1. HTA Regulation and Economic Evaluation in Europe: where are we? Professor Alistair McGuire, LSE, London Istanbul, May 2009

2. Outline Introduction Background Some specific regulatory regimes and specific countries

3. Levels

4. Health expenditure growth versus GDP Growth Health care growth is outpacing GDP growth in all OECD countries (bar Finland) and has done for the past 35 years Health Care Expenditure per capita Compound annual growth rate

5. Pharmaceutical market value (ex manufacturers prices € 2004) Source: UK OFT, 2007

6. % share in market value of generics in 2005 Source: UK OFT, 2007

7. Sources of funding for pharmaceuticals 2004-2006 Source: UK OFT, 2007

8. Overview of different Price and reimbursement system: 3 main types: reference pricing, profit control, value based pricing IRP – International Reference Pricing PVA – Price & Volume Agreements Source: UK OFT, 2007

9. Health Care Regulation Fee-for-service lists (primary care) DRG pricing of hospitals Price caps for pharmaceuticals Licensing of pharmaceuticals considers –Safety issues –Efficacy issues –Quality issues Cost-effectiveness analysis as a 4 th hurdle

10. Approaches to drug regulation: EU MeasureIn-patent drugsOff-patent drugs Free Pricing Germany, France(?), Malta, UK Direct price controls Austria, Finland, France, Greece, Ireland, Italy, Spain Netherlands, Portugal, Baltics, Sweden, Poland, Czech, Cyprus, Hungary, Slovakia, Slovenia Austria, Finland, Greece, Ireland, Netherlands, Sweden International price comparisons Austria, Belgium, Denmark, Finland, Greece, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, Baltics, Poland, Czech, Hungary, Slovakia, Slovenia, Canada Austria, Belgium, Denmark, Finland, Greece, Ireland, Netherlands, Portugal, Spain, Sweden Profit controlUK Reference pricing Netherlands, Hungary, Germany Belgium, Denmark, France, Germany, Italy, Portugal, Spain, UK

11. Current/Future Position of CEA in Europe ItalyFranceGermanyNetherlandsSpainUK Health care funding Social insurance (+ tax) Social insurance Tax funded Pharma funding National Target budget (13%) – Regional emphasis increased Not fixed – but more emphasis on budget setting National Budget – allocated regionally- physician budgets National Target budget Region. Controlled - incentives to physicians on volume Not fixed Pharma pricing Variable “Tax” & Reference pricing & “free” pricing for innovation Free pricingNegotiationCentrally negotiated PPRS Pharma regulation Increased HTA & CEA – but variable Positive listing & increase in CEA Positive lists & generic subs. & HTA & CEA & co- pay CEA & budget impact Regional discretion – increase in HTA &CEA at regions Negative lists & CEA & guidelines

12. Economic evaluation always involves a comparative analysis of alternative courses of action Choice Programme A Programme B Costs A Costs B Outcome A Outcome B The difference in costs is compared with the difference in outcomes, to assess the cost per unit of outcome of the intervention of interest ICER = (C A – C B ) / (E A – E B )

13. BACKGROUND TO THE EUROPEAN SITUATION Variety of approaches to assessment, drug pricing and reimbursement Great diversity in health care systems Increasingly formal requirements for economic evaluation On occasion industry has set the standard by presenting economic data

14. Specific Country examples Economic evaluation and role in –Germany –UK

15. Germany Historical – “Free” Pricing of Drugs Background –Pharmaceuticals “responsible” for some Regions going over budget –Pharmaceutical expenditure rising faster than other health care expenditure 2001 by 11% compared to 2.5%)

16. Germany Regulatory structure changing –Reference pricing for multi-source products –Prescription budgets (recently abolished) –Negative reimbursement list to be replaced with a positive list –Co-payment system –HTA reports by IQWiG to cover economic evaluation of pharmaceuticals Based on within treatment group comparator Clinical evidence at cornerstone Identification of an efficiency frontier

17. Germany – IQWiG proposals Efficiency frontier approach Comparison of new pharmaceutical products across relevant dimensions of effectiveness Various measures of effectiveness allowed Effectiveness data drawn from clinical trials Modelling of long term outcomes based on trial outcomes Value of effectiveness to be determined # of on-going techinical issues to be resolved

18. Germany – IQWiG proposals

19. UK Concern over rising expenditure on new products Regulation dominated by Pharmaceutical Pricing Reimbursement Scheme (PPRS) –Voluntary profit-capping scheme –“Free” pricing system –Negative list PPRS –Profit cap scheme NICE currently asks for evidence on cost-effectiveness –Value based pricing proposed (OFT)

20. NICE: UK Cost-effectiveness thresholds –Under £20,000 per QALY accept –£20,000 to £30,000 per QALY Issues of uncertainty Innovative nature of programme Particular features of intervention Wider societal aspects –Above £30,000 per QALY unlikely unless other good reason Is it a rationing device? Does it inhibit use? –Obviously yes; but in most cases guidance has been positive and use has increased –Most guidance is about APPROPRIATE use

21. NICE Outcomes UK National Cancer Director reviewed use of cancer drugs – Industry was concerned about NICE recommendations and continuing variation in use Considered 16 drugs evaluated by NICE Findings –Overall use general increases after NICE approval –Geographical variation in use lessens over time after approval Source:UK NHS Cancer Director: IMS data

22. NICE: UK NICE commissioned report on 28 guidance areas covering 33 (1/3 of all recommendations to start of 2005) recommendations to assess impact using IMS data and UK Hospital Pharmacy Audit data 30% recommended for 1st line use; 57% recommended for 2nd/3rd line use or specific patient groups; 12% (#4) rejected (but one entered a risk sharing agreement)

23. NICE Outcomes Expectation –NICE would limit up-take and generally have negative impact on diffusion Outturn –Varies across individual intervention –But generally positive…if restricted –Has occurred during a time of unprecedented pre-war growth in UK health expenditure (7% per annum real growth over 1999/2000 to 2007/08: c6% of GDP to c10% GDP) What would happen if health care expenditure was not growing?

24. Recent recommendations by OFT (2007) 1. All new products subject to a NICE ex-ante review, with an agreed cost per Qaly threshold 2. Prices are set by DoH on basis of above review 3. Periodic review and price adjustment when market conditions change 4. Prices can rise or decline as a consequence of the review 5. Patent expiry of a molecule implies a price cut for the molecule and price cuts for similar molecules; 6. Use risk-sharing and non-linear pricing agreements to help set the “right” prices 7. in short-term continue PPRS in combination with VBP as above 8. A fixed drug budget

25. Pricing issues - Ex ante VBP Ex ante assessment of pricing plus periodic ex post adjustment Trade-off innovation incentive and market incentive IF ex ante assessment based on product value and coupled with ex post adjustment based on product value –Innovative incentives reduced –Ex ante pricing based on efficacy does not necessarily reward innovation –Could apply risk-sharing more widely

26. Pricing issues - Ex post VBP If ex post pricing is adopted based on value of product the protection of innovation is weakened and the risk of innovation is returned to the firm –Firms may choose less “risky” innovations (potentially high value products) –Firms may not choose high risk innovation strategies (as payoff to discovery tends to zero relative to the ex post reimbursement inducement to minimise risk) –Variation in innovation decreased –Variance of risk minimised

27. Conclusions Regulation increasingly mapped to “Value based medicine” “Free” pricing systems changing regulations CEA is increasingly used as a supplement to negative or positive listing CEA – may be a follow-through regulation –price given in first instance for a set period –CEA evidence collected prospectively over a number of years within post-marketing context Regulation is here to stay –Question of optimal form of regulation –Optimal timing of imposition