Beating Around the Bush: Why Americans Don’t Use Cost-

Effectiveness Analysis (or do they?)

Peter J. NeumannPeter J. Neumann

Tufts-New England Medical Center, Tufts-New England Medical Center, Boston, MABoston, MA

Overview

Some historical contextSome historical context

Understanding the current political climateUnderstanding the current political climate

Why don’t Americans use CEA (or do they)?Why don’t Americans use CEA (or do they)?

Looking aheadLooking ahead

Employer54%

Medicare12%Medicaid

10%

Direct Purchase

8%

Military Health Insurance

3%

Uninsured13%

Source: Health Care Coverage in America: Understanding the issues and proposed solutions. www.CoverTheUninsured.org/Materials

Health insurance cover in US, 2005

Source: 2006 Annual Report of the Medicare Boards of Trustees

Medicare expenditures and income as % of U.S. GDP

A Variation Problem

Dartmouth Atlas of Healthcare

A bit of history …

A big country

We’re not Canada!

Understanding the current political climate

““I just bought a car from a guy that stole my I just bought a car from a guy that stole my girl, but the car don’t run, so I figure we got girl, but the car don’t run, so I figure we got an even deal” – Country Western songan even deal” – Country Western song

Why Don’t Americans Use Cost-Effectiveness Analysis?

Why don’t Americans use CEA? Mistrust of methodsMistrust of methods

Methods varyMethods vary Studies not relevantStudies not relevant

Mistrust of motivesMistrust of motives Legal and regulatory barriersLegal and regulatory barriers Systemic barriersSystemic barriers Distaste for (explicit) rationingDistaste for (explicit) rationing We ARE using CEA, just quietlyWe ARE using CEA, just quietly

CEA in America: Key players

MedicareMedicare Medicaid (The DERP)Medicaid (The DERP) Private plans (AMCP Format)Private plans (AMCP Format) FDAFDA Other public payers (VA, DoD)Other public payers (VA, DoD) The public health establishment (CDC, NiH, AHRQ, OMB The public health establishment (CDC, NiH, AHRQ, OMB

etc.)etc.) Private health plansPrivate health plans EmployersEmployers ConsumersConsumers

Medicare

Selected cost-effectiveness ratios for technologies covered by Medicare

Left-ventricular assist devices: $500,000-$1.4 Left-ventricular assist devices: $500,000-$1.4 million/QALYmillion/QALY

Lung-volume reduction surgery: Lung-volume reduction surgery: $98,000-$330,000/QALY$98,000-$330,000/QALY

Implantable cardioverter defibrillators: $30,000-Implantable cardioverter defibrillators: $30,000-$85,000/QALY$85,000/QALY

PET for Alzheimer’s disease: Over $500,000/QALYPET for Alzheimer’s disease: Over $500,000/QALY

Source: Matchar, 2003; Gillick, 2004

Cost Effectiveness and Use of Selected Interventions in the Medicare Population

Health InterventionHealth Intervention Cost Effectiveness (2002$ / Cost Effectiveness (2002$ / QALY)QALY)

% Implementation in % Implementation in MedicareMedicare

Influenza vaccineInfluenza vaccine Cost savingCost saving 40-70%40-70%

Beta blocker after MIBeta blocker after MI Under $10,000 / QALYUnder $10,000 / QALY 85%85%

Cholesterol management, Cholesterol management, secondary preventionsecondary prevention

$10,000 to $50,000 / QALY$10,000 to $50,000 / QALY 30%30%

Dialysis for ESRDDialysis for ESRD $50,000 to $100,000 / QALY$50,000 to $100,000 / QALY 90%90%

Lung-vol reduction surgeryLung-vol reduction surgery $100,000 to $300,000 / QALY$100,000 to $300,000 / QALY 5,000 to 100,000 cases per year*5,000 to 100,000 cases per year*

Left ventric assist devicesLeft ventric assist devices Over $500,000 / QALYOver $500,000 / QALY 5,000 to 100,000 cases per year*5,000 to 100,000 cases per year*

PET for Alzheimer’s diseasePET for Alzheimer’s disease Over $500,000 / QALYOver $500,000 / QALY 50,000 cases per year*50,000 cases per year*

Source: Gillick, 2004; Neumann, 2005; www.hsph.harvard.edu/cearegistry.

