Healthcare Systems, Policy and Economics 2024 PDF

Better Managers for a Better World Healthcare Systems, Policy and Economics November12, 2024 Costas Piliounis Guest lecturer: ChadiElias MSc in Pharma and Health Management  Professor’s Profile Costas Piliounis...

Better Managers for a Better World Healthcare Systems, Policy and Economics November12, 2024 Costas Piliounis Guest lecturer: ChadiElias MSc in Pharma and Health Management  Professor’s Profile Costas Piliounis Professor of Management Short descriptive biography: Education: Msc Chemistry – University of Patras, Greece Started my career in Food Industry in R+D and later in MSc Food and Management Sciences, University of Production. London From 1987 till 2017 I worked in Novo Nordisk where I had several leadership positions: Head of Middle East & Africa Head of Marketing and Business Development in International Operations Head of Spain and Portugal Head of Italy, Greece, Cyprus and Malta Hobbies: Travelling, Basket ball, Mentoring talented From 2017 I have established PNValue, an investment and people. consulting company. Through PNValue I invest in startup companies with focus Email contact: in eHealth. [email protected] 2 www.RomeBusinessSchool.com Contact details email: [email protected] Mobile: 00306944306625 00393455235730 3 Course Objectives Understand basics of the Healthcare systems Discuss the key drivers and the impact of various policies Discuss the role of Government Overview of Health Economics and HTA 4 Learning outcomes: After the lecture, you will be able to: Understand key Healthcare Systems Become familiar with various challenges the authorities and industry are facing Prepare for the upcoming classes of Market Access and HE 5 Reading Books: Leadership and Management in Healthcare, Neil Gopee and Jo Galloway, 2016 Transformational Leadership in Healthcare, Dr Dorine Fobi-Takusi, 2022 Lazard Biopharmaceutical Leaders Study, Sept 25, 2024 Health Economics Made Easy, Daniel Jackson, 2021 6 History of Healthcare systems Hippocrates of Kos 7 History of Health Systems Ancient Civilizations: Healthcare practices can be traced back to ancient civilizations. In Egypt, priests acted as physicians, using herbal remedies and surgery. The Greeks introduced the concept of rational medicine, with Hippocrates laying the groundwork for clinical observation and ethics. Middle Ages: During the Middle Ages, healthcare was heavily influenced by religion. Monasteries often served as centers for healing, where monks provided care and preserved medical texts. However, this era also saw the rise of superstition and limited medical knowledge. Renaissance: The Renaissance brought a renewed interest in science and anatomy. Figures like Andreas Vesalius advanced the understanding of human anatomy, leading to more effective surgical techniques and a shift towards empirical observation. 18th and 19th Centuries The Industrial Revolution transformed healthcare with the establishment of hospitals and the professionalization of medicine. Public health initiatives began to emerge, as did the germ theory of disease, championed by scientists like Louis Pasteur and Robert Koch, which revolutionized sanitation and infection control. Late19th century, Otto von Bismarck introduced a form of social insurance in Germany that provided health coverage to workers, which laid the groundwork for modern social health insurance systems 20th Century: The 20th century saw significant advancements in medical technology, pharmaceuticals, and healthcare delivery. The establishment of national healthcare systems in various countries aimed to provide universal access to healthcare. The World Health Organization (WHO) was founded in 1948 to coordinate international efforts. The same year NHS was established. 8 Chadi Elias Pharmacist and Health Economist Studied Pharmacy in University of Damascus Health Economics in University Pompeu Fabra Experienced professional in Pharma Industry with expertise in Sales, Market Access, Gov Affairs and Health Economics. Lives in Dubai, UAE 9 Chadi Elias Healthcare Systems Better Managers for a Better World Healthcare Systems and Basics of Health Economics 1. Healthcare system overview 2. Stakeholders, their roles and interaction 3. Types of HC Systems, their aspects and Pros & Cons 4. Regulation, Payment, Technology and Empowering Patients 5. Economic Evaluation in HealthCare 6. Defining and measuring Cost 7. Measuring Outcome 8. Decision Making Process 9. Utility in HC and Cost Utility Analysis – QLAY 10. Barriers and Misconceptions in HTA 11. Patient Financial Assistance Programmes The Healthcare System - Overview Better Managers for a Better World The healthcare system refers to the whole ecosystem around health: Organization of people, institutions, and resources that deliver healthcare services to meet the health needs of a population. Objective: To ensure timely, accessible, and high-quality healthcare to improve population health. Stakeholders: Regulator: Government bodies and policy makers. Provider: Hospitals, clinics, doctors, nurses, etc. Payer: Who fund the process Public (government, insurance, andout-of-pocket payments). Key Components: 1. Technology & Innovation: Medical technology, pharmaceuticals, digital health 2. Financing: Funding the process 3. Access: Availability of services, equity, affordability. 