I thank PHARMAC for responding1 to my recent Viewpoint article on discounting of future health benefits and costs, in which I argued that a high social discount rate, when used in economic evaluation, militates against both preventive medicine and many public health policies.2

I concur with PHARMAC that economic evaluation, in its various forms, should be used more widely in evaluation of Government programmes, including those initiated by the Ministry of Health (MOH) and District Health Boards. When this happens, the discount rate will become crucial to prioritisation of healthcare programmes. It is encouraging that PHARMAC has now reduced the discount rate from 10% to 8% and that it plans to ‘consult widely within the next 12 months.’ However, the issue is much broader than PHARMAC.

My main concern is with the valuation of future health benefits of novel interventions. High discount rates for health benefits can be fatal to Government prioritisation and funding of public health strategies such as new screening and infant vaccination programmes, a range of which will compete for limited funding in the next 5 years.

The Public Health Intelligence Unit of the MOH follows the World Health Organization (WHO) in using a discount rate of 3% in its Burden of Disease studies, to reflect the results of research into individuals’ time preference for future compared to present health benefits.3 It is puzzling why the MOH and PHARMAC utilise such different discount rates: if the MOH (by discounting at 3%) places a moderately high value on future disability (e.g. lung cancer at age 50 resulting from decades of nicotine addition), why does PHARMAC (by discounting at 8%) implicitly place such a low value on the future benefits accruing from interventions that reduce or avert future disability (e.g. smoking cessation therapies for adolescents)?

PHARMAC states: ‘There are many examples of health related behaviour suggesting that New Zealanders actually have a very high preference for health now at the expense of health in the future.’ Examples of devaluing the future can indeed be found (e.g. young males who consistently drive after binge drinking) but counter-examples are readily found (many women with young families; tertiary students preparing for lifetime careers). The social discount rate for health benefits must represent all New Zealanders; ideally it is the weighted average across all types of behaviour pertaining to health and survival.3

The Ministry of Health’s current emphasis on disease prevention is more compelling than anecdotes. The main health benefits of routine infant vaccination and screening for type 2 diabetes, cardiovascular disease, breast cancer, and cervical cancer all occur in the future. Implementation and widescreen acceptance of these programmes therefore suggests that both the MOH and the New Zealand public implicitly accept a moderately low social discount rate for health benefits. Research is needed: in the meantime, we can and must learn from other nations, which set the discount rate for health benefits generally between zero and 5%.2

In accord with international recommendations,4 most countries (including New Zealand [NZ]) set the discount rate for costs equal to that for health benefits. PHARMAC justifies its discount rate for both costs and benefits on purely financial grounds. These are:

Unfortunately PHARMAC’s revised discount rate for both costs and benefits (8%) is still substantially higher than that recommended in all published international consensus guidelines for economic evaluation (2.5% to 5% except for Spain at 6%6), and the difference matters, especially for health benefits.2,7

While I agree with PHARMAC that New Zealand should not ‘blindly’ follow historic decisions by the UK and the US because our current economy is different, I note that:

Rather than PHARMAC canvassing the opinions of pharmaceutical suppliers and clinician groups again, it would be more helpful if the MOH were to set up processes for informed discussion and decision making for all stakeholders. These discussions should take into account internationally agreed principles and practice, empirical research, and the Ministry of Health’s general policy objectives including its current emphasis on disease prevention.2 Lowering the discount rate will lend support to prioritisation of disease-prevention strategies without affecting the global health budget. It’s a small ask, if we are interested in both rational decision-making and disease-prevention.