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| Journal of the New Zealand Medical Association,
14-March-2003, Vol 116 No 1170
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PHARMAC measures savings elsewhere to the health
sector
Scott Metcalfe, Sean Dougherty, Matthew Brougham and Peter
Moodie
There has been ongoing debate in the New Zealand Medical
Journal regarding PHARMAC’s subsidisation (or lack thereof) of
prescription medicines in New Zealand.1–6
We believe such opinions deserve a response, and believe that PHARMAC (the
Pharmaceutical Management Agency of New Zealand) does systematically assess the
cost-effectiveness of new proposals in ways designed to limit bias and help
decision-making – where cost-effectiveness
is but one criterion.
How cost-effectiveness
affects the decisions PHARMAC makes
PHARMAC’s core objective, as laid down by the New
Zealand Public Health and Disability Act 2000, 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 amount of
funding provided” (our italics).
The normal decision-making process for a new medicine
listing on the Pharmaceutical Schedule* (endnotes can be found after references
at the end of this article) takes into account clinical benefit,
pharmacoeconomic analysis and affordability. The usual steps include: clinical
evaluation of efficacy relative to existing medicines; cost-benefit analysis;
prioritisation against other new medicines; assessment against budget
allocation; assessment against established criteria; consultation with the wider
health sector; and final decision by the PHARMAC Board.
To support this process and meet its statutory obligations
(maximising health gain within budget constraints), PHARMAC has a number of
established structures, policies and procedures:
1) Formal decision
criteria
PHARMAC has nine explicit published decision criteria as
part of its formal Operating Policies and Procedures
(OPPs),7 described in Table 1. The PHARMAC
Board uses these decision criteria each time it makes a decision.
Cost-effectiveness is just one of these criteria.
2) Clinical evaluation by
PTAC
The clinical evaluation role is carried out by the
Pharmacology and Therapeutics Advisory Committee (PTAC). PTAC is an independent
expert advisory committee to PHARMAC and is involved in PHARMAC’s
decision-making process. PTAC and its subcommittees provide independent and
objective advice to PHARMAC, and comprise medical practitioners with broad
general experience and a particular interest in medicines and their therapeutic
indications. PTAC has a generalist focus, but increasingly it takes advice from
known experts in their field, often via its subcommittees. PTAC members are
practising clinicians, appointed by the Director-General of Health, who are
specialists in their own areas and are usually drawn from the areas of general
medicine, general practice, paediatrics and clinical pharmacology. PTAC follows
established processes,8 and makes
recommendations either for the attachment of high, medium, or low priorities to
proposals, or that a proposal be declined or be referred back to suppliers for
further information.
Table 1. PHARMAC decision criteria
PTAC uses the same decision criteria as PHARMAC when it
evaluates medicines. Any recommendation by PTAC may ultimately vary from
PHARMAC’s view, in part because PTAC reviews Pharmaceutical Schedule
applications at a different stage in the assessment process to PHARMAC; PHARMAC
may have a wider range of relevant information when making decisions.
Consequently, PHARMAC may attach a different listing priority or make a decision
that differs from PTAC’s recommendations.
One criticism of PTAC has been that its processes have not
been completely transparent. However, the problem for PTAC and PHARMAC has been
one of commercial sensitivity. Pharmaceutical companies have often insisted that
their applications remain confidential, for both commercial reasons and to avoid
any adverse public comment about their medicines. Indeed, there have been times
when disclosure of PTAC minutes has been resisted by a company and they have
been released only as the result of an Official Information Act
request.
Following consultation, PHARMAC decided that from 1 July
2002 the minutes of PTAC meetings would be made publicly available. Once the
record of a PTAC or PTAC subcommittee meeting is finalised (including review by
PTAC), minutes are published on PHARMAC’s web site, although PHARMAC may
withhold any elements on the grounds of commercial sensitivity (guided by the
principles and withholding grounds of the Official Information Act
1982).8
3) Systematic derivation of
clinical data
PHARMAC uses cost-utility analysis, which is a form of
cost-effectiveness that measures costs per quality-adjusted life year (QALY)
gained. (An explanation of QALYs and how to measure them can be found on
PHARMAC’s website: http://www.pharmac.govt.nz/pdf/QALYExplanation.pdf)
PHARMAC attempts to conduct these analyses rigorously, with extensive data
searches and analysis, peer review, consultation and sensitivity
analyses.
