EHRA Policy Conference
Athens, December 13th 2011
Funding challenges: How to finance
expensive technologies in the context
of limited resources
Giuditta Callea
Cergas - Bocconi University, Milan, Italy
www.together4healthinnovation.eu
“Stemming the global tsunami of cardiovascular
diseases”, Lancet, 2011
•
2 billion people are at risk of cardiovascular diseases:
o
1.3 billion smokers
o
600 million hypertensive
o
220 million diabetics.
2
“Forecasting the Future of Cardiovascular Disease in the
US”, Circulation, 2011
•
Currently, CVD is the leading cause of death in the US and
constitutes 17% of the overall national health expenditures.
•
By 2030, 40.5% of US adults (116 million people) will have one or
more forms of CVD.
•
•
•
Between 2010 and 2030, total
direct medical costs are projected
to triple, from $273 billion to $818
billion.
Indirect costs due to productivity
loss are estimated to increase
from $172 billion in 2010 to $276
billion in 2030 (+61%).
Projected Direct and Indirect Costs
of CVD, 2010 to 2030 in the US (in
Billions 2008$)
1 200
1 000
276
800
600
400
200
-
172
196
220
273
358
470
2010
2015
2020
246
622
2025
818
2030
Direct (Medical) Costs of CVD
Indirect (Lost Productivity) Costs of CVD
These projections do reflect the demographics of an ageing
population.
3
In 2010, over 1/3 of EU’s
population has developed at
least one chronic disease
4
Economic burden of CVD in EU-27,
European Heart Journal, 2006
Cost of CVD (in Billions 2003€)
168
105
63
29
CVD
Informal care
34
Production
losses
28
Healthcare
costs
Medications
14
Inpatient care
Promary &
outpatient care
5
Pacemakers: units per million inhabitants
6
Defibrillators: units per million inhabitants
7
CRT-P: units per million inhabitants
8
CRT-D: units per million inhabitants
9
Good clinical evidence is not enough any longer
•
Over the past decades, the quality of clinical evidence has become
the primary criterion for accepting and funding technologies.
•
Nowadays increasing concerns around healthcare costs escalation:
o
The proportion of elderly is increasing
2030
2010
> 65
< 65
> 65
16%
84%
•
< 65
24%
76%
o
The incidence of chronic conditions increases
o
Public resources as from fiscal revenues necessarily decrease: fewer
people would cover a greater number of more costly people.
Necessity to combine clinical effectiveness to economic efficiency.
10
Where is Economics…in principle?
•
Healthcare decision-making level.
•
Bring evidence to the policy makers:
o
Health Technology Assessment
11
Health Technology Assessment
•
HTA is a multi-disciplinary process studying the medical, economic,
social and ethical implications of diffusion and use of health
technology aimed at informing policy-decisions to efficiently
allocate scarce resources.
•
Economic Efficiency and Clinical Effectiveness dominate HTA
activities and Cost-Effectiveness Analysis normally makes the most
of HTAs.
•
CEA decision rule: Incremental Cost-Effectiveness Ratio (ICER).
ICER =
CB  CA
EB  EA
12
Are (current) CEAs & ICERs good proxies for cardiac
devices values?
•
Since the 90s there has been significant innovations in the
cardiology sector (e.g. balloon angioplasty, coronary stents, ICDs,
TAVI, mitra-clip, ...).
•
Nevertheless a systematic review* on economic evaluation studies
of cardiac devices (i.e. ICDs, pace-makers, stents) over the period
early 1990-2009 shows poor results:
o
5% examined long-term benefits
o
15% used QALYs
o
Cost of device at uptake primary cost driver:

No consideration for learning curves

No organisational impact.

*Sorenson et al., Applying Health Economics for Policy Decision Making: Do Devices
differ from Drugs?,2011, Europace, