June 2017 Volume 15, Issue 6, Pages 838–840
DOI: http://dx.doi.org/10.1016/j.cgh.2017.02.026
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Cost-Effective but Bad for Health? Hepatitis C Treatment Moral Hazard, and Opportunity Cost
John B. Wong, MD , Joshua T. Cohen, PhD Division of Clinical Decision Making, Department of Medicine, Center for the Evaluation of Value and Risk in Health, Institute for Clinical Research and Health Policy Studies and Tufts Medical Center, Tufts University School of Medicine, Boston, Massachusetts
Since the Food and Drug Administration approval of sofosbuvir in 2013, the initial hue and cry over the $1000 pill, once deafening with congressional hearings, insurance restrictions, and patient advocacy, now has diminished through negotiated confidential discounts and with the approval of additional direct-acting antivirals (DAAs). In this issue of Clinical Gastroenterology and Hepatology, a study by Chhatwal et al1 showed how these discounts would affect published cost-effectiveness analyses for treating hepatitis C patients infected with genotype 1.
Health economists have long promoted the idea that using cost effectiveness to guide health care spending would maximize population health. The idea is straightforward. Cost effectiveness quantifies a new therapy’s value compared with current standard care as the ratio of the new therapy’s incremental or additional cost to its incremental health benefits (measured in terms of life-years or quality-adjusted life-years [QALYs]). By standardizing the effectiveness outcome measure as QALYs, cost-effectiveness analysis uses a common metric to help stakeholders assess whether an intervention confers sufficient benefit (improved survival and quality of life) to justify its cost. The incremental cost-effectiveness ratio (ICER) is essentially the price paid for health gains. A low ratio is favorable because it means that the new intervention incurs only a small cost for each life-year or QALY added.
The idea behind cost effectiveness is that we should implement the most favorable cost-effective interventions first, followed by the somewhat less favorable cost-effective interventions, and so on, until we run out of health care resources. Mathematicians have shown (and intuition suggests) that this approach maximizes health gains achievable with a constrained fixed budget. As a short cut, we can choose a cost-effectiveness threshold (eg, a maximum price of $100,000 per QALY gained) and implement only those interventions with cost-effectiveness ratios that are less than the threshold of societal willingness to pay for health gains.
The Chhatwal et al1 systematic review identified 24 studies from 11 countries involving combinations of 11 drugs. Appendix Table 2 in Chhatwal et al1 lists all 170 ICERs for the primary intervention vs the comparator using the DAA cost as published. When examining just the 89 ICERs for second-generation DAAs, 63% had published ICERs that were less than $100,000 per QALY gained,2 making them favorably cost effective at this threshold, and 35% reported ICERS that were cost-saving, which is even better than cost effective because the second-generation DAAs improved health (added QALYs) and reduced the overall lifetime cost of treatment and disease. When assuming a DAA cost of $60,000, the proportion of cost-saving ICERs increased to 71%. Of course, applying a realistic price places the analysis at odds with the methodologic reference case recommendations of the Panel on Cost-Effectiveness in Health and Medicine,3 which advised using average wholesale prices (eg, $94,500 for sofosbuvir and ledipisvir) to encourage comparability across economic analyses.
Paradoxically, despite favorability, spending money on these medications, even with the specified price limits, could make population health worse. How can that be? To understand the impact of channeling resources to new hepatitis C antivirals, we need to examine where those resources come from and hence what benefits are being displaced—that is, what economists call the opportunity cost.4 At the extreme, treating 2 to 3 million US hepatitis C patients with sofosbuvir would incur costs approximating annual US expenditures on all drugs,5, 6 so, hypothetically, assuming a fixed drug budget, the benefit of treating all hepatitis C patients would displace the benefits of all other drugs. This trade-off holds even if antivirals are cost-saving because the health care system incurs DAA costs now and accrues savings associated with reduced expensive and life-shortening complications only in the future.
What about other solutions such as treating the neediest patients? The problem is that even just treating the 50% of patients with hepatitis C who have been identified7 would increase total drug expenditures by half. Moreover, implementing targeted treatment is challenging.8 Because payers reimburse treatment for most patients even if only a subset substantially benefits, the therapy’s true price is invisible to most patients. Moreover, clinicians typically focus on maximizing clinical benefits for their patients without regard to cost.9, 10
As one hepatologist who prescribed $22 million worth of hepatitis C treatments said, “I think about taking care of the patients. Should I not take care of the patients because the cost is expensive?”
