Quantifying Opportunity Cost

Lessons to be learned from NICE and OHTAC

mike.paulden@theta.utoronto.ca

Mike Paulden

Background

•  I work for the THETA Collaborative in Toronto •  Among other things, we do economic assessments of

non-drug technologies for the Ontario Health Technology Advisory Committee (OHTAC)

•  OHTAC is currently reviewing its framework for making decisions (its ‘decision determinants’) – I sit on the subcommittee conducting this review

•  A key issue is how to integrate ‘opportunity cost’ •  While at York, I worked on HTA reports for NICE •  All opinions in this presentation are my own

A Real-world Example

•  In 2011, NICE considered cabazitaxel, a treatment for hormone-refractory, metastatic prostate cancer previously treated with docetaxel

•  Appears effective: Progression-free survival 2.8 months with cabazitaxel vs. 1.4 months with mitoxantrone (HR 0.74)

•  Expensive: Average cost of one cycle of treatment is £3696 (1.5 ml vial of cabazitaxel); median of 6 cycles per patient

•  Not cost-effective: ICER of at least £89,000 per QALY

•  NICE’s preliminary recommendation: •  “Cabazitaxel… is not recommended for the treatment of

hormone-refractory metastatic prostate cancer previously treated with a docetaxel-containing regimen”

A Real-world Example

•  During consultation, NICE received a letter from NHS Warwickshire (available on NICE’s website)

•  Until recently this was a Primary Care Trust (PCT) responsible for implementing NICE's guidance •  First comment: “Cabazitaxel is not a cost effective use of

NHS resources. The most plausible ICER… is in excess of £89,000 per QALY gained”

•  Further comments expressed concerns about the quality of evidence: “no reliable data on health-related quality of life”; and “substantial uncertainty about the effects of cabazitaxel on renal and cardiac adverse events”

•  Final comment…

“Based on estimates that 3 patients per 100,000 population would meet the appraised indication there would be 15 patients eligible for treatment with cabazitaxel in NHS Warwickshire. This would equate to a cost of £330,000 per annum for cabazitaxel. We would not consider that this expenditure would be justified for the small benefit in the small number of patients. There would be a significant opportunity cost, e.g. reduction in patient/family support services, disinvestment in non-essential clinical services (e.g. fertility services) or major transformation such as closing community hospitals. The local QIPP [Quality, Innovation, Productivity and Prevention] target for high cost drugs in 2011/12 is £1.6m and a new cost pressure of circa £300,000 would have significant impact on this, leading to disinvestment in other non-NICE approved technologies”

The NICE Approach

•  This opportunity cost must be considered •  Problem: the opportunity cost associated with

implementing NICE's guidance differs across PCTs, so it cannot be considered directly by NICE

•  Solution: NICE assumed PCTs have fixed budgets, and the objective of the NHS is to maximise QALYs

•  NICE uses cost-effectiveness analysis and then compares the ICER of the technology to a “cost-effectiveness threshold”

•  Crucially, this threshold represents (in principle) an estimate of the technoloy’s opportunity cost if adopted

•  If the ICER < this threshold, it is expected that adopting the technology will gain more QALYs than will be forgone

NICE’s “Guide to the methods of technology appraisal” (2008)

“The focus on cost-effectiveness analysis is justified by… the focus of the Institute on maximising health gains from a fixed NHS/PSS [Personal Social Services] budget” (p.33) “Given the fixed budget of the NHS, the appropriate threshold to be considered is that of the opportunity cost of programmes displaced by new, more costly technologies” (p.58) “The Institute does not have complete information about the costs and QALYs from all competing healthcare programmes in order to define a precise threshold” (p.58) “Consideration of the cost-effectiveness of a technology is a necessary, but is not the sole, basis for decision-making” (p.58)

Estimating NICE’s threshold

•  NICE’s threshold of £20,000 - £30,000 per QALY is a rough estimate of the opportunity cost of adopting a new technology within the NHS

•  Recent empirical work conducted by Claxton et al. estimated this opportunity cost with more precision

•  The authors analysed the relationship between marginal health expenditures and health outcomes

•  Best estimate of threshold: ~£18,000 per QALY •  Every £1m spent on a technology forgoes 55 QALYs •  Population health improves only if ICER < £18k

Suppose that you value apples at $1 each

At the market are two identical stalls selling identical apples but at different prices

Stall A

36¢ each

Stall B

18¢ each

How much would you be willing to pay for an apple from stall A?

Now suppose that society values QALYs at £100k each

Health technology

£36k per QALY

Other health programmes

£18k per QALY

How much should the NHS be willing to pay for a health technology?

Source of photo: redbubble.com

The opportunity cost of adopting a health technology is other health programmes

The OHTAC Approach

•  OHTAC considers four ‘decision determinants’: •  ‘Overall clinical benefit’ •  ‘Value for money’ •  ‘Consistency with societal and ethical values’ •  ‘Feasibility of adoption’

•  The opportunity cost cannot be directly considered •  OHTAC does not indirectly consider opportunity cost

•  ICERs are considered but not compared to any threshold

•  No empirical attempts to measure opportunity cost •  Implications for all four ‘decision determinants’

Empirical Research

•  At THETA, we have twice applied for CIHR funding to estimate a threshold for Ontario by conducting empirical work similar to that by Claxton et al.

•  We can potentially make use of patient-level data at ICES •  Would allow for a comparison across age groups or regions

•  On both occasions, both reviewers questioned how useful such work would be for policy makers:

•  Reviewer X: “it is not obvious how useful this would be to those making decisions on new technologies”

•  Reviewer Y: this research “will produce information of very limited (if any) value to decision-makers”

Take Away Points

•  OHTAC should place greater emphasis on considering opportunity cost as part of its decision making

•  There needs to be a better empirical understanding of what this opportunity cost is in Canadian practice

•  OHTAC and other agencies (including CADTH) should support empirical research similar to that conducted in the UK

•  Opportunity cost has implications that extend far beyond traditional ‘economic’ considerations

•  It raises numerous ethical issues •  The ‘overall clinical benefit’ of a technology depends upon

the effectiveness of the opportunity cost