* projection

The Medicare Modernization Act

““I don’t make jokes. I just watch the I don’t make jokes. I just watch the government and report the facts” government and report the facts”

– – Will RogersWill Rogers

MMA (1) Rx drug coverage for 40+ millionRx drug coverage for 40+ million

$0-$250, patient pays 100%$0-$250, patient pays 100% $250-$2,250, patient pays 25%$250-$2,250, patient pays 25% $2251-$3,600, patient pays 100%$2251-$3,600, patient pays 100% >$3,600, patient pays 5%>$3,600, patient pays 5%

Subsidies for low-income elderly and employerSubsidies for low-income elderly and employer New coverage for prevention (initial physical New coverage for prevention (initial physical

exam, cardiovascular screen, diabetes screen)exam, cardiovascular screen, diabetes screen) Medicare prohibited from negotiating drug pricesMedicare prohibited from negotiating drug prices

MMA (2) Formulary rules

Formularies must have multiple products in Formularies must have multiple products in each categoryeach category

Patients can get non-formulary drug if MD Patients can get non-formulary drug if MD deems necessarydeems necessary

USP sets therapeutic class and revisesUSP sets therapeutic class and revises Drug plans required to establish P&T Drug plans required to establish P&T

comm.comm. P&T decision must reflect therapeutic P&T decision must reflect therapeutic

advantages in terms of safety and efficacyadvantages in terms of safety and efficacy Formularies may use good practices (e.g., Formularies may use good practices (e.g.,

pharmacoeconomics, other tools)pharmacoeconomics, other tools)

“Every formulary must include drugs within each therapeutic category and class, though not

necessarily all drugs within such categories and class.”

MMA (3)

Demonstration projects (includes CEA)Demonstration projects (includes CEA) AWP reform (CMS monitoring)AWP reform (CMS monitoring) AHRQ role in AHRQ role in comparativecomparative-effectiveness -effectiveness

research research $15 million $15 million prohibited from using it to exclude drugsprohibited from using it to exclude drugs

Medicaid

John Kitzhaber

States Participating in DERP, 2006

AlaskaAlaska ArkansasArkansas CaliforniaCalifornia IdahoIdaho KansasKansas MichiganMichigan MinnesotaMinnesota MissouriMissouri MontanaMontana

New YorkNew York North CarolinaNorth Carolina OregonOregon WashingtonWashington WisconsinWisconsin WyomingWyoming CHCF/CALPERSCHCF/CALPERS

Source: Center for Evidence-Based Policy, OHSU

AMCP Format

MCOs and PBMs That Have Adopted AMCP’s Format

The Regence GroupThe Regence Group Premera Blue CrossPremera Blue Cross Providence Health PlanProvidence Health Plan Group Health CooperativeGroup Health Cooperative BC/BS of Hawaii (HMSA)BC/BS of Hawaii (HMSA) Blue Shield of CaliforniaBlue Shield of California Wellpoint Wellpoint Cardinal HealthCardinal Health Health PartnersHealth Partners Prescription SolutionsPrescription Solutions Intermountain Health CareIntermountain Health Care

Anthem Rx Mgmt Anthem Rx Mgmt Argus Argus CoventryCoventry Prime Therapeutics Prime Therapeutics M PlanM Plan Mayo Health PlanMayo Health Plan CaremarkCaremark MedImpact MedImpact ACS State HealthcareACS State Healthcare VA and DODVA and DOD Kaiser Permanente Kaiser Permanente

Audit of 106 economic analyses 2002-2005

Total AMCP Dossiers submitted in 2002-2005Total AMCP Dossiers submitted in 2002-2005 115115

Dossiers including economic informationDossiers including economic information 5252

(45%)(45%)

Total number of distinct health economic analyses Total number of distinct health economic analyses among the 52 AMCP dossiers containing economic among the 52 AMCP dossiers containing economic information information

*(dossiers may contain one or more analyses) *(dossiers may contain one or more analyses)

106*106*

Audit of 106 analyses, detail by year

YearYear

# of AMCP # of AMCP dossiers dossiers reviewedreviewed

# of AMCP # of AMCP dossiers dossiers

w/economic w/economic informationinformation

# of economic # of economic analyses analyses reviewedreviewed

20022002 3838 1515 2626

20032003 3131 2020 4141

20042004 3434 1313 4343

20052005 1212 44 55

TotalTotal 115115 5252 106106

General Description 1

Characteristics Characteristics Total # of Total # of

ObservationsObservations% Positive % Positive result (n)result (n)

