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9 Health economics in rheumatology
9
Health economics in rheumatology
Christopher J. McCabe BA, MSc Lecturer in Health Economics
Ron L. Akehurst BSc Professor, Chairman of the Executive Board
School of Health and Related Research (ScHARR), University of Sheffield, Regent Court, 30 Regent Street, Sheffield $1 4DA, UK
Economic evaluations of health-care technologies are playing an increasingly central role in determining which therapies are available to clinicians in the treatment of a whole range of conditions. In rheumatology, a large body of work has already been done on the cost effectiveness of alternative non-steroidal antiinflammatory drugs (NSAIDs), and much of the current work on disease modifying therapies incorporates economic evaluations. This chapter describes the main techniques of economic evaluation and reviews the strengths and weaknesses of each. Two published economic evaluations are discussed in order to highlight what economic evaluations can offer to the care of people with rheumatoid arthritis, as well as the current limitations of economic evaluation. The objective of this chapter is to equip readers with a critical understanding of economic evaluation that can be used in considering the increasing volume of health economic data that they encounter in their clinical work.
Key words: economic evaluation; cost effectiveness; rheumatology; costs; benefits; cost utility.
The element of the discipline of economics that is particularly relevant in health technology assessment is economic evaluation, that part of economics concerned with informing the answer to the question of whether a service or therapy should be provided and to what extent. Economic evaluation of a health technology proceeds by identifying the costs and benefits of that technology. In this context, technology means any process that is designed to impact upon the health state of the patient: it is not limited to capital equipment. Benefits reflect the provision of health gain by aspects of the service that the served population value positively. Costs are the benefits foregone as a consequence of the initiation of the technology. Money values are usually, although not exclusively, used to reflect the foregone benefits. Direct costs are the costs directly incurred, for Bailliere's ClinicalRheumatology-Vol. 11, No. 1, February 1997 ISBN 0-7020-2265-9 0950-3579/96/010145 + 12 $12.00/00
145 Copyright © 1997, by Bailli~re Tindall All rights of reproduction in any form reserved
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example, in the payment of doctors and nurses for the provision of a service. Indirect costs can be thought of as 'knock-on' consequences, for example the time lost from work as a consequence of treatment. Some economic evaluations confine themselves to direct costs, whereas others include all costs. The valuation of indirect costs may be difficult and contentious, meaning that different costs are valued for different questions, producing wide confidence intervals around cost estimates. There are a number of alternative techniques available for the economic evaluation of health technologies. The techniques differ in the manner and extent to which they take account of the health and non-health benefits that result from a particular intervention. Below, the range of techniques used is briefly reviewed. The assumptions made are made explicit, and the strengths and weaknesses of each approach are discussed.
Cost analysis Cost analysis is concerned only with the resources used in the provision of a specific type of health care or health care to a specific group of patients. It makes no attempt to relate these to the benefits or outcomes of health care. There are two approaches to doing a cost analysis: 'bottom up' and 'top down'. The 'top-down' approach divides the total cost of all disease between different diseases. The 'bottom-up' approach consists of identifying the health-care utilization and costs of a disease based upon a set of clear diagnostic criteria for the disease. Combining the detailed analysis of health-care utilization for patients who fulfil the criteria with data on the prevalence of the condition gives a robust estimate of the total cost of the disease (Drummond et al, 19 8 7). Purists would argue that cost analysis is not strictly a form of economic evaluation, as economics is concerned with how to maximize the benefits from the consumption of limited resources, and cost analysis ignores the consideration of benefits. Despite the limitations of cost analysis, this type of work is still carried out and can be useful. First, when the burden of disease is not fully understood, a cost analysis is one approach to quantifying the burden. It also identifies how the burden is distributed between the health-care system, other parts of the public sector, the patient, the family and society as a whole. Such information is useful in identifying the potential for improvements in the care provided, indicating those areas where change is likely to have the greatest impact, and may identify obstacles to change because of the burden of costs on any key groups. Second, a cost analysis can be viewed as a step towards a full economic evaluation. Any problems encountered by the cost analysis will also impact upon a full economic evaluation.
Cost minimization analysis Cost minimization analysis is used to compare two or more alternative
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treatments for the same condition. It is assumed, or has been demonstrated elsewhere, that the outcomes for each treatment are equal, and the most efficient therapy is therefore the least costly or cost-minimizing one. There is an intuitive appeal to cost minimization analysis. There are many conditions for which there are alternative therapies that appear to be equally efficacious. Non-steroidal anti-inflammatory drugs (NSAIDs) are a good example of this. However, it does not take a great deal of thought to realize that although many therapies are equally efficacious in relation to primary outcome, for example, the management of inflammation, this is not the same as saying that the outcomes of each treatment are the same. Different treatments have different side-effects; some individuals will find one method of administration more acceptable than another, leading to differences in levels of compliance; and people 'grow used' to the therapy they have had for a long time and may be reluctant to change, giving rise to additional variations in compliance. When thought about in this way, the intuitively appealing cost minimization analysis can be seen to be very limited and likely to be an appropriate form of analysis in only a very few cases.
Cost-effectiveness analysis Like cost minimization analysis, cost-effectiveness analysis is used to compare two or more therapies for the same condition. Unlike cost minimization analysis, it does not assume that the therapies are equally effective but instead measures the health effects of the alternative therapies, as well as the costs. As the therapies being compared are for the same condition, the health benefits are measured in the most appropriate natural unit of effect, for example cost per true case identified by a screening programme, or cost per unit reduction in cholesterol by use of appropriate drugs. The most efficient therapy for the condition is that which has the lowest cost per unit of effect. Cost-effectiveness analysis thus concentrates upon only one dimension of outcome. There is an ~mplicit assumption that there are no important differences between the therapies on other dimensions of effect, for example side-effects. If there is reason to believe that this assumption does not hold, cost-effectiveness analysis is then not the appropriate evaluation technique. In addition to looking at a single dimension of effect, cost-effectiveness analysis is also limited because it can only compare therapies for the same condition. Decision-makers are often faced with the need to choose whether to spend limited resources on therapies for different conditions. Costeffectiveness analysis does not show decision-makers whether coronary artery bypass grafts, for example, are a more efficient use of health service resources than NSAID therapy. To address this question, a universal measure of outcome is required.