Critical to the measurement of cost-effectiveness is the
medicine’s relative efficacy and side effects. In conjunction with PTAC
processes, PHARMAC has systems to systematically identify and synthesise
relevant clinical inputs.9 Development of these
systems happened in line with ongoing international concerns about the quality
of clinical components of economic analyses,10
and is similar to international
jurisdictions.11,12,13 PHARMAC’s systems
include: explicitly defining indications for treatment; defining the comparator
medicines or regimes/protocols; defining disease-severity groups; explicitly
stating literature search strategies; defining both explicit outcome measures
and eligibility criteria for source data; assessing quality of evidence,
including structured critical appraisal and place in hierarchy of evidence;
assessing missing data and possible publication bias; using additional clinical
opinion and clinical contacts; and review processes. The degree of rigour
applied to the process relates to the level of detail required (see section 4
below).
Again, depending on the level of detail required, data used
in effectiveness and cost-utility analyses are classified according to a
hierarchy of evidence, using the Scottish Intercollegiate Guidelines Network
(SIGN) grading system.14,15 Clinical trials
used in analyses, and guidelines used when developing access criteria, are
critically appraised in a structured manner, in line with standard practice (http://www.nzgg.org.nz/tools.cfm)
and using tools such as the GATE checklists developed by EPIQ (Effective
Practice, Informatics & Quality Improvement) at the University of Auckland
and the AGREE Tool for Critical Appraisal of Guidelines (http://www.agreecollaboration.org).
PTAC,
its subcommittees, and external reviewers are used to review the clinical
aspects of analyses for major investment proposals, and these analyses are then
adjusted as needed.
PHARMAC expects industry to provide all relevant evidence,
and will seek out evidence independently, but does also consider all evidence
supplied to it. PHARMAC does accept research that is funded by the
pharmaceutical industry, if remaining wary of the potential influence that
funding sources might have on either the design, operation, reporting or
interpretation of any clinical trial, as a possible source of bias (in common
with standard international practice).16 The
funding for many clinical trials comes from pharmaceutical companies; were
PHARMAC to dismiss all such funded evidence out of hand, then it would be unable
to perform many evaluations at all. In short, we use this evidence, but are
aware of the potential for
bias.17–23
4) Policies and processes
for economic analyses
PHARMAC also has explicit policies for assessing the
comparative costs and benefits of new medicines, set out in its Prescription for
Pharmacoeconomic Analysis.24 These policies
include: estimating costs not only to the Pharmaceutical Schedule, but also to
other areas of the health sector, including direct costs to patients; estimating
improvements in QALY gains; discounting both costs and QALY gains according to
PHARMAC’s current rate (10%); and using univariate and multivariate
sensitivity analyses.
PHARMAC undertakes four levels of economic analysis: very
rapid, preliminary, indicative, and detailed. These levels are described in
Table 2. In a pragmatic public policy/purchasing environment with finite
analytical capacity, there are inevitable trade-offs between precision and
timeliness. The level (extent and depth) of economic analysis varies according
to individual policy issues, availability of analyst resources at the time, the
defensibility of any recommendations derived from the results, and the extent of
information available for analysis.
Table 2. Levels of economic analysis undertaken by
PHARMAC
At a minimum, less detailed analyses are explicitly
described as such, permitting audiences to informally assess the robustness of
analysis and the sourcing of component clinical data and assumptions. At last
count, PHARMAC had completed 73 economic analyses since 1996, varying in extent
and depth according to individual policy issues and analyst resource
availability (16 detailed, 30 indicative, 17 preliminary, and 10 very
rapid).†
As used to be the case with PTAC minutes, the results and
component assumptions of economic analyses have not generally been widely
disseminated. Commercial sensitivity is even more of an issue here, because the
price offered by suppliers is so pivotal to the analyses. Further, analyses are
sometimes used to estimate fair prices, using a range of notional cost/QALY
values, as part of PHARMAC’s negotiations with suppliers –
information that is very sensitive to the supplier. Hence, explicit publication
of full analyses can be problematic, apart from when such publication is no
longer commercially relevant.
