Put in simple terms, Health Economics is the application of principles of economics in the field of health and healthcare delivery systems to prioritise the needs of the general public based on cost effectiveness. By health economic evaluation, we attempt to provide ‘Value for Money’ in healthcare systems. This is done by ensuring cost-effectiveness in addition to clinical effectiveness of a given healthcare system or technology.
On the other hand, outcomes research is the analysis of end-results of any healthcare practice or intervention. These end-results may include mortality, clinical efficiency, patient satisfaction, doctor satisfaction, economic burden, social/ cultural/ societal impact, etc. Outcomes research takes into account patients’ experiences, preferences and values. It attempts to provide practical and real-world evidence for the effectiveness of various health technologies.
Two related terms are pharmacoeconomics (PE) and HTA.
Pharmacoeconomics is a branch of health economics which evaluates clinical, economic and humanistic aspects of a pharmaceutical product. It provides valuable information to the healthcare decision makers, healthcare providers and patients for the purpose of optimal allocation of healthcare resources.
HTA on the other hand is a process of critically assessing various properties of any medical technology used in healthcare and intends to act as a bridge between evidence and policy-making.
Though all these terms appear as same, but we can broadly say that PE and HTA are the subsets of HEOR. While PE is primarily concerned with the economic analysis of a pharma product, HTA has a wider coverage and includes any health technology, and the assessment includes economic as well as other practical aspects of the health technology in question.
Pharmacoeconomics
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Dr Amit Dang
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Out of these different terms that have been introduced in the previous section, the term that is perhaps the best known in the Indian context is pharmacoeconomics. In pharmacoeconomics, we compare the ‘value’ of one drug or drug schedule with another.
The concept of ‘Costs’ and ‘Consequences’
Two most basic terminologies in pharmacoeconomics are ‘cost’ and ‘consequences’. Put in plain terms, in pharmacoeconomics, all types of inputs in any healthcare intervention are termed as costs (expressed in monetary terms), and all forms of outputs are termed as consequences of the intervention (expressed in terms of monetary value, efficacy of the intervention, or enhancement of the quality of life of the individual).
The costs may be direct, indirect and intangible.
- Direct costs include the costs of all resources consumed during the course of providing the intervention to the patient, as well as any consequences of the intervention (such as adverse events). They can be broadly categorised into:
- Medical costs: Include costs which are directly related to the medical services, such as physician’s consulting fees, costs incurred for diagnosis, and costs for treatment including medicines and surgical costs
- Non-medical costs: Include non-medical costs which are directly due to the illness, such as transportation, parking, outside food consumption, child care etc.
- Indirect costs are those which are associated with the reductions in individual productivity due to the illness, disability or death. These include costs due to sickness absenteeism, unpaid assistance from family member, etc.
- Intangible costs are costs due to pain and sufferings, which cannot be measured
The various types of consequences considered in pharmacoeconomics are:
- Direct monetary benefits
- Effectiveness of the therapy. E.g., number of years of life saved, duration of hospitalisation avoided, complication-free episodes, etc.
- Utility: A utility is a Quantified preference for a specified health state. Utilities are usually expressed using scales of zero to one. E.g., QALY (Quality-adjusted life year), HALY (Health-adjusted life year) etc.
The concept of ‘Perspectives’ and its importance in pharmacoeconomic analyses
Another basic and important concept in pharmacoeconomics is ‘perspectives’. It indicates the viewpoint from which a pharmacoeconomic study is to be conducted and interpreted. With changing perspective, the need to do the pharmacoeconomic evaluation and the expected desirable outcome also changes significantly.
For example, from the perspective of a medical scientist involved in medical research, the most desirable outcome with a new health technology is its clinical effectiveness. But, from the perspective of a patient, all possible types of costs to the individual, due to the new health technology, should also be counted in addition to its effectiveness. When the perspective of a hospital administrator is considered, the costs and consequences of all the patients attending the particular hospital should be taken into account and decision that benefits the majority of the patients are to be taken. The implications are larger from the perspective of the society and even larger when the national perspective is considered. Economic analyses should take the widest possible perspective in order to maximise their value to a large number of people as a basis for healthcare decision-making. This is also the reason why whenever the Government wants to do a pharmacoeconomic evaluation, it gives the most importance to the societal and the national perspective.