Cost utility analysis Cost utility analysis is an attempt to overcome the limitations of cost-
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effectiveness analysis by using a measure of outcome that can be applied-to all health-care interventions, most commonly the quality adjusted life year (QALY). The QALY is based upon the observation that health care produces improvements in individuals' quality of life, improvements in their life expectancy (quantity of life) or both, and combines both of these elements in a single measure. Thus, a quality adjusted life year (QALY) should in principle be able to measure the outcome of any health care and can be used to choose between any competing health-care interventions (Williams, 1985). As well as allowing comparisons between health-care technologies for different conditions, the QALY measure should capture all the health effects of any given intervention. Thus, when there are multiple important dimensions of effect, making cost-effectiveness analysis inappropriate, cost utility analysis can be used. One of the key difficulties in using cost utility analysis is measuring the quality of life of individuals in specific health states. At the most basic level, it is not straightforward to describe a health state so that people can give it a value, i.e. say what the quality of life would be. There are problems of calibrating the scale along which individuals are asked to value their health state. Should death be the lowest point on the scale, or should we give individuals the opportunity to value some health states as worse than death? There is also an issue about whose valuations should be used. Doctors have the greatest technical knowledge about health, but individuals with a condition know what the technical problems mean for their quality of life. On the other hand, in the UK, people who pay tax actually pay for their health care, so maybe their valuations of different health states should be taken into account. Irrespective of whose valuations are obtained, different methods of obtaining the values have been shown to produce different results for the same health states (Gudex et al, 1993). In addition to the methodological challenges faced by the cost utility approach, there are concerns about the ethical implications of using QALYs to allocate resources. For example, treatments for older people will necessarily produce fewer life years than treatments for young people, and therefore QALYs necessarily favour treatments for younger people and will bias resource allocation towards them (Birch and Gafni, 1992). Despite these difficulties, a number of instruments for measuring quality of life are now available. After early work on health state valuation by Rosser and Kind (1978), the EuroQol team have produced an instrument for measuring quality of life (EuroQol Group, 1990), and an instrument based on the SF-36 health survey, called the SF-6D, will be published soon (J. Brazier, personal communication). A team at McMaster University in Canada have been developing the health utilities index for approximately 20 years, the latest incarnation being the health utilities index III (Torrance et al, 1995). As the availability of appropriate instruments has improved, the number of cost utility analyses being undertaken has also increased. Early work in the area of neonatal screening and neonatal intensive care (Boyle et al,
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1991) has been followed up with cost utility analyses for coronary artery bypass grafting (Williams, 1985), smoking cessation and haemodialysis, among many others (Department of Health, 1994). Despite the difficulties with cost utility analysis, it is becoming increasingly used in guiding, for example, health-care purchasing decisions by health authorities in the UK.
Cost-benefit analysis and willingness to pay Although cost utility analysis will help decision-makers to choose between funding different health-care technologies, it does not help to inform the debate about how resources should be allocated between health and other activities. In an ideal world, the benefits from all resource use would be expressed in financial terms in order to allow the comparison of all alternative uses of the limited resources. This approach is called costbenefit analysis. In cost-benefit analysis, the costs and the benefits of the health care are given a financial value. The difference in the value of the costs and benefits is called the net present value (NPV). If the NPV is negative, i.e. the resources used by the intervention are valued more highly than the health benefits it produces, the intervention should not be provided. All interventions with a positive NPV can be considered for provision. The objective in determining which of these interventions to provide is to maximize the total value of the net benefits, so the interventions should be ranked. The combination of interventions that produces the most benefit per pound spent should be funded. It is clearly crucial that the method of valuing benefits should be robust. An increasingly popular approach is contingent valuation (CV) (Morrison and Gyldmark, 1992), often referred to as 'willingness to pay' (Donaldson, 1990). Strictly speaking, willingness to pay is only one form of contingent valuation, the other being willingness to accept (Morrison and Gyldmark, 1992). In essence, individuals are asked how much they would be willing to pay to increase the probability of a specific outcome to X%, or reduce the risk of a specific illness by X%. Alternatively, they are asked how much they would be willing to accept as compensation for increasing the risk of a negative outcome or decreasing the probability of a positive outcome to X%. A wide variety of questions are asked in a structured format, and the results are used to assess the individual's valuation of different health states. To date, CV has been used to obtain valuations for prevention, valuations of specific treatments and services, and valuations of health states (Morrison and Gyldmark, 1992). Gafni (1991) has identified three criteria that willingness to pay studies should fulfil if their results are to be consistent with economic theory and therefore likely to lead to efficient use of resources: Willingnesss to pay questions should be expressed in terms of an insurance premium against a stated risk of requiring the services, as individuals cannot plan their use of health care.
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•
The effect of the treatment on the individual's health status should also be expressed in terms of probability, as the probability of the treatment being successful is a separate consideration from its being required.
•
A representative sample should be used as it is the total willingness to pay of the total population that matters in valuing the benefit of a service provided to a population.
We might add that any resulting estimated preference function should be demonstrably valid in being able to predict an individual's behaviour well. Morrison and Gyldmark (1992) argue that the majority of studies to date do not meet the first three criteria. Questions have also been raised about the reliability and reproducibility of individuals' responses in countries where health care is funded from tax, as they do not have experience of this type of decision, reflecting the widespread observation that the fourth consideration is seldom met. Cost-benefit analysis is, in principle, the most satisfactory form of economic evaluation. It can take account of all aspects of specific choice, not being constrained to the health effects, and it allows expenditure on health care to be compared with expenditure on other activities. However, there are formidable difficulties in obtaining financial valuations for healthcare benefits. A number of teams of researchers are now working on the challenges of CV, and there is likely to be more rather than less of this type of work in the future.
Types of cost The previous section concentrated upon the manner and extent to which the different techniques of economic evaluations incorporate the benefits of a specific health-care intervention. The issue of the identifying and quantifying the costs of health care were not addressed. Health economics employs a well-established taxonomy of cost, which is reproduced in Table 1 (Drummond et al, 1987). Ideally, all economic evaluations would include all types of cost. However, few studies look at more than the direct costs. This reflects the relative ease with which direct costs can be identified and quantified. Also, Table 1. Taxonomy of cost. Type of cost
Definition
Direct costs
Organizational and operational costs incurred in the provision of the health care Costs borne by patients and their families, including production losses directly attributable to the health care Costs that cannot be given a financial value, e.g. the anxiety and pain suffered by patients and/or their families as a result of the health care
Indirect costs Intangible/humanistic costs
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the confidence intervals around estimates of indirect cost are considerably larger than those for direct costs, with the result that studies incorporating indirect costs are less likely to produce a clear result. A further reason for the concentration on direct costs in economic evaluations is that the majority of studies are carried out from the perspective of the service and are aimed at affecting service provision. Indirect costs are not incurred by the service and are therefore unlikely to impact upon their decisions, certainly not with the same weight as direct costs. Intangible costs, called humanistic costs in the USA, are those costs which cannot be assigned a financial value. These are considered even less frequently than indirect costs as they can only be described rather than incorporated into the cost-benefit equation.