4. Quality: Effectiveness, safety, and patient-centered care.  The Healthcare System - Stakeholders Better Managers for a Better World Government authorities that create policies, set standards, and Entities that finance healthcare services, including: oversee the healthcare system to ensure safety, quality, and 1-Government programs (like Medicare and Medicaid in the US) equity. 2-Insurance companies 3-Individuals paying out-of-pocket. Examples: FDA in the US, EMEA in Europe and local Ministries of Health in different countries. In addition, there might be local They control how services are paid for and influence costs and authorities in some countries, such as DHA and DOH in UAE. access to care. Regulator Payer Providers Patient Healthcare professionals and institutions that deliver medical Individuals who receive healthcare services. services, such as doctors, nurses, hospitals, clinics, and pharmacies. Patients seek care, participate in treatment decisions, and contribute to healthcare demand. They are the central focus of the They are responsible for diagnosing, treating, and managing system and its services. patients' health. Connection and Interaction Better Managers for a Better World Regulators, payers, providers, and patients are deeply interconnected, forming the core of the healthcare system: 1. Regulators set the rules and standards that providers and payers must follow Regulator 2. Payers (insurance companies, government programs) finance healthcare services, negotiate costs and influence the type of care offered. 3. Providers deliver medical services to patients and depend on payers for reimbursement. Patient 4. Patients receive care from providers and rely on payers to cover the costs. They are protected by the oversight of regulators, who ensure care is safe and affordable. Provider Payer These relationships are cyclical and interdependent, where actions in one area influence the others, aiming to balance quality, access, and costs in healthcare delivery. Roles and Responsibilities Better Managers for a Better World Regulators Payers Providers Ensuring Quality and Compliance Interact with Providers on Contract The Relationship with patients on Setting standards, approving drugs, negotiations and reimbursement how providers deliver care to models (fee for service, value based patients. overseeing compliance. care). Oversight of payers (e.g., insurance plan Importance of patient Prior authorization, billing, and claims approvals, rate reviews). communication, trust, and shared management. Ensuring payers comply with healthcare decision making. How reimbursement policies affect laws and standards. providers' operations and services. The influence of patient satisfaction Impact on healthcare costs and access. on healthcare outcomes. Payers and Patients: Navigating Setting care standards. Insurance and Costs Licensing, accreditation, and Patients’ interaction with payers certification processes for providers. (insurance claims, coverage decisions). Impact of regulations on care quality Cost sharing models: premiums, deductibles, copays. and safety. Understanding out of pocket costs. Collaboration is key: A functional “patient centric” system relies on seamless cooperation, shared goals and quality care. Types of HC System Better Managers for a Better World Universal Health System Private Health System Funded primarily by the government through taxes Provided either through employers or (EU and Canada) or national resources in tax-free purchased individually, where service coverage countries (GCC). differs based on the plan. Public Insurance: Government-funded programs like Access to healthcare is typically determined by *Medicare* (US seniors), *Medicaid* (low-income ability to pay or insurance coverage. individuals), and *National Health Services* (e.g., Out Of Pocket: Patients pay directly for NHS in the UK). healthcare services not covered by insurance, Healthcare is available to all citizens (The case of such as co-pays, deductibles, or full-service GCC) Or citizens and residents. costs. Universal HS – Access and Finance Better Managers for a Better World Pros Cons Provides equal access to all individuals regardless of income. Bureaucracy and Potential long wait times for non- Reduces health disparities by covering the entire population. emergency treatments. Lower overall healthcare costs due to government negotiation Relatively low incentive for HCPs, entrepreneurs and power and efficiency. innovation. Reduces financial burden on individuals, especially for high- Possible resource constraints (e.g., staff, equipment). cost treatments. Funded by taxes, which can lead to higher tax rates. Avoid the provisions of transactional costs Risk of budget cuts affecting quality or availability of care. Subject to the influence of macroeconomics and political agendas Private HS – Access and Finance Better Managers for a Better World Pros Cons Faster access to services for those who can afford it. Limited access in response to affordability. Involve individuals in the process, allowing to embrace their Inequality in healthcare availability. input. High out-of-pocket expenses, especially for uninsured or