:Provides ROI answers. Such as: What is the monetary value of economic benefits compared to the economic costs (the investment)?What is the monetary value of economic benefits compared to the economic costs (the investment)? What is the Net Present Value of the investment?What is the Net Present Value of the investment? When will we reach breakeven?When will we reach breakeven?

23. summary Think of the Simpson family when confronted with tough healthcare choicesThink of the Simpson family when confronted with tough healthcare choices Pharmacoeconomics assist decision makers to allocate scarce healthcare resources in a rational wayPharmacoeconomics assist decision makers to allocate scarce healthcare resources in a rational way Price is not the same as costPrice is not the same as cost The best way to help the poor is not to become part of them (A Lincoln)The best way to help the poor is not to become part of them (A Lincoln)