That said, key examples of analyses of particular interest
(and that are no longer commercially sensitive) can be found on PHARMAC’s
web site (http://www.pharmac.govt.nz)
on the resources page (pharmacoeconomics and pharmacoepidemiology) (http://www.pharmac.govt.nz/economic_analysis.asp).
PHARMAC will continue to be judicious about which analyses are published in this
manner.
PHARMAC
reports to Parliament each year a summary of both numbers of patients receiving
medicines specifically funded by new decisions in that year, and the extent of
population health gains (QALY gains) expected from those investments that
year.25–29 This information is publicly
available and can be found on the PHARMAC web site publications page (http://www.pharmac.govt.nz/annual_report.asp).
Data for the four years July 1998 to June 2002 can be seen in Table 3.
Table 3. Results of economic analyses and expected
population health gains reported by PHARMAC’s annual reports to
Parliament: QALYs gained in year of decision, from key PHARMAC funding decisions
from 1998/1999 to 2001/2002 (where information available)
*indicative estimates, where the extent and depth of
analysis varies according to individual policy issues and analyst resource
availability (ranging from very rapid to detailed assessments); all analyses
comply with PHARMAC’s policies for pharmacoeconomic analyses, http://www.pharmac.govt.nz/download/pfpa.pdf
†total QALY gains in patient users over time horizon during the financial year decided, at net present value (discounting at 10%) ‡risperidone, clozapine and olanzapine §existing patients refractory or intolerant to risperidone PHARMAC measures
‘savings’ elsewhere to the health sector
There still seems to be a perception by some that PHARMAC
considers only direct pharmaceutical costs when evaluating new proposals. This
is incorrect. As many direct health costs as possible are included in analyses.
These extend beyond just medicine costs, to include potential costs and savings
(ie, costs averted) in hospitalisations and other health and disability support
services, and direct costs to patients. PHARMAC consulted widely, including with
the pharmaceutical industry, on this and other issues in 1999, prior to
releasing the ‘Prescription for
Pharmacoeconomics’.24
For instance, the information displayed in Table 3 allows
calculation of the extent of potential savings to the rest of the health sector,
as a proportion of pharmaceutical spending, seen in various analyses (columns
‘Possible net costs to the health sector in FY, discounted’ and
‘Gross cost to schedule in FY’). For instance, potential
‘savings’ elsewhere might have accounted for 53% of pharmaceutical
spending on four key medicines newly funded or extended during 2001/02
(tranexamic acid for heavy menstrual bleeding, leflunomide for rheumatoid
arthritis, statins for dyslipidaemia, beta interferon for multiple sclerosis. We
intend to more fully describe such potential savings in forthcoming
publications.
Given the wide consultation that PHARMAC took before
deciding which costs to include in its
analyses,24 it is disappointing to keep hearing
claims otherwise.
Some have suggested that “global socioeconomic
costs” should be included in such
evaluations.1 PHARMAC does not include such
costs, primarily because trying to quantify these figures is typically fraught,
and because they can bias against certain groups. Attempts to determine the full
financial implications of disease burden can produce awkward results. For
example, extrapolating a recent analysis of the burden of
asthma30 to all disability-adjusted life years
(DALYs) lost in New Zealand31 would cause
predicted costs to the New Zealand economy of $563 billion each
year.‡ The magnitude of this figure seems
overwhelming, especially when compared with the New Zealand Gross Domestic
Product for 2001/02 of $120 billion.32 The
extent of the economic costs of any particular disease, although still
important, can be overestimated by such methods, at the expense of other health
priorities for which such analysis has yet to be undertaken. Including indirect
costs, such as loss of earnings, may prejudice decisions against issues
affecting the young, elderly, and other low-income groups.
Concluding
remarks
One of the comments arising from the Journal’s
anonymous review of this viewpoint article was that it read more like an
advertorial justifying PHARMAC’S current practices. As evidenced by the
volume of comment in the Journal,1–6
there is confusion about how PHARMAC undertakes assessments of new medicines.
The descriptive and subjective view provided here simply aims to address some of
the criticisms voiced in others’ viewpoint articles.
