“I need a model”! It is one of the most common starting points for a conversation with Coreva Scientific. Next follows the discussion of which type of model would make most sense given the business situation. Budget impact for commercial payers and insurers, cost-effectiveness for national providers. Now, though, the discussion is becoming less pertinent as the two systems converge towards… wanting both!
To ensure maximizing possible net benefit in the implementation of a new treatment, assessments for efficacy and safety are required. A safe and efficacious treatment is the starting point for approval and reimbursement. To obtain reimbursement generally requires evaluations of the financial impact and the per-capita costs resulting from the implementation of the new treatment. As funding authorities and systems differ within and between countries the requirements for these economic evaluations vary. There can be conflict between institutions focused on financial viability or profit and those interested in the individuals’ long-term health, productivity and social functioning. These parameters can only be determined in real-world scenarios by using extensive, long-term studies which will probably leave the product outdated after the observation period. This leads us to the need for computational models. They can be generalized to two types: Short-term budget impact models solely focusing on the financial impact and long-term cost-effectiveness models assessing the cost compared to the outcomes for a treatment.
For years, country specific guidelines and requirements focused on one type. Recently this mindset has been questioned as national health expenditures increase rapidly and new, cost-effective treatments are posing high costs for payers. Therefore, the National Institute for Health and Care Excellence (NICE) and the National Health System (NHS) have developed a new system to limit the extent of the financial impact caused by new treatments – a budget impact threshold of GBP 20m for each of the first three years. This threshold is used either to allow a product with low budget impact and low costs per extra year of quality adjusted life of GBP 10k (or less) for fast-track approval or to ensure that prices are re-negotiated if it is surpassed. A similar system was proposed by the American Institute for Clinical and Economic Review (ICER). They advocate an annual budget impact threshold of USD 915m for drugs.
These suggestions have sparked a discussion between supporters and critics of budget impact thresholds for cost-effective treatments. The main goal of the budget impact thresholds from a payer perspective is the sustainability of treatment financing. This, in the case of the fast-track approval in the NHS, leads to a beneficial reduction in the time required to gain market access for a treatment and therefore ensure that patients benefit from timelier new developments. On the other hand, the cap is criticized as arbitrary and inflexible, e.g. not accounting for treatments with multiple indications. Also, it is only a workaround for the well-recognized problem of the shortcomings of the incremental cost-effectiveness ratio. The long-term goal should not be an arbitrary cap on health expenditure, but a new assessment combining both cost-effectiveness and budget impact. In the meanwhile, it is recommended to cover both the budget impact and the cost-effectiveness of new treatments to facilitate the payers’ decision-making process.