Case studies This section presents two case studies of economic evaluations in the area of rheumatology in order to illustrate what economic evaluations can offer to the care of people with rheumatology and the problems that remain unresolved.
Example 1: Cost analysis The cost of rheumatoid arthritis. Mclntosh E (1996) British Journal of Rheumatology 35(8): 781-790. McIntosh reports a bottom-up costing of rheumatoid arthritis in the UK in 1992. Data from morbidity statistics from general practice and the OPCS survey of Disability in Great Britain were used to estimate the prevalence of disability associated with RA. Health-service utilization, the direct cost, for adults with RA was estimated using data from two rheumatologists and one rheumatology specialist nurse. Estimates of the value of lost production were based upon an assumption of a 50% work disability rate applying to all people with RA. The estimated total cost of RA in England was £1.256 billion in 1992. Of this, £604.5 million was direct costs and in principle subject to change by the National Health Service. Given the concentration in the literature on the costs of alternative NSAID therapies (Bloom, 1988; Fries et al, 1991; Zeidler, 1992; Barradell et al, 1993, Bentkover et al, 1994; Bloor and Maynard, 1996), it is interesting to note that drugs do not comprise the largest category of cost. The cost of hospital-based care and communal establishments was considerably greater. This suggests that changes in management practice in these areas have the potential to produce greater savings than does substituting one NSAID for another. The indirect costs, measured as lost productivity due to morbidity, accounted for £651.5 million, over 50% of the total burden. The relationship between the lost productivity from RA and the activities of the
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National Health Service is less direct than for direct costs; however, .the scale of the indirect costs suggests that management maximizing the ability of individuals to return to work might prove to be cost-saving from the societal perspective. Thus increasing the $11 million presently spent on 'Aids' might lead to an increase in production worth more than the addition to expenditure. The cost analysis produced by McIntosh does not relate health-care resources to health-care benefits and is not an economic evaluation. It does, however, highlight the scale of the resources being used in the treatment of RA and the benefits that society is foregoing under the present treatment regimen, in terms of lost output. This information gives important descriptive data on the scale and nature of RA as a health problem and thereby highlights the importance of people with RA as a patient group.
Example 2: Cost utility analysis Cost utility analysis of misoprostol prophylaxis for rheumatoid arthritis patients receiving non-steroidal anti-inflammatory drugs. Gabriel SE, Campion ME & O'Fallon WM (1994) Arthritis and Rheumatism 17(3): 333-341. The objective of this study was to quantify the cost per QALY gained from misoprostol prophylaxis for NSAID use. Three prophylaxis strategies were compared: no prophylaxis, prophylaxis for high-risk NSAID users only (i.e. the elderly); and prophylaxis for all NSAID users. The health care utilization data associated with gastric ulcers were based on a sample of 37 consecutive patients with RA who had a confirmed gastric ulcer and documented NSAID use within 30 days prior to the ulcer diagnosis. The costs for the health-care utilization were the mean charges for the services actually used by this cohort of patients. Patient values of eight alternative health states, describing possible outcomes of the different therapeutic strategies, were obtained from 57 patients with RA. Two valuation techniques were employed: the visual analogue scale or category scaling method, and the time trade-off method. The probabilities of each outcome actually occurring were obtained from the published literature. The expected quality of life (QoL) of valuations for each strategy were consistently lower using the category scaling method than the time trade-off method, but the ranking of QoL was consistent. There was, however, great variation in the valuations within the sample. Monte Carlo simulation analysis of 10 000 simulations showed that 87% of the time 'no prophylaxis' would lead to the lowest cost strategy, and 50% of the time it would produce the best quality of life for patients; i.e. prophylaxis and no prophylaxis had equivalent expected outcomes. The strength of this work is that it looks in a quantitative fashion at the trade-off between the high risk of small side-effects from the prophylaxis and the small risk of severe side-effects from the NSAIDs. It relates the expected benefits of the prophylaxis to the expected additional cost of
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obtaining them. This said, the differences in the result of the alternative valuation techniques must raise concerns about exact valuations of the health benefits, and even more about the utilization of the results in allocating health-care resources.
Strengths and weaknesses of health economics The two studies described have both strengths and weaknesses. The first describes the nature and the scale of burden of RA. In so doing, it assists clinicians and policy-makers to identify those areas where there is the potential for benefit from improved health care, and where there may be potential for the efficient use of existing health-care resources. It does not indicate how these efficiency gains should be made or how the health benefits should be achieved, nor whether it is sensible even to make the attempt. The second study describes the application of the techniques of economic evaluation to a very specific question: what are the benefits from prophylaxis alongside NSAID therapy, and how do these benefits compare with the costs of achieving them? In measuring benefits, it adopts an approach that would allow the comparison of NSAID prophylaxis with alternative uses of the health service resources, such as coronary artery bypass grafts and haemodialysis. This type of result allows policy-makers to choose how to spend limited health service resources. It also allows clinicians to compare the efficacy of alternative therapies for the same condition, taking account of a broad range of effects including primary clinical efficacy and side-effects. This said, the results of both of these studies, and indeed all economic evaluations, have to be considered with an awareness of their limitations. Much work remains to be done on the methods of obtaining quality of life valuations for different health states. When comparing cost per QALY ratios for different health-care interventions, it is important to remember that any differences may be due to the use of different valuation techniques rather than to real differences in the quality of life benefits. Large variations in the valuation of health states within samples is common, and confidence intervals around valuations can be large. Ranking interventions on the basis of cost per QALY may often be misleading as the confidence intervals around the central estimates for the various interventions may well overlap (Drummond et al, 1993). In the two studies described above, the costs used were collected from existing data sources. Increasingly, economic evaluations of new therapies are carried out at the same time as trials of clinical effectiveness. This approach has the strength that the clinical effectiveness and the cost data are collected for the same process. However, clinical trials may not be representative of clinical practice in terms of the resources used, and therefore the generalizability of the results of economic evaluations alongside clinical trials cannot be taken for granted. The alternative approach is to use the clinical effectiveness results from the clinical trial and combine these with cost data reflecting real-world
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activity. This is most often done through the construction of clinical decision models (Weinstein and Fineberg, 1980). The strengths and weaknesses of this approach have been excellently reviewed by Sheldon (1996). Sheldon's main concern is the large number of potential sources of bias, including the structure of the model, the reliability of the estimates used in the model and the type of sensitivity analyses that are performed using the model. Sheldon concludes that, 'Decision analysis should not be used as a substitute for knowledge. The method does nothing to reduce the uncertainty faced by the decision maker. Rather it should be used to help tease out the uncertainties and identify those which most affect choice.'