PHARMAC was specifically set up to provide medicines from
within the funding provided. This is set in legislation, and critics must
realise that any increase in the total budget must come from somewhere, be it
the health sector itself, other areas of government spending, or an increase in
taxation. Contrary to the view that New Zealand is “going it alone”,
similar debates are occurring in all developed countries, including Australia,
Canada, Great Britain and the USA.
If the overall budget constraint is accepted as binding,
then how that budget is allocated becomes critical. It is tempting to try to
find one “magic number” that will prioritise all medicines. However,
any decision will be a compromise based on accessibility, relevance to the
population need, effectiveness, equity, social acceptability,
efficiency,33 and level of risk and
uncertainty. Many of these can only be assessed subjectively.
It is also tempting to reduce the prioritisation debate to a
battle between an uncaring regulator and pressure groups (clinical, patient
support groups, or suppliers). However, PHARMAC consciously seeks out the views
of, and tries to work together with, the health sector to improve its
decision-making processes and improve health outcomes. While PHARMAC works hard
to include the views of all affected groups, it also has to work in a commercial
environment, as evidenced by litigation by the pharmaceutical industry. Most of
all, it is our job to worry about the health opportunities forgone from making
the wrong decision.
To quote Arthur Schopenhauer, “In a constrained
environment...there will be both winners and losers.” There will always be
a tension between those who look at the individual and those who look at the
whole of society, just as there will be a tension between those who wish to
maximize profit and those charged to manage cost. For those who lose, it may be
helpful to know that at least the process was fair.
Author information:
Scott Metcalfe, Public Health Physician, Wellington; Sean Dougherty, Analyst
Analysis and Assessment, PHARMAC, Wellington; Matthew Brougham, Manager,
Analysis and Assessment, PHARMAC, Hamilton; Peter Moodie, Medical Director,
PHARMAC, Wellington
Acknowledgments:
Wayne McNee (PHARMAC), Rachel Grocott (PHARMAC), Cristine DellaBarca (PHARMAC),
Professor Gregor Coster, Dr John Hedley, and Associate Professor Richard Milne
commented on earlier drafts. The NZMJ’s anonymous referees also made
helpful comment. The 73 economic analyses since 1996 alluded to were undertaken
by Peter Sharplin (1995–1999), Scott Metcalfe (1995–), Matthew
Brougham (1998–), Sean Dougherty and Rachel Grocott (both
2002–).
Conflicts of
interest: Dr Scott Metcalfe is externally contracted to work with PHARMAC
for public health advice.
Correspondence: Dr
Peter Moodie, PHARMAC, PO Box 10-254, Wellington. Fax: (04) 460 4995; email:
peter.moodie@pharmac.govt.nz
References:
* Note that the process described in this paper relates
to PHARMAC’s assessment of community-dispensed pharmaceuticals listed on
the Pharmaceutical Schedule. However, PHARMAC also has recently established a
process to assess new hospital pharmaceuticals under the National Hospital
Pharmaceutical Strategy. This process involves concurrent (or as near as
possible) assessments by PHARMAC of pharmaceuticals assessed by DHB hospitals.
Note however that national assessment by PHARMAC does not oblige DHB hospitals
to fund or not fund a new pharmaceutical. The key objectives of the process are
to introduce cost-utility analysis into assessments, promote dialogue and build
confidence in a system aimed at ultimately achieving national consistency of
access (and also reduce duplication of work). As such, the process for hospital
pharmaceuticals differs in form and intent from that described in this paper for
community pharmaceuticals. Further details of the New Hospital Pharmaceutical
Assessment Process (and the National Hospital Pharmaceutical Strategy) are
available on PHARMAC’s web site at http://www.pharmac.govt.nz/hospital_strategy.asp
and http://www.pharmac.govt.nz/pdf/nhps.pdf
† This figure underestimates the number of very rapid analyses, including (but not confined to) rapid assessments for Exceptional Circumstances. ‡ The 18,800 DALYS lost from asthma accounted for around 3.3% of DALYs lost in New Zealand in 1996, out of 563,000 total DALYs lost. Applying the ARFNZ report’s $100,000 statistical value for a life year to these 563,000 total DALYs lost suggests that overall DALY losses cost New Zealand some $563 billion per annum. |
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