Higher flexibility in choosing healthcare providers. underinsured individuals. More competitive and consumer-driven, allowing for High administrative and transactional costs, due to profit innovation and diverse service offerings. motives. Healthcare costs can be controlled through individual choices. Complexity in billing and approval process. Private HS – Quality, Innovation Better Managers for a Better World Pros Cons Boosts innovation and the adoption of latest technologies. Prioritizing profit may lead to over-treatment or Tailored services to individual patient needs with more variety. unnecessary procedures. High satisfaction among those who can afford it. Inequality, where innovation may not be accessible to all. Fast process for treatment and more personalized care. Frustration among large segment of the society, where Encourages FDI and building capacities satisfaction is often tied to the ability to pay. Inadequate medical attention for prevention, causes higher burden to address complications. Sociocultural consequences for the frustration among large portion of the society. Regulator Bodies and Standards Better Managers for a Better World WHO (World Health Organization): Sets global health standards, monitors public health risks, and guides international health policy. FDA (Food and Drug Administration) in the US and EMEA in Europe (European Medicines Agency): Oversee the safety, efficacy, and quality of medicines. National Health Authorities: Each country, like the UK’s NHS, India's CDSCO, and Japan's MHLW, regulates healthcare systems, ensuring compliance with local laws and policies. Common Regulatory Themes Across Countries: Patient Safety and Quality Standards: Universal focus on reducing medical errors and ensuring the delivery of effective treatments. Data Protection and Privacy Laws: Varying regulations such as GDPR in Europe, HIPAA in the US, and similar privacy frameworks globally. Access to Healthcare: Policies differ, but countries aim to provide equitable access to healthcare services through public and private systems. Regulation and Compliance in HC Better Managers for a Better World Data Protection and Patient Privacy: Dedicated laws like HIPAA (US) and GDPR (EU) were developed to secure confidentiality and protection of patient data. Ethical Practice and Code of Conduct: Ensure all stakeholders to follow ethical guidelines, including patient rights, informed consent, and non-discriminatory care. Healthcare Quality: Ensure that providers meet the standards for patient safety, effective treatments, and transparency in dealing with patients. Financial Practices: Ensure compliance in billing, to prevent fraud, over utilization and abuse. Compliance is highly critical in healthcare practice and essential to: Secure legal Protection, avoiding fines, and loss of licenses. Anchor Patient Trust, where the can secure and confident. Ensure operational efficiency to improve performance. Payment Methods in Healthcare Better Managers for a Better World Fee-for-Service (FFS): Payers reimburse Providers for each service.; this is the traditional method; yet it can incentivize volume over value. Value-Based Care (VBC): Payment is linked to the quality of care rather than the quantity, encouraging patient outcomes. Health Insurance: Private or Public Out-of-Pocket Payments: Patients pay directly for healthcare services not covered by insurance, full or co-pay. Capitation: Providers are paid a fixed amount per patient, regardless of the number of services, often used in managed care systems. Bundled Payments: A single payment covers all services related to a specific treatment or condition. Healthcare payment methods vary widely, with each system balancing incentives, access, and cost-efficiency to ensure sustainable, and high- quality The Role of Technology in HC Better Managers for a Better World 1. Enhancing Patient Care: Electronic Health Records (EHRs): Sharing patient information, improving coordination and continuity of care. Telehealth: Enables remote consultations and monitoring, increasing access to healthcare, especially in rural or underserved areas. 2. Improving Diagnostic and Treatment Precision: AI & Machine Learning: AI-powered tools assist in diagnosing diseases, predicting outcomes, and personalizing plans. Imaging & Robotics: Advances in imaging technologies and surgical robots improve diagnoses and minimally invasive procedures. 3. Boosting Efficiency and Reducing Costs: Reduce administrative burdens and streamline processes. Wearable Devices to Track patients’ health in real-time, leading to early detection, preventive and proactive. 4. Fostering Research and Innovation: Big Data & Analytics: Facilitates research by analyzing large datasets to identify health trends and enhance public health. Access: Role, Barriers & Efforts Better Managers for a Better World Regulators ensure equitable access by enforcing laws, mandating insurance coverage, and setting standards for services. Payers play a critical role in financing care, expanding coverage options, and incentivizing value-based care to make healthcare more affordable and accessible. Barriers to Healthcare for Underserved Populations: Financial Barriers: Lack of insurance, high out-of-pocket costs, and low income can limit access to care. Geographical Barriers: Remote areas often face shortages of healthcare providers, limiting timely access to care. Cultural Barriers: Miscommunication, cultural sensitivity, and language differences can hinder access for minorities. Efforts to Address Healthcare Disparities: Policy Interventions: Expanding coverage, increasing subsidies, and creating universal healthcare systems in some regions. Community Outreach: Mobile clinics, telemedicine, and cultural initiatives aim to reduce access gaps. Education and Advocacy: Awareness programs and promote preventative care in underserved communities. Empowering Patients in Healthcare Better Managers for a Better World Role of Patients in Managing Their Own Health: Patients are playing an increasing role in their own health, making informed decisions, following treatment, and adopting healthier lifestyle. Self-management tools with digital health, allow patients to track their health and communicate more effectively with healthcare providers. Impact of Patient Advocacy Groups: Patient advocacy groups raise awareness, provide support networks, and influence healthcare policy. These groups play a vital role in ensuring patient rights, improving healthcare access, and driving research for new treatments. Improving Patient Empowerment: Education Programs: Building capacities and capabilities to improve patient understanding of medical conditions and preventive care. Clear Communication: Ensuring HCPs communicate in an accessible way, understandable, culturally sensitive to all patients. Digital Health Tools: Providing user-friendly technology that promotes self- care and personalized care plans. Empowering patients through education, advocacy, and technology improves outcomes and enhances the overall experience in healthcare Future Trends in Healthcare Better Managers for a Better World Growing Role of AI and Data Analytics: AI and data analytics are transforming diagnostics, predicting patient outcomes, and improving clinical decision-making. Shift Toward Personalized and Precision Medicine: Precision medicine leverages genomic data to predict individual response, allowing personalized treatments based on a patient’s genetic, environmental, and lifestyle, leading to more effective therapies that reduce trial-and- error approaches. The Potential of Value-Based Care: Value-based care models focus on outcomes while controlling costs, shifting away from the traditional fee- for-service; this trend emphasizes collaboration between providers and payers and promoting preventive care.  Better Managers for a Better World Basics of Health Economics Health Technology Assessment HTA Economic Evaluation of HTA–Why Better Managers for a Better World Ensure that resources are used efficiently and that healthcare interventions provide the best value for money. Specifically, economic evaluation helps to: 1. Maximize Health Outcomes: Compare costs and benefits, to ensure allocating the scarce resources in a way that offer the greatest health benefits for the least cost. 2. Informed Decision-Making: Policymakers and healthcare providers can use economic evaluations to make data-driven decisions on which to fund or prioritize. 3. Cost-Containment: In a setting of limited resources, economic evaluations help avoid unnecessary spending on less effective interventions, optimizing the healthcare budget. 4. Equity and Access: Economic analysis ensures that funds are spent in a way that promotes fair access to healthcare services, improving outcomes for the population. This process allows for balancing quality, effectiveness, and affordability in healthcare systems. Where are we today? Better Managers for a Better World Clinicians Hospital Admin. Payers Governments Patients past present future Why To Consider Cost in HC Better Managers for a Better World The ultimate purpose of health care is to maximize benefits and QoL The total benefits it provides to a general population Any activity comes at a cost, whether directly or indirectly through tax or insurance premiums. Money is limited; therefore: Are the results worth the cost or any price?? If we have more than one option, which one should be prioritized Access To Medicines Better Managers for a Better World The 4th and the 5th Hurdles Market Access has grown in importance over the past decade and become known as The 4th and the 5th “Hurdles” in Pharmaceuticals These “hurdles” are cost-effectiveness and budget impact. Steps of Economic Evaluations (EE) Better Managers for a Better World Before Conducting EE, we need to ask: What is the Cost, the Benefits, the most efficient way of implementation, and whether the intervention is worthy Where do we start – The steps: Defining the Options. Perspective of the study: Country level, Societal, Payer… Choosing the Method Analysing the results Interpreting the results into insight for informed decision  Better Managers for a Better World 1-Defining the Technology / Options 2-Perspective Both the technology under study and the evaluation processes The audience/target group at which the EV is aimed should be clearly defined and described The viewpoint or the perspective In case of differences in subgroups, maybe separate analyses (The patient, Particular