1. 1 Applying economic evaluation to drug subsidy decisions: an Australian perspective Adriana Platona Director Pharmaceutical Evaluation Branch adriana.platona@health.gov.au

2. 2 Australian system u Universal access through Pharmaceutical Benefits Scheme for over 50 years u Cost-effectiveness evaluation mandatory for decisions about funding of pharmaceuticals since 1993 u Experience from >1,150 PBAC decisions involving economic evaluation u Is the system it perfect?

3. 3 u NO, JUST THE BEST! u To provide timely, reliable and affordable access for the Australian community to necessary and cost- effective medicines –Equity of access AND value for money

4. 4 Australian health care system u Federal government - Canberra –subsidises community-based services u State/territory governments –provide public hospital services (partially funded by federal government via transfer payments) u Coordinated care? u Coordinated policies for drug purchasing ? Tendering occurs in hospitals, nationally for vaccines, but not for PBS

5. 5 Major community programs u Medicare Benefits Schedule –medical, pathology, diagnostic, imaging services –Medical Services Advisory Committee (MSAC) u Pharmaceutical Benefits Scheme (PBS) u National Immunisation Schedule –Pharmaceutical Benefits Advisory Committee (PBAC) u Current work – improve coordination –In decisions eg for hybrid technologies, drugs requiring molecular testing –In processes MSAC 12-18 months; PBAC 17 weeks

6. 6 The 17 week PBAC cycle u Manufacturer prepares application u Submission is evaluated 10 weeks u Technical sub-committees – Economics, Drug Utilisation u Occasional PBAC initiates reviews –ATRAs vs ACE –Herceptin metastatic breast cancer –Clopidogrel for stable angina in patients undergoing stenting –Current work: rheumatoid arthritis u No fee currently charged for evaluation – proposal to introduce cost-recovery u Independent review of PBAC decisions

7. 7 Forecast DoHA Expenditure

8. 8

9. 9 PBS cost to government

10. 10 Volume of PBS prescriptions

11. 11 Regulatory and reimbursement u 1. Marketing approval from TGA “registers” drug –efficacy, safety, quality u 2. PBAC “recommends” –comparative effectiveness, comparative safety, comparative costs –www.health.gov.au or www.pbs.gov.auwww.health.gov.au »PBAC Outcomes and Public Summary Documents” ; PBAC agenda published 6 weeks prior to meeting u Minister “declares”

12. 12 Current work u Strategic collaboration between regulatory clinical evaluation and reimbursement clinical evaluation -For methodological issues: eg. surrogate outcomes, molecular targeting -Processes -Better use of scarce evaluation resources

13. 13 All major submissions have an economic analysis u New drug u Major change to current restriction

14. 14 Major submissions 1991-2008

15. 15 Types of economic evaluation in manufacturers initial submissions Number: 38 67 47 62 58 61 61 47 51 46 36 36 49 49 52 49 809

16. 16 u PBAC does not have a single threshold for the incremental cost-effectiveness ratio (ICER) u Strength of economic evaluation depends on quality of clinical data! u Weak clinical data means uncertain ICER

17. 17 Activity Indicators for the Pharmaceutical Benefits Scheme

18. 18 Activity indicators

19. 19 u Uncertain ICER can be managed through u better data and/or lower price u frequently backed up by legal contracts (deed of agreement) between government and drug company about jointly managing the risks in financial expenditure u a few examples of CED in practice

20. 20 Cost-Effectiveness: benefits u “Outcomes-based reward system” – buy health outcomes u Cost-justification - not legal to pay a higher price unless a drug has better efficacy or better safety over the comparator u Robust, consistent decision-making u Basis for greater transparency u BUT not always a cost-containment tool

21. 21 Current PBAC Guidelines Current PBAC Guidelines URL: –http://www.health.gov.au/internet/main/publishing.ns f/Content/pbacguidelines-indexhttp://www.health.gov.au/internet/main/publishing.ns f/Content/pbacguidelines-index –2008 (version 4.3) u No minimum standard for clinical data (Complex decisions for drugs for orphan indications) u Promote comparability across submissions u Transparent inputs and methods of analysis

22. 22 6 sections to a major submission u A: context –restriction and comparator u B: clinical evaluation u C: details of inputs into economic evaluation u D: economic evaluation – structure and results u E: utilisation and financial implications u F: quality use of medicines, risk-sharing arrangements and other relevant factors

23. 23 A: context of submission u Requested restriction –aim is to identify and restrict in those likely to benefit most –Problematic when discordance between regulatory and reimbursement indications arise u Main comparator –pragmatic: “the therapy prescribers would most replace in practice” –can be a product which is generic