Future of health economics in rheumatology Having outlined some of the challenges that currently face health economics, it is important to state that economic evaluations in health care, including the management of RA, are going to become more rather than less important in the future. There are a number of factors that give us confidence in this assertion. Perhaps most important is the increasing requirement by licensing and reimbursement authorities for data demonstrating cost-effectiveness as well as clinical effectiveness before new products gain approval. In Canada and Australia, these requirements are legal; in other countries, such as the UK, they are enforced by the structure of the health-care system. Increasingly, the pharmaceutical industry will use these data in the promotion of its products to the medical profession, patient pressure groups and individual patients. On the other side of the debate, health-care purchasers will increasingly justify not funding a particular intervention in terms of the costs and benefits of that intervention. As this type of activity increases, the requirement for a critical understanding of strengths and weaknesses of health economic evaluations will become a central skill for clinicians. As the language of health economics plays a greater role in the discussion of who receives what treatment, the discipline itself must continue to develop and refine its techniques, so that the information it produces for the decision-making process is as useful as possible. All of this work will require the involvement of clinicians and patients. Active engagement by clinicians in the research process will help to speed the process of finding solutions to the present challenges and thereby lead to long-term improvements in the use of the limited health-care resources.
Practice points •
critically consider the evidence for cost effectiveness/cost utility of alternative therapies where it is available
•
incorporate the results of robust economic evaluations into clinical practice
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Summary The use of economic evaluations in the health-care decision-making process is increasing in all industrialized nations. There is a range of techniques of economic evaluation. Which technique to use depends upon the question being asked and the context in which it is being asked. As the volume of information increases, it is important for clinicians to be able critically to evaluate the data that are presented to them. When used appropriately, cost analyses, cost minimization analyses and cost-effectiveness analyses are useful sources of additional information on the relative merits of alternative therapies. However, the scope of these techniques is limited. Techniques with a broader scope, i.e. cost utility analysis and cost-benefit analysis, are in many ways techniques in development, with significant methodological challenges still to be overcome before they produce robust, reliable and reproducible results. This said, the use of these techniques, especially cost utility analysis, in real-world decision making is becoming increasingly common. Clinicians must not blindly accept this type of work but rather engage in constructive debate to help to improve the use of existing work and raise the quality of future work. In this way, the allocation of healthcare resources can be improved to maximize the health benefits delivered to patients by the health-care system.
References Barradell LB, Whittington R & Benfield P (1993) Misoprostol: pharmacoeconomics of its use as prophylaxis against gastroduodenal damage induced by nonsteroidal anti-inflammatory drugs. Pharmacoeconomics 3(2): 140-170. Bentkover JD, Baker AM & Kaplan H (1994) Nabumetone in elderly patients with osteoarthritis: economic benefits versus ibuprofen alone or ibuprofen plus misoprostol. Pharmacoeconomics 5(4): 335-342. * Birch S & Gafni A (1992) Cost effectiveness/utility analysis: do current decision rules lead us to where we want to be? Journal of Health Economics 11: 279-296. Bloom BS (1988) Cost of treating arthritis and NSAID-related gastrointestinal side effects. Alimentary Pharmacology and Therapeutics 2S: 131-139.
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Bloor K & Maynard A (1996) Is there scope for improving the cost-effective prescribing of nonsteroidal anti-inflammatory drugs? Pharmacoeconomics 9(6): 484-496. Boyle MH, Torrance GW, Sinclair JW & Horwood SP (1983) Economic evaluation of neonatal intensive care of very low birth weight infants. New England Journal of Medicine 308: 1330-1337. Department of Health (1994) Register of Cost-Effectiveness Studies. London: HMSO. * Donaldson C (1990) Willingness to pay for publicly provided goods: a possible measure of benefit? Journal of Health Economics 9:103-118. * Drummond MF, Stoddart GL & Torrance GW (1987) Methods of Economic Evaluation of Health Care Programmes. Oxford: Oxford University Press. Drummond M, Torrance G & Mason J (1993) Cost-effectiveness league tables: more harm than good? Social Science and Medicine 37(1): 33-40. * EuroQol Group (1990) EuroQol--a new facility for the measurement of health related quality of life. Health Policy 16: 199-208. Fries JF, Williams CA, Bloch DA & Michel BA (1991) Non-steroidal anti-inflammatory gastropathy: incidence and risk factor models. American Journal of Medicine 91: 213-222. Gabriel SE, Campion ME & O'Fallon WM (1994) Cost-utility analysis of misoprostol for rheumatoid arthritis patients receiving non-steroidal anti-inflammatory drugs. Arthritis and Rheumatism 17(3): 333-341. * Gafni A (1991) Willingness to pay as a measure of benefits. Medical Care 29(12): 1246-1252. Gudex C, Kind P, van Dalen H et al (1993) Comparing Scaling Methods for Health State Valuations: Rosser Revisited. York: Centre for Health Economics, University of York. McIntosh E (1996) The cost of rheumatoid arthritis. British Journal of Rheumatology 35(8): 781-790. "Morrison GC & Gyldmark M (1992) Appraising the use of contingent valuation. Health Economics 1: 233-243. Rosser R & Kind P (1978) A scale of valuations of states of illness: is there a social consensus? International Journal of Epidemiology 7(4): 347-357. Sheldon T (1996) Problems of using modelling in the economic evaluation of health care. Health Economics 5: 1-11. Torrance GW, Furlong W, Feeny D & Boyle M (1995) Multi-attribute preference functions: Health Utilities Index. Pharmacoeconomics 7(6): 503-520. * Weinstein MC & Fineberg HV (1980) Clinical Decision Analysis. Philadelphia: WB Saunders. * Williams A (1985) Economics of coronary artery bypass grafting. British Medical Journal 291: 326-329. Zeidler H (1992) Epidemiology and economics of NSAID-induced gastropathy. Scandinavian Journal of Rheumatology 92 (supplement): 3-8.