Institution, and societal) should be considered Performed from the broadest viewpoint possible Steps 3-Method 4-Analyzing the Results – Uncertainty Cost Benefit: To quantify the Benefits – Like the Cost- in a Monetary unit As EV involves comparison, they must be calculated incrementally i.e. Additional Cost per unit Cost Effectiveness (CEA): Outcomes are valued in Non- Monetary units, when it’s (QALY) then it’s CUA Identify the source of uncertainty and incorporate it into the model Interpretation is the crux of CEA in the context of resource allocation & and Decision-making CUA provides the advantage of predefining the acceptable cost/QALY (Threshold) Cost Better Managers for a Better World Conceptually easier than benefits!! There is, almost, a consensus around the Monetary Unit that measures the value of resources (Exception for rare commodities) Yet!!?? Challenges arise when estimating this cost?? Knowing the long-term Cost and saving (Outcomes in Probabilistic Terms: Cure, improvement, Death…) Cost Variation (Geographical among others) Cost depends on the perspective of the analysis Fixed and variable costs No market price, and the need to adjust the market price (Inflation) The price tag of a drug is just the “tip of the iceberg) when it comes to calculating the full cost Most of cost treatment are hidden under the surface. Estimating Cost Better Managers for a Better World Identifying the used resources Cost, in essence, is everything that diminishes the welfare of the stakeholders in scope, which depends on the perspective. This includes: Health Care and Non-HC sector (By patients and their relatives) Direct and Indirect (Absenteeism and presentism) Intangible (Pain and worries) Future Cost: Although controversial What not to be included: Common costs (In comparative analysis) Measuring the Quantity of used resources, expressed in natural – not monetary – units. Measuring the Price: Micro Costing: The sum of the amounts of all components DRG: Diagnostic Related Group, Gross Costing Approach: It’s a technical approach to classify hospital patients on the basis of diagnosis. Cost is a product of a vector of quantities (Q) and a vector of unit prices (p): Cost = Q*P Drug costs Better Managers for a Better World Drug costs are only part of the equation Drug Drug  100k ∆ 75k Drug  25k Drug costs Better Managers for a Better World Pharmacy budget offsets should be included Other medication Drug Supplies Drug  100k 15k 30k = 145k ∆ 60k Drug  25k 20k 40k = 85k Drug costs Better Managers for a Better World In health economics, we look at all direct costs Other medi- Primary Drug Supplies care Hospital cation Drug  100k 15k 30k 10k 100k = 255k ∆ 40k Drug  25k 20k 40k 15k 115k = 215k  Drug costs Better Managers for a Better World We have indirect costs: Lost productivity Drug Supplies Other Primary Hospital Productivity medication care loss ∆ -10k = 305k Drug  100k 15k 30k 10k 100k 50k = 315k Drug  25k 20k 40k 15k 115k 100k Discounting Better Managers for a Better World Concept Time preference: Now and Then Time Preference is not a product of Inflation, even if the interest rate is Zero. It’s actually the opposite! Reasons are: Limited time horizon, uncertainty, and the perception of getting richer with time The concept goes beyond monetary issues to everything that has a value Should future benefits be Discounting Procedure discounted as well??? It depends on the agreed Interest Rate IR (r) (Individual Time Preference Rate) Future Value FV= PV (1+r)^n, where r is the IR and n is the number of years Net Present Value NPR: PV= FV/ (1+r)^n This concept is also used for calculating the cost of research and development of a new drug Average Cost and Marginal Cost Better Managers for a Better World Cost Concepts Total cost (TC) Cost of producing a particular quantity of a product or service (Q) Fixed cost (FC) Costs that do not vary with the quantity of the product or service in the Short- term Variable cost (VC) Costs that vary with the level of product or service Average cost (AC) Mean cost per unit of product or service: AC = TC/Q Marginal cost (MC) Additional cost of producing one more unit of the product or service: MC = TC(Q+1) – TC(Q Factors Influencing Pricing Better Managers for a Better World Product Life Cycle & Positioning Patent Competition Protection Corporate Rx Level of Philosophy Pricing Innovation Gov Clinical & Controls & Economic Policies Value Reimburse- ment Landscape Effectiveness and Utility CEA/CUA Better Managers for a Better World 1. The first step in EV using Cost Effectiveness Analysis CEA and Cost Utility Analysis CUA is to identify the benefits of the technology in question: Benefits can be categorized between Health benefits, which can be measured in biological units ( BP).. and Non-health benefits: such as Improvement in productivity and the Quality-of-Life QoL) for patients and relatives 2. The second step is measuring these benefits: In CEA, benefits are measured in natural units due to the absence of price attached to health outcomes like pain reduction. A crucial point in this regard is how to measure effectiveness in health benefits?? Which very much depends on the treatment in question Intermediary outcome and Surrogate Indicator: Established by experts to set the objective of the treatment and the unit of measurement (HbA1C in Diabetes). Measuring Outcomes Better Managers for a Better World Limitations of Natural units 1. The significance of clinical effectiveness is not clear or recognized by individual preference. 