Need of pharmacoeconomics in healthcare system
Pharmacotherapy decisions traditionally depended solely on clinical outcomes like safety and efficacy, but pharmacoeconomics teaches us that there are three basic outcomes to be considered: clinical, economic, and humanistic in drug therapy.
Pharmacoeconomic analysis helps the decision makers of a healthcare system (e.g., clinicians, hospital administrators, health insurance providers, or the government) to optimise the resources in health. Burdened by the limited nature of resources, the decision makers face the problem of balancing the healthcare needs of a few patients with the healthcare needs of the larger society. In this background, pharmacoeconomic analysis provides means for assessing costs and consequences of all the available alternate pharma products.
With the boom in the pharma industry, many drugs belonging to the same class have been made available to the prescriber. Further, different brands of the same drug are often at the disposal of the prescriber. Though this situation improves the choice for the prescriber, it also brings in confusion as to which brand should be chosen.
At a higher level, a similar dilemma is will be faced by a hospital, Government, or an insurance company, when an introduction of a health scheme or a health insurance scheme is being contemplated. The hospital/ insurance company/ government will be interested to know whether the new drug/ device/ procedure, which is usually more expensive than the established drug/ device/ procedure, is significantly beneficial to the patient, and at the same time economically viable.
In either of these scenarios, pharmacoeconomics plays a very crucial role in helping with the correct choice of healthcare delivery systems.
Pharmacoeconomics also plays a vital role for the pharmaceutical industry by providing inputs for fixing the price of a new drug, and for re-fixing the price of an existing drug in the context of another similar drug of a rival pharmaceutical industry entering the market.
Pharmacoeconomics in India
Pharmacoeconomics is not well established in India. There are very few, if any, quality papers dealing with pharmacoeconomics from the Indian context. There are no uniform guidelines for performing PE studies in India, and the researchers who plan to conduct such studies most often rely on guidelines used in the US or European countries which do not suit the Indian situation entirely. Further, there is a dearth of qualified professionals as well as institutions which offer quality education, in the field of pharmacoeconomics.
The Indian chapter of International Society for Pharmacoeconomics and Outcomes Research (ISPOR) was established in May 2006, and is the information centre for all the pharmacoeconomic-related activities in India. The Indian chapter of ISPOR has drafted the proposed pharmacoeconomic guidelines for India, with the objective of initiating India-specific pharmacoeconomics research. Despite this, the full potential of pharmacoeconomics is yet to be realised in India.
Health Technology Assessment (HTA)
Health Technology Assessment (HTA) is a process of critical assessment (examining and reporting) of various properties of any ‘medical technology’ used in healthcare. The term ‘medical technology’ includes any technology, procedure or intervention related to the healthcare management of the patient, such as diagnostic equipment, diagnostic tests, novel drug or drug schedule, device, surgical technique, surgical materials, etc.
The properties of the ‘medical technology’ considered while doing HTA may include its safety and efficacy, indications for use, feasibility, its cost and cost-effectiveness, its outcomes, and its short-term and long-term consequences (social, economic, ethical, legal and political). Both direct/ intended as well as indirect/ unintended consequences are considered.
Need for HTA in healthcare system
HTA comes into picture whenever a new healthcare technology is made available in a healthcare set-up, and a decision is to be made between the new technology and the already-existing technology.
HTA seeks to answer two major questions:
- How do the health outcomes of the new technology compare with the established alternatives? (i.e. clinical effectiveness) and
- Are the clinical improvements seen with the novel technology commensurate with the additional costs due to the technology?(i.e. cost-effectiveness).