Thus, not surprisingly, many providers react with hostility when presented with cost-effectiveness analyses.9 Economists refer to the resulting situation as the moral hazard problem: the clinician does not bear the cost of its provision; indeed, they may profit from it. Insurance increases the patient demand for health care (and hence health care expenditures) regardless of health status and possibly reduces patient incentives to follow behaviors that preserve health.4 This does not leave anyone interested in carefully weighing therapeutic costs and benefits, a situation that makes optimal allocation less likely.
To address the resulting budget impact, perhaps health policymakers should cap drug prices. Arguably, the government-maintained monopoly pricing that drug manufacturers enjoy produce profits that are too large. All economists would view selling a product for a price far greater than manufacturing costs as inefficient, or what Joseph Newhouse terms “static inefficiency.”12 Society, however, protects patents to foster research and development that improve health as a societal good. The societal challenge then is to create a system that optimizes “dynamic efficiency,”12 that is, provides enough incentives for research and development, but does not inflate profits inefficiently. Whether current laws achieve a proper balance is hotly debated.
What is clear, however, is that even if drug prices were reduced, challenges would remain. Will we ask clinicians to think not only about maximizing benefit for each of their patients, but also about the balance between cost and benefit? That type of personalized medicine would help society pay for new, innovative treatments and mitigate the budget cuts that hurt others. The Physician Charter on Professionalism promotes “a just distribution of finite resources” so that, “While meeting the needs of individual patients, physicians are required to provide health care that is based on the wise and cost-effective management of limited clinical resources.”13 DeCamp and Riggs14 highlight the tension between obligations to patients and to judicious use of societal resources. They state that trainees should focus on patient welfare as their professional identity, and that they should receive only careful, limited education about “cost-quality trade-offs.”14 Detsky and Naglie9 state that it is probably inappropriate for clinicians to consider cost effectiveness in individual patient care.
Ultimately, we cannot avoid grappling with opportunity costs and moral hazard. Because preserving drug innovation is costly, finding a way to pay those costs must be part of the solution. Even with drug price limits, we still would have to think about how we pay for new therapies and whether the opportunity cost resulting from the displacement of other medical care would be worthwhile. Optimally, we would fund new and improved therapies by defunding those therapies that deliver the least clinical value relative to their cost. Stopping even inefficient or ineffective therapy, however, is politically and clinically difficult,15 so the prospects here are limited.
Clinical practice guidelines seek to optimize patient care, including treatment decisions. The widely adopted method for developing clinical guidelines, called the Grading of Recommendations Assessment, Development, and Evaluation approach, explicitly incorporates resource utilization for alternative treatments in the evidence base for rating the quality of the evidence and the strength of recommendations.16 Unfortunately, this guidance has been implemented inconsistently and to varying extents. Even if evidence-based guideline recommendations were incorporated into routine practice, all guidelines acknowledge the role of clinical judgment when providers apply recommendations to individual patients. Despite a new emphasis on population health and initiatives such as Choosing Wisely, their impact on utilization by providers has been marginal.17, 18
Thus, both policy and provider interventions face challenges. Policy makers should identify and cut low-value health care programs; providers should distinguish patients who should not receive treatment from those who should or could wait. In the quality-improvement literature, an oft-cited quote with unclear attribution is that “Every system is perfectly designed to get the results that it gets.” Plsek19 describes health care as a complex adaptive system that will adjust itself in the presence of appropriate incentives. Epstein et al20 define patient-centered care as the quality of interaction between providers and patients, and they propose it as one such initiative with evidence supporting higher patient satisfaction, quality of care, and health outcomes, and lower health care costs. They advocate for policies that promote engaged and informed patients, receptive and responsive health professionals, and a health care environment supportive of these efforts. With health care expenditures now more than one-sixth of the US economy, the question is not just whether cost-effectiveness analysis finally will be used to inform health policy,21, 22 but also whether decision makers and clinicians will make the hard choices needed to best promote population health.
References
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