2. Measuring effectiveness based on Surrogate “intermediate” parameters is not comparable, when we compare two different diseases; giving rise to the need to move to the final outcome (Diabetes measured by complication reduction). 3. Consolidation and aggregation is a problem in natural units when the technology has effects in several dimensions. 4. Cost Effectiveness ratio is not easy to interpret and it’s also important to distinguish the term cost-effective from “cheaper”* QoL in HealthCare Better Managers for a Better World We use QoL Scales to measure health programs without monetary units and avoiding natural units. Subjective Scales based on multi-dimensional psychometric techniques. Closely related to individual preference than clinical outcomes. Properties of HRQoL: Interval Scale for measurability Gains for QoL need to be additive Must include death as a point of ref. Comparable and combinable with improvement in life expectancy, as we need to allocate value pairwise (Quality and Quantity of Life) Must reflect the preferences of the people affected Measuring Outcomes WTP Better Managers for a Better World (Willingness to Pay) The value of goods depends on the consumers’ preferences, manifested through their willingness to pay for them; nevertheless, the problem arises when there is no market for these products, such as increase QoL. CBA focuses on estimating the amount individuals would be prepared to pay for such improvement, which is addressed through two types of methods: 1-Revealed Preference Methods: Includes several “sophisticated arbitrary” techniques: (To mention the names). Market based, Hedonic, Travel, Avoided, Volunteer and Risk–Risk trade off. 2-Stated Preference Methods: Contingent valuation method: Simulates a hypothetical market via a consumer survey. Conjoint analysis: Considers that goods to be valued by aggregating the values of their different components, breaking down their overall value into the sum of their components. Time Trade-Off Better Managers for a Better World The concept of TTO is built on finding out the Quantity of life the person is willing to trade off for improvement in Quality of Life e.g.: When U (X years, disabled; death) = U(Y years, good health; death), V(Disability) = Y/X, which is interpreted as the value of QoL with this situation of disability is Y/X With QALY all properties are met: Health states are defined on the same scale, where QALY is measurable, comparable, based on individual preference, and related to the duration of the state. Perfect health Amputation (and we mean “perfect”) (- one leg) 10 5 0 years How to Measure Utility? Trade Off Better Managers for a Better World Example: Blindness Describe the health state: What does it mean to be blind? What would you prefer: 10 years in health state or 5 years in perfect health? Answer: 10 years in health state What would you prefer: 10 years in health state or 7.5 years in perfect health? Answer: 7.5 years in perfect health What would you prefer: 10 years in health state or 6.25 years in perfect health? Answer: 10 years in health state What would you prefer: 10 years in health state or 6.9 years in perfect health? Answer: 10 years in health state What would you prefer: 10 years in health state or 7.2 years in perfect health? Answer: 7.2 years in perfect health Indifference level: (6.9+7.2)/2 = 7.05 Utility: 7.05/10 = 0.71 QALY: Quality Adjusted Life Years Better Managers for a Better World The limitations displayed by all these HRQoL scales have given rise to a variant of CEA, known as cost-utility analysis (CUA), where QALY stands out as the most accepted unit of measurement. Concept of QALY: Breakdown of health into two factors: Quality and Quantity e.g. the number of years of prevented disability, in this case, QALY associates one single number for the pair (Years, Disability). In this concept: The value of any pair (Q,Y) can be measured as U(Q,Y) = V(Q) * Y = Number of QALY Therefore, a QALY can be interpreted as one year of life with good health. Methods of Measuring QALY: 1. Visual Scale Analogue (0 -100) 2. Standard Gamble 3. Time Trade-Off Method QALY: Quality Adjusted Life Years Better Managers for a Better World INDEX (“utility level”) Perfect 1 Health 0.6 +5 +10 0.5 25 +5 Time 0 Death 50 60 Quality-adjusted life-years (QALYs) Better Managers for a Better World The QALY is a measure of health outcome that captures gains from reduced morbidity and mortality, and combine these into a single measure Mainly used in Cost-utility Analysis (CUA) on an interval scale ranging from 0 to 1 – (1) corresponds to optimal health – (0) corresponds to health state judged to be = to death” Cost-utility Analysis (CUA) Better Managers for a Better World Focuses on the quality of health outcome produced, where improving quality of life and life years gained are the main outcomes. The unit employed to measure the outcomes is expressed in terms of “QALY”. Where Utility is a Time Trade-Off Limitations: The absence of incorporating the patient’s