Health economics in rheumatology
Christopher J. McCabe BA, MSc Lecturer in Health Economics
Ron L. Akehurst BSc Professor, Chairman of the Executive Board
School of Health and Related Research (ScHARR), University of Sheffield, Regent Court, 30 Regent Street, Sheffield $1 4DA, UK
Economic evaluations of health-care technologies are playing an increasingly central role in determining which therapies are available to clinicians in the treatment of a whole range of conditions. In rheumatology, a large body of work has already been done on the cost effectiveness of alternative non-steroidal antiinflammatory drugs (NSAIDs), and much of the current work on disease modifying therapies incorporates economic evaluations. This chapter describes the main techniques of economic evaluation and reviews the strengths and weaknesses of each. Two published economic evaluations are discussed in order to highlight what economic evaluations can offer to the care of people with rheumatoid arthritis, as well as the current limitations of economic evaluation. The objective of this chapter is to equip readers with a critical understanding of economic evaluation that can be used in considering the increasing volume of health economic data that they encounter in their clinical work.
Key words: economic evaluation; cost effectiveness; rheumatology; costs; benefits; cost utility.
The element of the discipline of economics that is particularly relevant in health technology assessment is economic evaluation, that part of economics concerned with informing the answer to the question of whether a service or therapy should be provided and to what extent. Economic evaluation of a health technology proceeds by identifying the costs and benefits of that technology. In this context, technology means any process that is designed to impact upon the health state of the patient: it is not limited to capital equipment. Benefits reflect the provision of health gain by aspects of the service that the served population value positively. Costs are the benefits foregone as a consequence of the initiation of the technology. Money values are usually, although not exclusively, used to reflect the foregone benefits. Direct costs are the costs directly incurred, for Bailliere's ClinicalRheumatology-Vol. 11, No. 1, February 1997 ISBN 0-7020-2265-9 0950-3579/96/010145 + 12 $12.00/00
145 Copyright © 1997, by Bailli~re Tindall All rights of reproduction in any form reserved
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example, in the payment of doctors and nurses for the provision of a service. Indirect costs can be thought of as 'knock-on' consequences, for example the time lost from work as a consequence of treatment. Some economic evaluations confine themselves to direct costs, whereas others include all costs. The valuation of indirect costs may be difficult and contentious, meaning that different costs are valued for different questions, producing wide confidence intervals around cost estimates. There are a number of alternative techniques available for the economic evaluation of health technologies. The techniques differ in the manner and extent to which they take account of the health and non-health benefits that result from a particular intervention. Below, the range of techniques used is briefly reviewed. The assumptions made are made explicit, and the strengths and weaknesses of each approach are discussed.
Cost analysis Cost analysis is concerned only with the resources used in the provision of a specific type of health care or health care to a specific group of patients. It makes no attempt to relate these to the benefits or outcomes of health care. There are two approaches to doing a cost analysis: 'bottom up' and 'top down'. The 'top-down' approach divides the total cost of all disease between different diseases. The 'bottom-up' approach consists of identifying the health-care utilization and costs of a disease based upon a set of clear diagnostic criteria for the disease. Combining the detailed analysis of health-care utilization for patients who fulfil the criteria with data on the prevalence of the condition gives a robust estimate of the total cost of the disease (Drummond et al, 19 8 7). Purists would argue that cost analysis is not strictly a form of economic evaluation, as economics is concerned with how to maximize the benefits from the consumption of limited resources, and cost analysis ignores the consideration of benefits. Despite the limitations of cost analysis, this type of work is still carried out and can be useful. First, when the burden of disease is not fully understood, a cost analysis is one approach to quantifying the burden. It also identifies how the burden is distributed between the health-care system, other parts of the public sector, the patient, the family and society as a whole. Such information is useful in identifying the potential for improvements in the care provided, indicating those areas where change is likely to have the greatest impact, and may identify obstacles to change because of the burden of costs on any key groups. Second, a cost analysis can be viewed as a step towards a full economic evaluation. Any problems encountered by the cost analysis will also impact upon a full economic evaluation.
Cost minimization analysis Cost minimization analysis is used to compare two or more alternative
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treatments for the same condition. It is assumed, or has been demonstrated elsewhere, that the outcomes for each treatment are equal, and the most efficient therapy is therefore the least costly or cost-minimizing one. There is an intuitive appeal to cost minimization analysis. There are many conditions for which there are alternative therapies that appear to be equally efficacious. Non-steroidal anti-inflammatory drugs (NSAIDs) are a good example of this. However, it does not take a great deal of thought to realize that although many therapies are equally efficacious in relation to primary outcome, for example, the management of inflammation, this is not the same as saying that the outcomes of each treatment are the same. Different treatments have different side-effects; some individuals will find one method of administration more acceptable than another, leading to differences in levels of compliance; and people 'grow used' to the therapy they have had for a long time and may be reluctant to change, giving rise to additional variations in compliance. When thought about in this way, the intuitively appealing cost minimization analysis can be seen to be very limited and likely to be an appropriate form of analysis in only a very few cases.
Cost-effectiveness analysis Like cost minimization analysis, cost-effectiveness analysis is used to compare two or more therapies for the same condition. Unlike cost minimization analysis, it does not assume that the therapies are equally effective but instead measures the health effects of the alternative therapies, as well as the costs. As the therapies being compared are for the same condition, the health benefits are measured in the most appropriate natural unit of effect, for example cost per true case identified by a screening programme, or cost per unit reduction in cholesterol by use of appropriate drugs. The most efficient therapy for the condition is that which has the lowest cost per unit of effect. Cost-effectiveness analysis thus concentrates upon only one dimension of outcome. There is an ~mplicit assumption that there are no important differences between the therapies on other dimensions of effect, for example side-effects. If there is reason to believe that this assumption does not hold, cost-effectiveness analysis is then not the appropriate evaluation technique. In addition to looking at a single dimension of effect, cost-effectiveness analysis is also limited because it can only compare therapies for the same condition. Decision-makers are often faced with the need to choose whether to spend limited resources on therapies for different conditions. Costeffectiveness analysis does not show decision-makers whether coronary artery bypass grafts, for example, are a more efficient use of health service resources than NSAID therapy. To address this question, a universal measure of outcome is required.