A health technology which has a good evidence of effectiveness in literature may fare poorly when introduced in a healthcare set-up due to some unexpected adversity (such as high cost, unacceptable levels of side effects, or unexplained hurdles in the social, cultural, or societal front). This will result in tremendous loss, both monetary and otherwise, for the healthcare providers, patients, and the policy-makers. A properly done HTA will predict whether or not a health technology intended to be introduced in a hospital or society will result in a favourable risk-benefit profile. Thus, HTA is expected to act as a bridge between evidence and policy-making.
Key stakeholders in HTA
The key stakeholders in HTA are:
- Healthcare policy makers: Those involved in funding, planning, purchasing and investing in healthcare
- Healthcare providers: Responsible for the administration of the health technology
- Patients: The recipients of the health technology
- Pharmaceutical industry: Manufactures the health technology
- Government: Decides upon the health technologies to be introduced in its public health plans and schemes
- Insurance companies: To seek justifications and make decisions for including new technologies under various insurance schemes
HTA in India
The poor public healthcare delivery in India and the virtual absence of health insurance schemes has resulted in increasing reliance on private health sector. As a result, the current model in the Indian healthcare system relies on most of healthcare expenditure being borne out of pocket (OOP) by the patient. There is no control over what tests the practitioner can order and what drugs the patient can be prescribed; the deciding authority rests with the practitioner.
In this background, increasing and often illogical ordering of diagnostic tests and the irrational prescription of unwanted medicines often results in catastrophic payments (a scenario where the healthcare expenditure in a household exceeds 10-20 per cent of the total household income); India’s catastrophic payments prevalence is amongst the highest in Asia.
If, the scenario of OOP spending for healthcare needs in India is replaced by a system where all individuals are covered by some form of health insurance (either Government or private), the entire equation undergoes a drastic change.
Since the payment for the healthcare services comes from the Government and insurance companies, accountability will be brought into all aspects of healthcare system, including diagnostics and prescription of drugs. More significantly, the onus will be on the pharma companies and manufacturers of healthcare chemicals and devices to convince the Government and insurance companies that their product is indeed different and unique in comparison with the existing ones.
If this scenario becomes a reality, since the Government and insurance companies are expected to cater to the whole society and not just to a few patients, they will be expected to take decisions with due importance given to all aspects of the health technology being considered (including the effectiveness, costs, risks, and social, cultural, legal, ethical and societal impacts). The only tool that can provide all these information is HTA.
Major hurdles for introducing HTA in the Indian healthcare system
Though the idea of HTA is lingering (The High Level Expert Group report on Universal Health Coverage by the Planning Commission of India has highlighted the need for using economic evidence for policymaking in India), unfortunately India lacks a commendable HTA programme. While the importance of HTA has been fully appreciated and has been fully utilised for framing healthcare policies in developed countries of the world, India remains one of the few major countries in the world that does not have a formal HTA programme. Further, there is a lack of qualified HTA personnel in India, or courses which impart quality HTA education in India.
Though there is no formal national HTA programme in India, there have been isolated attempts by a few groups in the direction. For example, NICE International (UK), SIGNET initiative (Singapore), ISPOR-Indian chapter, HTA International, and PHFI have all organised workshops and conferences in order to provide sensitisation in the branch of HTA to Indian policy makers and senior clinicians.
The way forward
For the approval of a new drug in India, the Drug Controller General (India) (DCGI) requires only clinical data, and not economic data. This, it becomes important to sensitise the policy makers and senior politicians about the need for HTA in India.
HTA is a complex science, and guidelines need to be formulated. In this direction, the Indian chapter of ISPOR has already drafted the proposed pharmacoeconomic guidelines for India. Most of the existing guidelines and protocols in HTA and HEOR have been developed in the western world. While devising similar guidelines for India, due care has to be given to the prevalent socio-economic situations, healthcare systems, medical practices, cultures and values systems in India which are significantly different from those in the western world.
Further, it is also important to realise that there is a dearth of adequately qualified authority in the field of HTA in India and hence, related talent development is the need of the hour.