willingness to pay Age, comparing a teenager’s QALYs to an older individual’s QALYs may not be considered “fair” Specific health outcomes may also be difficult to quantify (impact on others e.g. relatives Alternatives to QALY: Disability-adjusted life years (DALYs) Saved young life equivalents (SAVEs) Healthy-year equivalents (HYEs) Incremental Cost-Effectiveness Ratio Better Managers for a Better World (ICER) Costnew – Costcurrent ICER = Effectnew – Effectcurrent A measure of the cost per additional unit of Effectiveness achieved Note: Cost difference = net cost (= including possible savings/extras) Note: Some authors prefer ‘cost-utility’ analysis (and even ICUR) when effects are expressed in QALYs QALYs: ICER Example Better Managers for a Better World Cost treatment A (Standard of Care) = 1,000 Cost new treatment B = 6,000 If disease: -2 QALYs * 0.8 x 10 + 0.2 x 8 Cost of “failure” = 10,000 Calculate expected result Success 1,000 SoC A 0.8 10 QALY 3,000 9.6 Failure 11,000 Treat disease X 0.2 8 QALY Success 6,000 New B 0.9 10 QALY 7,000 9.8 Failure 16,000 0.1 8 QALY ICER = (7000-3000)/(9.8-9.6) = 4000/0.2 = 20000 € /QALY gained Decision-Making Quadrant: Better Managers for a Better World Increases costs ICER Willingness to pay threshold (WTP) Decreases health benefits Increases health benefits Cost savings Common scenarios: are large Increased health enough to benefits, inducing justify reduced either lower or benefits higher costs Reduces costs Diabetes-related complications* Better Managers for a Better World Mortality ~ 0.000 0.505 Amputation Stroke 0.621 0.677 Coronary Ischaemic heart disease 0.695 insufficiency 0.711 Blindness in one Coronary thrombosis 0.730 eye 0.785 Diabetes without complications Perfect health ~ 1.000 *) Clarke P. et al. UKPDS; Med Decis Making 2002;22:340-49  PROBLEM: Better Managers for a Better World where is the threshold?? The value of the Cost-effectiveness threshold is the maximal costs of gaining a QALY or LYG Interventions or drugs which fall below this threshold represent value for money Desaigues et al (2007) Willingness to pay method: €40,000 per Healthy Life Year (for EU25 countries) BENCHMARKING e.g. cost-effectiveness of caring for a dialysis patient 1 Historically (USA) 50,000 $ per QALY WHO Highly cost-effective (< GDP per capita) Cost-effective (between one and three times GDP per capita) e.g. USA = ~$56,000-167,000 e.g. Egypt = ~$3,700-11,000 UK, £30,000 The Netherlands, €20,000 GCC $30,000?? At the discretion of the decision maker… 1 http://www.who.int/choice/costs/CER_thresholds/en/ Example for the WTP Thresholds Better Managers for a Better World Cost Benefit Analysis CBA Better Managers for a Better World Why measure outcomes in monetary terms, how to incorporate innovations with no health benefits, and Measure outcomes in terms of willingness to pay? In a cost-benefit analysis (CBA) outcomes and costs are assessed in monetary units, namely money, which allows a direct comparison of outcomes with costs, to determine the net value of the program. However, the main problem lies when not all the benefits can be reduced to monetary magnitude, with the slow – Yet growing- adoption of the technique, considering its advantages in terms of: Same unit comparison Transferability across different areas and diseases No interpretation is needed for decision-making. Monetary valuation of outcomes: NPV for Costs and valuing life according to human capital theory: The human capital approach: To interpret healthcare as an investment in human capital, an approach focusing on productivity gain?! Where it attaches no value to improvements that don’t have a direct effect on time available for work?! Plus, other challenges related to equality in wages and equity in the labor market. Pharmacoeconomics Evaluation Better Managers for a Better World Different types of PE evaluation are distinguished from each other in the way the consequences of a health program are valued ? Cost Cost-effectiveness Cost-utility Cost-benefit Minimisation analysis (CEA) analysis (CUA) analysis (CBA) Analysis (CMA) Decisions drivers addressed by HE Better Managers for a Better World Unmet Need Cost of Illness Studies Affordability Budget Impact Studies Cost-Effectiveness Studies Cost-Benefit Studies Value for Money Cost-Utility Studies Cost-Minimization Studies Barriers to the Use of EE in DM Better Managers for a Better World Production of Economic Information Decision Context-Related Barriers Setting related: Population, Socioeconomic Lack of understanding of economic evaluation Poor quality of evidence / bias of studies Politics : the power Delay the adoption of economic evolution in policy decision-making Philosophical & ethical considerations: the culture Decision Makers preference locally relevant information. Standardization of Economic Evaluation Prioritization: Absence of economic evaluation for major Methods health problems Economic Evaluation Guidelines Misconceptions about PE Better Managers for a Better World Misconceptions about Pharmacoeconomics Cost-effective and cost-containment are not the same. Many interventions are not “cost savings,” but they are still a “good value for money” (i.e. cost-effective) Very few medical interventions are cost-savings (Childhood immunization