Cost utility analysis Cost utility analysis is an attempt to overcome the limitations of cost-
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effectiveness analysis by using a measure of outcome that can be applied-to all health-care interventions, most commonly the quality adjusted life year (QALY). The QALY is based upon the observation that health care produces improvements in individuals' quality of life, improvements in their life expectancy (quantity of life) or both, and combines both of these elements in a single measure. Thus, a quality adjusted life year (QALY) should in principle be able to measure the outcome of any health care and can be used to choose between any competing health-care interventions (Williams, 1985). As well as allowing comparisons between health-care technologies for different conditions, the QALY measure should capture all the health effects of any given intervention. Thus, when there are multiple important dimensions of effect, making cost-effectiveness analysis inappropriate, cost utility analysis can be used. One of the key difficulties in using cost utility analysis is measuring the quality of life of individuals in specific health states. At the most basic level, it is not straightforward to describe a health state so that people can give it a value, i.e. say what the quality of life would be. There are problems of calibrating the scale along which individuals are asked to value their health state. Should death be the lowest point on the scale, or should we give individuals the opportunity to value some health states as worse than death? There is also an issue about whose valuations should be used. Doctors have the greatest technical knowledge about health, but individuals with a condition know what the technical problems mean for their quality of life. On the other hand, in the UK, people who pay tax actually pay for their health care, so maybe their valuations of different health states should be taken into account. Irrespective of whose valuations are obtained, different methods of obtaining the values have been shown to produce different results for the same health states (Gudex et al, 1993). In addition to the methodological challenges faced by the cost utility approach, there are concerns about the ethical implications of using QALYs to allocate resources. For example, treatments for older people will necessarily produce fewer life years than treatments for young people, and therefore QALYs necessarily favour treatments for younger people and will bias resource allocation towards them (Birch and Gafni, 1992). Despite these difficulties, a number of instruments for measuring quality of life are now available. After early work on health state valuation by Rosser and Kind (1978), the EuroQol team have produced an instrument for measuring quality of life (EuroQol Group, 1990), and an instrument based on the SF-36 health survey, called the SF-6D, will be published soon (J. Brazier, personal communication). A team at McMaster University in Canada have been developing the health utilities index for approximately 20 years, the latest incarnation being the health utilities index III (Torrance et al, 1995). As the availability of appropriate instruments has improved, the number of cost utility analyses being undertaken has also increased. Early work in the area of neonatal screening and neonatal intensive care (Boyle et al,
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1991) has been followed up with cost utility analyses for coronary artery bypass grafting (Williams, 1985), smoking cessation and haemodialysis, among many others (Department of Health, 1994). Despite the difficulties with cost utility analysis, it is becoming increasingly used in guiding, for example, health-care purchasing decisions by health authorities in the UK.
Cost-benefit analysis and willingness to pay Although cost utility analysis will help decision-makers to choose between funding different health-care technologies, it does not help to inform the debate about how resources should be allocated between health and other activities. In an ideal world, the benefits from all resource use would be expressed in financial terms in order to allow the comparison of all alternative uses of the limited resources. This approach is called costbenefit analysis. In cost-benefit analysis, the costs and the benefits of the health care are given a financial value. The difference in the value of the costs and benefits is called the net present value (NPV). If the NPV is negative, i.e. the resources used by the intervention are valued more highly than the health benefits it produces, the intervention should not be provided. All interventions with a positive NPV can be considered for provision. The objective in determining which of these interventions to provide is to maximize the total value of the net benefits, so the interventions should be ranked. The combination of interventions that produces the most benefit per pound spent should be funded. It is clearly crucial that the method of valuing benefits should be robust. An increasingly popular approach is contingent valuation (CV) (Morrison and Gyldmark, 1992), often referred to as 'willingness to pay' (Donaldson, 1990). Strictly speaking, willingness to pay is only one form of contingent valuation, the other being willingness to accept (Morrison and Gyldmark, 1992). In essence, individuals are asked how much they would be willing to pay to increase the probability of a specific outcome to X%, or reduce the risk of a specific illness by X%. Alternatively, they are asked how much they would be willing to accept as compensation for increasing the risk of a negative outcome or decreasing the probability of a positive outcome to X%. A wide variety of questions are asked in a structured format, and the results are used to assess the individual's valuation of different health states. To date, CV has been used to obtain valuations for prevention, valuations of specific treatments and services, and valuations of health states (Morrison and Gyldmark, 1992). Gafni (1991) has identified three criteria that willingness to pay studies should fulfil if their results are to be consistent with economic theory and therefore likely to lead to efficient use of resources: Willingnesss to pay questions should be expressed in terms of an insurance premium against a stated risk of requiring the services, as individuals cannot plan their use of health care.
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•
The effect of the treatment on the individual's health status should also be expressed in terms of probability, as the probability of the treatment being successful is a separate consideration from its being required.
•
A representative sample should be used as it is the total willingness to pay of the total population that matters in valuing the benefit of a service provided to a population.
We might add that any resulting estimated preference function should be demonstrably valid in being able to predict an individual's behaviour well. Morrison and Gyldmark (1992) argue that the majority of studies to date do not meet the first three criteria. Questions have also been raised about the reliability and reproducibility of individuals' responses in countries where health care is funded from tax, as they do not have experience of this type of decision, reflecting the widespread observation that the fourth consideration is seldom met. Cost-benefit analysis is, in principle, the most satisfactory form of economic evaluation. It can take account of all aspects of specific choice, not being constrained to the health effects, and it allows expenditure on health care to be compared with expenditure on other activities. However, there are formidable difficulties in obtaining financial valuations for healthcare benefits. A number of teams of researchers are now working on the challenges of CV, and there is likely to be more rather than less of this type of work in the future.