24. 24 B: clinical evaluation – EBM approach u Hierarchy of preferred sources of evidence –direct randomised trial(s) –indirect comparisons: two sets of randomised trials involving common reference –non-randomised studies –expert opinion u Minimise systematic and random error

25. 25 Issues with cost-minimisation u Usually based on indirect comparison which introduces uncertainty –Trials not always comparable –Minimum clinical important differences not always justified (partly related to lack of coordination and insufficient details for decisions made by regulatory authorities) –See expert reports on www.pbs.gov.au u The new products simply asks for the same price of the comparator, not a reduced price u Although applications claim that one product replaces another with small financial expenditure – often not true

26. 26 Superiority vs noninferiority 0 Better Worse ? x x Superior Treatment effect over comparator Better 0 Worse Noninferior x ? x MCID Drug A Drug B Drug C Drug D

27. 27 C: Translating trial evidence u New section in the Guidelines u Request a more explicit set of connections between the clinical and economic evaluations 1. Identify and investigate whether translation issues arise and the impact on ICER –applicability, extrapolation or transformation 2. Facilitate independent verification 3. Relate results to the economic evaluation

28. 28 Guidance on translation u Applicability of trial results to Australian patients –critical issue for HIV drugs, diabetes drugs –subgroup analyses where justified u Extrapolation beyond trial horizon –What assumption is made about the treatment effect beyond the trial u Transformation of trial outcomes –surrogate to final outcomes –utility valuation

29. 29 Surrogate to final outcomes u 3 steps to a more convincing transformation 1. Association between surrogate and final –typically epidemiological (longitudinal) studies –plus biological reasoning 2. TE on surrogate predicts TE on final –requires randomised trials –eg vit D analogues for renal disease 3. Rationale to accept this prediction given the mechanism of action of the proposed drug

30. 30 Association – what we get Surrogate outcome Final outcome Association Eg Framingham in CVD Detected difference in surrogate outcome Projected (inferred) difference in final outcome

31. 31 Trial-based predictions – what we would like to get: capture uncertainty Difference in surrogate outcome Difference in final outcome Relationship Prediction bound 95% CI of relationship 95% CI of relationship

32. 32 Surrogate to final outcomes u Extremely complex technical area u Large area of uncertainty for ICER u Need randomised controlled trials u Enthusiasm for biomarkers as surrogate outcomes –Smaller, faster trials –But quantification of benefits uncertain –Implications for safety assessment? –Needs early and strategic engagement of regulatory and reimbursement agencies

33. 33 D: economic evaluation u Select between noninferiority and superiority –for noninferiority »select between cost-minimisation and cost analysis –for superiority »purely trial-based or »“stepped” evaluation – each step is linked with an area of section C u More extensive sensitivity analyses –broad assessment of uncertainty – REMAINS AN ISSUE –probabilistic sensitivity analysis has a role (new)

34. 34 Valuation of outcomes u CUA preferred u Utilities from the same trials as the treatment effect using MAUI u No preference for a particular MAUI – rare to have trial based u Choice experiments: SG, TTO accepted u Critical issue: framing bias in scenarios, interpretation of utility gain u QALYs not always useful - paucity of reliable research about the trade-offs individuals are prepared to make for children, end-of-life

35. 35 Other supplementary analyses u Not accepted in the base case – only in sensitivity analyses »production changes »carer impacts

36. 36 Summary of current issues u Early and strategic engagement of regulatory and reimbursement agencies u Better coordination for drug-device/drug-test products u Economic evaluation is only one component for pharmaceutical policy in Australia u Published prices vs real effective prices u High costs medicines u Risk sharing arrangements u CED

37. 37 Pricing policies u For brand medicines or vaccines, after positive PBAC recommendation that drug is cost-effective – consideration by PBPA u PBPA – Health, Industry, consumer, pharma industry u Declaration about cost of production u Profit margin approx 25-30% acceptable u Lower uptake of generics than in most other OECD countries – remains an issue u Until 2006, through cost-minimisation, generics entrant had the same price as the already available branded product u Financial benefit of generics accrued to pharmacy not federal government

38. 38 Pricing policies u Mandatory 12.5% price reduction when generic becomes available u 1 August 2007, two separate formularies –F1 – single brand medicines –F2 – multiple brands; price reductions from 1 August 2009 »F2A – 2% price reduction for three years »F2T – one-off 25% price reduction –No links between the F1 and F2 – some anomalies »Alendronate – risedronate; SSRI but not venlafaxine; simvastatin but not atorvastatin or rosuvastatin u Price disclosure – aims to claw-back discounts by manufacturers to pharmacy