programs do save overall health care costs) PE evaluation does not compromises the clinical care. Expensive health care is not always the best health care  Innovative Contracting Better Managers for a Better World InCo Better Managers for a Better World Negotiation and Innovative Contracting InCo leverages HTA to transform traditional payment models to improve outcomes, reduce costs, and enhance flexibility for healthcare providers and payers. Types of InCo: Value-Based Contracts: Payment based on outcomes and quality rather than service volume. Risk Sharing: Both payers and providers share the financial risks of care, encouraging cost-effective treatment strategies. Bundled Payments: A single payment for all services related to a treatment episode, driving collaboration and efficiency. Collaborative Negotiation: Fosters long-term partnerships between stakeholders with shared goals of patient-centered care, cost control, and improved health outcomes. Benefits: Improves care quality Controls healthcare spending Fosters innovation and efficiency  Payer Negotiations Better Managers for a Better World The 4 Step approach to payer negotiations helps to prepare and conduct negotiations 2 negotiation strategy & tactics steps 2 insight generating steps D A Conduct negotiation Know your payer C B Develop negotiation strategy Know your product Source: Simon-Kucher & Partners. Note: The approach is based on the Harvard negotiation methodology, as described in books like “Getting to YES”, and “The Negotiations Fieldbook” Uncertainty in Value Based Pricing Better Managers for a Better World As Contracting evolves from simple discounts to outcome-based, complexity and risk increase Risk Sharing Budget Predictability Aims to link outcome with Focus shift from price to price and access budgetary concern Risk is shared between Price Discounting Discounts are rebates linked budget holder and Focuses Purely on Price to utilization manufacturer Frequent Some Advanced Discount Price reduction Cap Outcome-based risk Free Goods Price revenue agreement sharing Uncertainty in Value Based Pricing Better Managers for a Better World PFAP Better Managers for a Better World Patient Financial Assistance Programmes PFAF Summary Better Managers for a Better World 1. WHY 2. WHAT 3. HOW A Patients Financial Assistance A PFAP directly helps patients with Affiliates can get help from a global Programme is a way to address their out-of-pocket payments. framework in determining whether a affordability challenges in a way that This can for instance be as discounts at PFAP could be feasible in their market. benefits a number of patients are out of the counter, co-pay coverage or by The framework contains tools our reach, because they may find it providing a free service after a certain and step-by-step guides. difficult to handle the cost of initiating number of purchases. It will assist affiliates in assessing and staying compliant on our treatments. The programmes can be designed the affordability issues in the local A PFAP can lead to increased initiation, in many different ways, depending market, selecting the possible PFAP better adherence, and longer duration of on what is beneficial and feasible in solutions, and identifying the treatment. It is an opportunity to the individual market. different barriers to overcome. improve patient access and outcomes – Ultimately, the design depends on The framework also supports roll-out, while growing our business. local opportunities and risk analyses and stakeholder constraints – and there may be more engagement. options than it seems. Affordability is a challenge Better Managers for a Better World Patients may find it difficult to afford their share of the cost of medicine, whether it is fully out-of-pocket or partly reimbursed. For some, these challenges may result in: Reduced Reduced Reduced initiation adherence duration Patients are not Patients use less of the Patients discontinue the prescribed or do not product than product after it has been collect the product. prescribed. prescribed and dispensed. PFAP Better Managers for a Better World A way to address patients’ affordability issues directly PFAP PFAPs are not Reimbursement Out-of-pocket cost Social responsibility initiatives addressing access and affordability initiatives, such as ‘Defeat Diabetes’. Patient Support Programmes that support and assist individual patients in the management of their disease and medication. PFAPs helps Patients and Business Better Managers for a Better World Patients experience a reduction in financial burden Improved patient compliance, increased initiation, better adherence, and longer duration Purpose An overall increase in product uptake and volumes PFAPs helps Patients and Business Better Managers for a Better World Help the patients directly with their Can take different shapes – for Are designed to fit opportunities share of the treatment’s cost. instance discounts, free extra and conditions in the local market. products, earning points, etc. Copyright No part of the previous contents may be reproduced, copied, modified of adapted, without the prior written consent of the author, unless otherwise indicated for stand-alone materials. 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