Statement on form of economic analysis Statement on form of economic analysis (even if wrong)(even if wrong)

106106 59% (62)59% (62)

Discussion about Discussion about formform of economic analysis of economic analysis chosenchosen

106106 11% (12)11% (12)

Form of analysis chosen is a Form of analysis chosen is a CMA or a ‘costs CMA or a ‘costs study’study’

106106 48% (51)48% (51)

Discussion about Discussion about analysis analysis andand parameters parameters selectedselected

106106 17% (18)17% (18)

Statement of viewpoint of analysisStatement of viewpoint of analysis 106106 38% (40)38% (40)

General Description 2

Characteristics Characteristics Total # of Total # of Obs.Obs.

% Positive % Positive result (n)result (n)

Analysis perspective is Analysis perspective is 33rdrd party payer’s party payer’s 106106 89% (91)89% (91)

Time horizon for costs and benefits statedTime horizon for costs and benefits stated 106106 78% (83)78% (83)

Time horizon is Time horizon is 2 years or more2 years or more 106106 42% (44)42% (44)

Discounting if analysis 2 years or longerDiscounting if analysis 2 years or longer 4444 34% (15)34% (15)

All All assumptionsassumptions are clearly stated are clearly stated 106106 20% (21)20% (21)

General Description 3

CharacteristicsCharacteristics Total # of Total # of

Obs.Obs.

% Positive % Positive results (n)results (n)

Report of productivity changesReport of productivity changes 106106 13% (14)13% (14)

Statement of rationale behind choice Statement of rationale behind choice of comparatorsof comparators

106106 41% (43)41% (43)

Compared product to all Compared product to all relevant relevant comparatorscomparators

106106 37% (39)37% (39)

General Description 4Characteristics Characteristics Total # of Total # of

Obs.Obs.

% Positive % Positive results (n)results (n)

Reports Reports quantityquantity of resources of resources separatelyseparately from from pricesprices

106106 21% (22)21% (22)

Reports sReports sensitivity analysisensitivity analysis performed performed 106106 43% (46)43% (46)

Incremental resultsIncremental results reported (even if wrong reported (even if wrong formulas)formulas)

106106 26% (28)26% (28)

All conclusions follow from data reported All conclusions follow from data reported 106106 54% (57)54% (57)

Conclusions accompanied by specific Conclusions accompanied by specific caveatscaveats 106106 18% (19)18% (19)

Report mentions that Report mentions that comparators might be comparators might be superiorsuperior given changes in assumptions given changes in assumptions

106106 8% (8)8% (8)

CEA in America: The Critical Importance of Value Assessment

MedicareMedicare Medicaid (The DERP)Medicaid (The DERP) FDAFDA Other public payers (VA, DoD)Other public payers (VA, DoD) The public health establishment (CDC, NiH, The public health establishment (CDC, NiH,

AHRQ, OMB etc.)AHRQ, OMB etc.) Private health plansPrivate health plans EmployersEmployers ConsumersConsumers

Looking ahead

Prospects for CEA

The view from academia…

““Cost-effectiveness analysis has had, at best, a Cost-effectiveness analysis has had, at best, a troubled youth… but it will give way to a troubled youth… but it will give way to a successful adulthood.”successful adulthood.”

- Peter Ubel, U of - Peter Ubel, U of MichiganMichigan

The view from politicians …

““I’m so miserable without you, it’s like I’m so miserable without you, it’s like having you here.”having you here.”

““I don’t know whether to kill myself or go I don’t know whether to kill myself or go bowling”bowling”

7 trends to watch

1. Growing use of value evidence to inform:1. Growing use of value evidence to inform: CoverageCoverage Formulary managementFormulary management PaymentPayment IncentivesIncentives

2. Expanded use of AMCP Format 2. Expanded use of AMCP Format 3. More consumer-driven health care3. More consumer-driven health care4. Medicare reforms (tiptoeing around CEA)4. Medicare reforms (tiptoeing around CEA)5. DERP-ization of drug class reviews5. DERP-ization of drug class reviews6. Employers revolt/Unions give back6. Employers revolt/Unions give back7. A new institute?7. A new institute?