Types of cost The previous section concentrated upon the manner and extent to which the different techniques of economic evaluations incorporate the benefits of a specific health-care intervention. The issue of the identifying and quantifying the costs of health care were not addressed. Health economics employs a well-established taxonomy of cost, which is reproduced in Table 1 (Drummond et al, 1987). Ideally, all economic evaluations would include all types of cost. However, few studies look at more than the direct costs. This reflects the relative ease with which direct costs can be identified and quantified. Also, Table 1. Taxonomy of cost. Type of cost
Definition
Direct costs
Organizational and operational costs incurred in the provision of the health care Costs borne by patients and their families, including production losses directly attributable to the health care Costs that cannot be given a financial value, e.g. the anxiety and pain suffered by patients and/or their families as a result of the health care
Indirect costs Intangible/humanistic costs
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the confidence intervals around estimates of indirect cost are considerably larger than those for direct costs, with the result that studies incorporating indirect costs are less likely to produce a clear result. A further reason for the concentration on direct costs in economic evaluations is that the majority of studies are carried out from the perspective of the service and are aimed at affecting service provision. Indirect costs are not incurred by the service and are therefore unlikely to impact upon their decisions, certainly not with the same weight as direct costs. Intangible costs, called humanistic costs in the USA, are those costs which cannot be assigned a financial value. These are considered even less frequently than indirect costs as they can only be described rather than incorporated into the cost-benefit equation.
Case studies This section presents two case studies of economic evaluations in the area of rheumatology in order to illustrate what economic evaluations can offer to the care of people with rheumatology and the problems that remain unresolved.
Example 1: Cost analysis The cost of rheumatoid arthritis. Mclntosh E (1996) British Journal of Rheumatology 35(8): 781-790. McIntosh reports a bottom-up costing of rheumatoid arthritis in the UK in 1992. Data from morbidity statistics from general practice and the OPCS survey of Disability in Great Britain were used to estimate the prevalence of disability associated with RA. Health-service utilization, the direct cost, for adults with RA was estimated using data from two rheumatologists and one rheumatology specialist nurse. Estimates of the value of lost production were based upon an assumption of a 50% work disability rate applying to all people with RA. The estimated total cost of RA in England was £1.256 billion in 1992. Of this, £604.5 million was direct costs and in principle subject to change by the National Health Service. Given the concentration in the literature on the costs of alternative NSAID therapies (Bloom, 1988; Fries et al, 1991; Zeidler, 1992; Barradell et al, 1993, Bentkover et al, 1994; Bloor and Maynard, 1996), it is interesting to note that drugs do not comprise the largest category of cost. The cost of hospital-based care and communal establishments was considerably greater. This suggests that changes in management practice in these areas have the potential to produce greater savings than does substituting one NSAID for another. The indirect costs, measured as lost productivity due to morbidity, accounted for £651.5 million, over 50% of the total burden. The relationship between the lost productivity from RA and the activities of the
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National Health Service is less direct than for direct costs; however, .the scale of the indirect costs suggests that management maximizing the ability of individuals to return to work might prove to be cost-saving from the societal perspective. Thus increasing the $11 million presently spent on 'Aids' might lead to an increase in production worth more than the addition to expenditure. The cost analysis produced by McIntosh does not relate health-care resources to health-care benefits and is not an economic evaluation. It does, however, highlight the scale of the resources being used in the treatment of RA and the benefits that society is foregoing under the present treatment regimen, in terms of lost output. This information gives important descriptive data on the scale and nature of RA as a health problem and thereby highlights the importance of people with RA as a patient group.
Example 2: Cost utility analysis Cost utility analysis of misoprostol prophylaxis for rheumatoid arthritis patients receiving non-steroidal anti-inflammatory drugs. Gabriel SE, Campion ME & O'Fallon WM (1994) Arthritis and Rheumatism 17(3): 333-341. The objective of this study was to quantify the cost per QALY gained from misoprostol prophylaxis for NSAID use. Three prophylaxis strategies were compared: no prophylaxis, prophylaxis for high-risk NSAID users only (i.e. the elderly); and prophylaxis for all NSAID users. The health care utilization data associated with gastric ulcers were based on a sample of 37 consecutive patients with RA who had a confirmed gastric ulcer and documented NSAID use within 30 days prior to the ulcer diagnosis. The costs for the health-care utilization were the mean charges for the services actually used by this cohort of patients. Patient values of eight alternative health states, describing possible outcomes of the different therapeutic strategies, were obtained from 57 patients with RA. Two valuation techniques were employed: the visual analogue scale or category scaling method, and the time trade-off method. The probabilities of each outcome actually occurring were obtained from the published literature. The expected quality of life (QoL) of valuations for each strategy were consistently lower using the category scaling method than the time trade-off method, but the ranking of QoL was consistent. There was, however, great variation in the valuations within the sample. Monte Carlo simulation analysis of 10 000 simulations showed that 87% of the time 'no prophylaxis' would lead to the lowest cost strategy, and 50% of the time it would produce the best quality of life for patients; i.e. prophylaxis and no prophylaxis had equivalent expected outcomes. The strength of this work is that it looks in a quantitative fashion at the trade-off between the high risk of small side-effects from the prophylaxis and the small risk of severe side-effects from the NSAIDs. It relates the expected benefits of the prophylaxis to the expected additional cost of
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obtaining them. This said, the differences in the result of the alternative valuation techniques must raise concerns about exact valuations of the health benefits, and even more about the utilization of the results in allocating health-care resources.
