OHE Lunchtime Seminar with Associate Professor Paula Lorgelly, Deputy Director, Office of Health Economics From the Antipodes to the Motherland: reflections on HTA decision makers as budget takers and budget makers

1. Assoc Prof Paula Lorgelly
14th December 2015
From the Antipodes to the
Motherland: reflections on HTA
decision makers as budget takers
and budget makers

2. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
By way of introduction

3. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Presentation Plan
• HTA decision making globally and locally
• Review/describe how the United Kingdom,
Australia and New Zealand make funding
decisions/recommendations
• Listing and funding
• Case studies
• include cancer drugs
• Ways forward for NICE?
• Economic theory of decision making

4. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Health Technology Appraisal
Globally and Locally

5. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
HTA Globally – one size does
not fit all
• Various committees
• NICE in England and Wales
• SMC in Scotland
• CADTH CDR in Canada
• IQWiG in Germany
• Pharmaceutical Benefits Advisory Committee (PBAC) in
Australia
• Pharmaceutical Management Agency (PHARMAC) in New
Zealand
• Alternative criteria

6. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
http://www.ispor.org/PEguidelines/index.asp

7. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Factors that influence HTA
decisions
• A range of factors affect adoption decisions
• Recent synthesis found that there is little
consensus across agencies Bossers et al, 2015
• Additionally differences in studies focusing on
the same agencies
• However, for NICE cost effectiveness appears to
be important Devlin & Parkin, 2003; Dakin et al, 2006; Dakin et
al, 2014; Cerri et al, 2014

8. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
HTA Locally – UK issues
• NICE cost effectiveness threshold
• End of Life inflation
• Cancer Drugs Fund
• Austerity and affordability

9. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
The Motherland and the Antipodes

10. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
United Kingdom
• Population = 64.1m
• GDP per capita = $39,800 (PPP)
• Real growth rate = 3%
• Health expenditure % GDP = 9.1%
• Pharmaceutical expenditure =
£16,393m (Oct 2015)
• Pharma exp per capita = $367
($US PPP 2008) OECD, 2014

11. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
NICE
• Established in 1999 to undertake technology
appraisals and produce clinical guidelines
• Now has a wider remit
• Appraisal committee considers the evidence
• Clinical – Patient benefits
• Economic – Value for money

12. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Decision Criteria and
Recommendations
• Explicit cost effectiveness threshold, £20k-£30k
per QALY
• End of life threshold of £50k (weight of 1.6)
• Decisions
• Recommended
• Optimised (restricted)
• Only in research (approve with research)
• Reject

13. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Implementation into NHS
• Mandatory that approved technologies are made
available within 90 days
• Clinical Commissioning Groups are to find this
money
• NICE does not advise on how to find this money,
although does produce costing templates to understand
the budget implications locally
• In some instances NHS England may provide special
funding

14. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Criticisms
• A postcode lottery remains with regard to what
disinvestment decisions are made locally to fund
NICE decisions
• NICE has no funding mandate, threshold bears
no relation to the budget impact

15. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Australia
• Population = 22.8m
• GDP per capita = $46,600 (PPP)
• Real growth rate = 2.7%
• Health expenditure % GDP = 9.4%
• Pharmaceutical expenditure =
$10,050m (AUD)
• Pharma exp per capita = $509
($US PPP 2008) OECD, 2014

16. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
PBAC
• PBAC established by act of parliament in 1953
• Since 1993 mandatory that submissions include
economic evidence
• The PBAC is an independent expert body
appointed by the Australian Government
• Economic Subcommittee (ESC)
• Drug Utilisation Subcommittee (DUSC)
• No new medicine can be listed unless the
committee makes a positive recommendation

17. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Submission requirements
• Clinical evidence
• Safety
• Economic evidence
• cost minimisation analysis
• cost effectiveness analysis
• Consider budget impact (5 year forecast)

18. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Decision Criteria
• No explicit cost effectiveness threshold
• Often assumed to be $50,000 per QALY
• Some consider PBAC to work within a value
based pricing framework

19. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Recommendations
• PBAC makes recommendations to the Minister
for Health for Pharmaceutical Benefits Scheme
(PBS) listing
• Positive, reject, defer
• Sponsor negotiates pricing arrangements with
Department of Health
• When that listing is expected to cost more than
$20 million in any one of the four years of the
forward estimates period the Cabinet must give
approval

20. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Funding decisions
• Very few instances where Minister/DoH has not
funded as per PBACs recommendation
• Sildenafil for erectile dysfunction (2002)
• Number of deferrals in 2011
• Hep C drugs (discussed later)
• Most notable was trastuzumab for metastatic
breast cancer, which in 2001 was not
recommended by PBAC
• Resulted in the Herceptin Program
• Although this year it came into the PBS

21. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Pharmaceutical expenditure

22. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Criticisms
• Timely access to drugs
• High cost drugs and expenditure growth
• Cost of generics

23. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
New Zealand
• Population = 4.4m
• GDP per capita = $35,300 (PPP)
• Real growth rate = 3.3%
• Health expenditure % GDP = 9.7%
• Pharma expenditure = $795m (NZD)
• Pharma exp per capita = $261
($US PPP 2008) OECD, 2014

24. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
PHARMAC
• Established in 1993
• PHARMAC's statutory objective is: ’to secure for
eligible people in need of pharmaceuticals, the
best health outcomes that are reasonably
achievable from pharmaceutical treatment and
from within the funding provided.’ Section 47(a)
of the NZPHD Act
• Expanded remit to evaluate hospital
pharmaceuticals and medical devices

25. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Decision criteria (current)
1. The health needs of all eligible people within New Zealand;
2. The particular health needs of Māori & Pacific peoples;
3. The availability and suitability of existing medicines, therapeutic medical devices
and related products and related things;
4. The clinical benefits and risks of pharmaceuticals;
5. The cost-effectiveness of meeting health needs by funding
pharmaceuticals rather than using other publicly funded health & disability
support services;
6. The budgetary impact (in terms of the pharmaceutical budget and the
Government’s overall health budget) of any changes to the Schedule;
7. The direct cost to health service users;
8. The Government’s priorities for health funding, as set out in any objectives notified
by the Crown to PHARMAC, or in PHARMAC’s Funding Agreement, or elsewhere;
and
9. Such other criteria as PHARMAC thinks fit. PHARMAC will carry out appropriate
consultation when it intends to take any such “other criteria” into account.

26. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Factors for Consideration, 2016

27. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Cost effectiveness
• Incremental utility cost ratio (IUCRs), i.e. the incremental
QALY gains per unit net cost, is the metric used
• Expressed as QALYs per $1 million of the total budget
invested
• QALYs gained per $1M spend emphasises health gain, by
presenting the result as maximising health gains as
opposed to minimising cost
• Less inference on cost-effectiveness thresholds, instead
focuses decisions on opportunity cost (the gains within a
set budget)

28. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Cost effectiveness threshold?
• There is no threshold below which a pharmaceutical is
considered cost-effective
• Proposals are only considered in relation to other funding
proposals at the time
• Cost-effectiveness is only one decision criterion used by
PHARMAC
• Spending on pharmaceuticals is required to be kept within
a fixed budget
• What is and is not considered cost-effective will vary with
the amount of funding available
Metcalfe and Grocott, 2010

29. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Recommendation to list
• Pharmacology and Therapeutics Advisory
Committee (PTAC) advises PHARMAC, offer
recommendation
• Positive: high, medium and low priority
• If PHARMAC accept then begin commercial
negotiations
• Funding within a fixed capped budget, so need
to fund new products from savings

30. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
PHARMAC’s budget

31. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Praise and Criticisms
• “Pharmac is possibly the most publicly respected
body in this country. Protesters took to the streets at
the mere suggestion its ability to drive hard bargains
with pharmaceutical manufacturers might be
compromised in the recently concluded Trans-Pacific
Partnership trade negotiations. ‘Big Pharma's’
occasional lobbying attempts to change Pharmac's
remit only reinforces our confidence in the
professionals who decide how our taxes can be spent
for medicines of most value.” NZ Herald, 5th Dec
• Lack of choice
• Waiting list of drugs

32. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Summary comparison
NICE PBAC PHARMAC
Serving a population of 64m 23m 4.4m
Pharmaceutical
spending per person is
$367 $509 $261
Considers economic
evidence
Yes Yes Yes
Has an explicit cost
effectiveness threshold
Yes Maybe No
Has an explicit budget
threshold
No No Yes
Implementation Mandatory but
not funded
Funded If there is money
in the fixed
budget

33. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Case studies and comparisons

34. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Case studies - Sofosbuvir
• Sovaldi (Gilead)
• Blockbuster drug
• Extraordinary high cost
• Costs US$84k for a 12 week
course
• One of a number of direct-
acting antivirals (DAA)
• Notably cost effective at most acceptable
thresholds

35. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in the UK?
• NICE approved Sofosbuvir in Feb 2015
• Estimated cost of implementing the guidance would be £106m
• Accepted that NHS England should be allowed longer than
the standard 3 months to implement (31st July 2015)
• Recently NICE approved three further treatments
• Prior to this NHS England took proactive approach creating
an Emergency Access Programme
• There are now Operational Delivery Networks to help NHS
England commission hepatitis treatment
• Commercial in confidence pricing arrangements

36. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in Australia?
• Sofosbuvir first reviewed March 2014, then again in March
2015 (with a price discount)
• Range of other DAAs reviewed at the July 2015 meeting
• The PBAC advised the Minister:
• that there is the high clinical need for all oral interferon-free
treatments of CHC to be made available on the PBS
• that these treatments would be cost-effective at $15,000/QALY
range and that there was no basis on which to recommend that
any one treatment be more expensive than another
• there is a large opportunity cost to health care system. Given
this large opportunity cost, the cost of a course of treatment
should be set irrespective of the duration, and that other
pricing policies be considered

37. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in Australia?
• Rumour that Sovaldi will cost $AUD65k
• Estimated that there are 233,000 patients =
$15b (twice the pharmaceutical budget)
• Approved as Section 100 drug
• Rationing by stealth

38. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in New Zealand?
• Considered Sofosbuvir in August 2014
• PHARMAC ranked it (and Ledipasvir+Sofosbuvir;
Harvoni) high priority for certain groups of
patients
• Decompensated cirrhosis
• Pre/post liver transplant
• Essential mixed cryoglobulinaemia
• But not get listed nor funded

39. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in New Zealand?
• Request for Information in Aug 2015 to help
inform a decision
• Gauging supply, and understanding new agents in the
pipeline, getting a better understanding of health
utilisation and prevalence
• Next communication is due Nov/Dec 2015

40. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Case studies - Pembrolizumab
• Keytruda (MSD)
• Immunotherapy for advanced stage melanoma
• First in a new class of cancer
immunotherapeutics
• Described by oncologists as revolutionary
• Follows the success of ipilimumab (Yeroy)
targeted therapy

41. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in the UK?
• Melanoma is the fifth most common cancer in
the UK
• Yervoy reviewed in 2012 and 2014, received
positive recommendation with Patient Access
Scheme (PAS)
• NICE published positive recommendation for
Keytruda in October 2015
• First drug to be approved through the Medicines
and Healthcare Products Regulatory Agency’s
Early Access to Medicine Scheme (EAMS)

42. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in Australia?
• Highest rate of melanoma in the world
• PBAC considered Keytruda at the March 2015
meeting
• Yervoy was approved in November 2012, after rejecting
at July 2011 and March 2012 meetings
• Committee said that Keytruda appeared to offer
a clinical advantage over Yervoy, but the
economic modelling did not allow a price
advantage to be estimated with confidence
• Proposed a managed entry scheme, may result
in revising the price

43. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in New
Zealand?
• Second highest rate of melanoma (after Australia)
• PHARMAC considered the evidence to still be developing
• Pricing being sort was excessively high, adversely
affecting the cost effectiveness ($300,000 for a full
course)
• In December 2015 PHARMAC recommended, but with low
priority
• In 2014 PHARMAC declined Yeroy
• Calls for the government to intervene, which is what
happened in 2008 with Herceptin
• Health minister recently conceded that it was wrong to overrule
PHARMAC

44. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Case studies – Trastuzumab
Emtansine
• Kadcyla (Roche)
• New line of targeted therapy for HER2 positive
breast cancer
• Part of Roche’s monopoly on targeted therapies for
breast cancer, includes Trastruzumab (Herceptin) and
Pertuzumab (Perjeta)

45. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in the UK?
• NICE first reviewed Kadcyla in April 2014
• Not cost effective even given flexibility in
threshold with EoL allowance
• Funded on CDF in 2014
• Roche recently agreed a discount with NHS
England to retain it on the CDF
• November 2015 NICE rejected it again, still not
cost effective
• Notably a lesser discount was offered to NICE
• “Questionable long-term future in the NHS”

46. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in Australia?
• Reminder that Herceptin for advanced cancer
was not funded via the PBS
• Evaluation of both Kadcyla and Perjeta were
problematic as the comparator was not deemed
cost effective
• Reviewed first in July 2013 and then with pertuzumab in
March 2014
• Herceptin for advanced cancer patients needed
to be brought into the PBS
• Note it has been periodically reviewed since 2001

47. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in Australia?
• Evaluated all three in November 2014
• Herceptin and Perjeta were approved (with risk sharing
arrangements), Kadcyla was deferred
• In an out-of-session meeting pricing proposal for Kadcyla
was proposed and accepted by PBAC

48. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What happened in New Zealand?
• MedSafe approved but no evidence that
PHARMAC is reviewing it
• Perjeta reviewed in February 2014, given low
priority
• Possibly an instance where the manufacturer
doesn’t wish to enter the market

49. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Cancer Drugs Fund
• Established with a fixed budget
• Lack of incentive to price cost effectively
resulted in NICE rejecting many cancer drugs
and these being funded on the CDF
• Budget was not constrained, now there is a need
for a rationing mechanism
• New consultation document regarding the CDF
• No equivalent in Australia nor New Zealand
• Although many oncologists in Australia have called for a
fund to expedite access while the PBS is overhauled

50. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Economics of Agency Decision
Making

51. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Agency Problem
• Principal-agent problem
• Principal recruits an agent to act on their behalf
• Due to asymmetry of information
• Agent acts imperfectly
• Lack of understanding of principal’s preferences and a
lack of (misaligned) incentives
• Generally in health economics see it in the
patient-doctor relationship (purchaser-provider
split)

52. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Agency problem in HTA
• Principal is the health service (NHS), agent is
the HTA agency (NICE)
• What criteria is of importance to the NHS?
• Funds allocation beyond technologies, includes hospitals
and other health providers
• Is this the same criteria NICE are using?

53. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Double agent problem
• Alternatively the population (general
public and/or patients) is the
principal and health service is their
agent, for whom NICE is their agent
• Again asymmetric information
• Given local implementation issues, the principal
could be at the level of the local catchment
• Highlights the implementation issues

54. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Misspecification of the objective
function
• NICE is seeking to maximise QALYs
• NHS is seeking to maximise health
• The public is seeking to maximise what?
• Health/wellbeing/wealth?
• What does the principal wish to maximise?
• Depends on who the principal is

55. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Misspecification of the
constraint
• Need to understand opportunity cost of
decisions
• What is the budget the agency is working
within?
• Is it possible to set an informed threshold?
• Threshold setter
• One that can be adapted/relaxed when faced
with adopting technologies which will have non-
marginal effects on the budget
• Threshold searcher

56. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
A way forward for NICE and the
NHS?
• PHARMAC’s fixed budget appears to offer more
affordable pharmaceutical prices, but with
limited drugs
• PHARMAC’s request for a greater budget was recently
denied
• PBAC appears to function with no budgetary
constraints, but this results in delays and
concerns regarding future budget impact
• What could be the NICEst approach?

57. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
NICEst approach Sampson, 2015
• It could be a threshold setter
• What is the social value of a QALY?
• It could be a threshold searcher
• Need to consider the current budget and affordability
issues
• This would require it to make disinvestment decisions (at
what threshold?)
• It could abandon the threshold (or at least give
less weight to it) and go down the PBMA or
MCDA approach

58. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
What could NHS England do?
• Alternatively, NHS England could search for the
threshold and then set the threshold for its
agent
• Or perhaps not have an agent at all?
• However need for credible separation of the
appraisal and implementation task

59. From the Antipodes to the Motherland:
reflections on HTA decision makers and budgets
Questions?
Comments?
Thank you!