Strengths and weaknesses of health economics The two studies described have both strengths and weaknesses. The first describes the nature and the scale of burden of RA. In so doing, it assists clinicians and policy-makers to identify those areas where there is the potential for benefit from improved health care, and where there may be potential for the efficient use of existing health-care resources. It does not indicate how these efficiency gains should be made or how the health benefits should be achieved, nor whether it is sensible even to make the attempt. The second study describes the application of the techniques of economic evaluation to a very specific question: what are the benefits from prophylaxis alongside NSAID therapy, and how do these benefits compare with the costs of achieving them? In measuring benefits, it adopts an approach that would allow the comparison of NSAID prophylaxis with alternative uses of the health service resources, such as coronary artery bypass grafts and haemodialysis. This type of result allows policy-makers to choose how to spend limited health service resources. It also allows clinicians to compare the efficacy of alternative therapies for the same condition, taking account of a broad range of effects including primary clinical efficacy and side-effects. This said, the results of both of these studies, and indeed all economic evaluations, have to be considered with an awareness of their limitations. Much work remains to be done on the methods of obtaining quality of life valuations for different health states. When comparing cost per QALY ratios for different health-care interventions, it is important to remember that any differences may be due to the use of different valuation techniques rather than to real differences in the quality of life benefits. Large variations in the valuation of health states within samples is common, and confidence intervals around valuations can be large. Ranking interventions on the basis of cost per QALY may often be misleading as the confidence intervals around the central estimates for the various interventions may well overlap (Drummond et al, 1993). In the two studies described above, the costs used were collected from existing data sources. Increasingly, economic evaluations of new therapies are carried out at the same time as trials of clinical effectiveness. This approach has the strength that the clinical effectiveness and the cost data are collected for the same process. However, clinical trials may not be representative of clinical practice in terms of the resources used, and therefore the generalizability of the results of economic evaluations alongside clinical trials cannot be taken for granted. The alternative approach is to use the clinical effectiveness results from the clinical trial and combine these with cost data reflecting real-world
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activity. This is most often done through the construction of clinical decision models (Weinstein and Fineberg, 1980). The strengths and weaknesses of this approach have been excellently reviewed by Sheldon (1996). Sheldon's main concern is the large number of potential sources of bias, including the structure of the model, the reliability of the estimates used in the model and the type of sensitivity analyses that are performed using the model. Sheldon concludes that, 'Decision analysis should not be used as a substitute for knowledge. The method does nothing to reduce the uncertainty faced by the decision maker. Rather it should be used to help tease out the uncertainties and identify those which most affect choice.'
Future of health economics in rheumatology Having outlined some of the challenges that currently face health economics, it is important to state that economic evaluations in health care, including the management of RA, are going to become more rather than less important in the future. There are a number of factors that give us confidence in this assertion. Perhaps most important is the increasing requirement by licensing and reimbursement authorities for data demonstrating cost-effectiveness as well as clinical effectiveness before new products gain approval. In Canada and Australia, these requirements are legal; in other countries, such as the UK, they are enforced by the structure of the health-care system. Increasingly, the pharmaceutical industry will use these data in the promotion of its products to the medical profession, patient pressure groups and individual patients. On the other side of the debate, health-care purchasers will increasingly justify not funding a particular intervention in terms of the costs and benefits of that intervention. As this type of activity increases, the requirement for a critical understanding of strengths and weaknesses of health economic evaluations will become a central skill for clinicians. As the language of health economics plays a greater role in the discussion of who receives what treatment, the discipline itself must continue to develop and refine its techniques, so that the information it produces for the decision-making process is as useful as possible. All of this work will require the involvement of clinicians and patients. Active engagement by clinicians in the research process will help to speed the process of finding solutions to the present challenges and thereby lead to long-term improvements in the use of the limited health-care resources.
Practice points •
critically consider the evidence for cost effectiveness/cost utility of alternative therapies where it is available
•
incorporate the results of robust economic evaluations into clinical practice
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Summary The use of economic evaluations in the health-care decision-making process is increasing in all industrialized nations. There is a range of techniques of economic evaluation. Which technique to use depends upon the question being asked and the context in which it is being asked. As the volume of information increases, it is important for clinicians to be able critically to evaluate the data that are presented to them. When used appropriately, cost analyses, cost minimization analyses and cost-effectiveness analyses are useful sources of additional information on the relative merits of alternative therapies. However, the scope of these techniques is limited. Techniques with a broader scope, i.e. cost utility analysis and cost-benefit analysis, are in many ways techniques in development, with significant methodological challenges still to be overcome before they produce robust, reliable and reproducible results. This said, the use of these techniques, especially cost utility analysis, in real-world decision making is becoming increasingly common. Clinicians must not blindly accept this type of work but rather engage in constructive debate to help to improve the use of existing work and raise the quality of future work. In this way, the allocation of healthcare resources can be improved to maximize the health benefits delivered to patients by the health-care system.
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Bloor K & Maynard A (1996) Is there scope for improving the cost-effective prescribing of nonsteroidal anti-inflammatory drugs? Pharmacoeconomics 9(6): 484-496. Boyle MH, Torrance GW, Sinclair JW & Horwood SP (1983) Economic evaluation of neonatal intensive care of very low birth weight infants. New England Journal of Medicine 308: 1330-1337. Department of Health (1994) Register of Cost-Effectiveness Studies. London: HMSO. * Donaldson C (1990) Willingness to pay for publicly provided goods: a possible measure of benefit? Journal of Health Economics 9:103-118. * Drummond MF, Stoddart GL & Torrance GW (1987) Methods of Economic Evaluation of Health Care Programmes. Oxford: Oxford University Press. Drummond M, Torrance G & Mason J (1993) Cost-effectiveness league tables: more harm than good? Social Science and Medicine 37(1): 33-40. * EuroQol Group (1990) EuroQol--a new facility for the measurement of health related quality of life. Health Policy 16: 199-208. Fries JF, Williams CA, Bloch DA & Michel BA (1991) Non-steroidal anti-inflammatory gastropathy: incidence and risk factor models. American Journal of Medicine 91: 213-222. Gabriel SE, Campion ME & O'Fallon WM (1994) Cost-utility analysis of misoprostol for rheumatoid arthritis patients receiving non-steroidal anti-inflammatory drugs. Arthritis and Rheumatism 17(3): 333-341. * Gafni A (1991) Willingness to pay as a measure of benefits. Medical Care 29(12): 1246-1252. Gudex C, Kind P, van Dalen H et al (1993) Comparing Scaling Methods for Health State Valuations: Rosser Revisited. York: Centre for Health Economics, University of York. McIntosh E (1996) The cost of rheumatoid arthritis. British Journal of Rheumatology 35(8): 781-790. "Morrison GC & Gyldmark M (1992) Appraising the use of contingent valuation. Health Economics 1: 233-243. Rosser R & Kind P (1978) A scale of valuations of states of illness: is there a social consensus? International Journal of Epidemiology 7(4): 347-357. Sheldon T (1996) Problems of using modelling in the economic evaluation of health care. Health Economics 5: 1-11. Torrance GW, Furlong W, Feeny D & Boyle M (1995) Multi-attribute preference functions: Health Utilities Index. Pharmacoeconomics 7(6): 503-520. * Weinstein MC & Fineberg HV (1980) Clinical Decision Analysis. Philadelphia: WB Saunders. * Williams A (1985) Economics of coronary artery bypass grafting. British Medical Journal 291: 326-329. Zeidler H (1992) Epidemiology and economics of NSAID-induced gastropathy. Scandinavian Journal of Rheumatology 92 (supplement): 3-8.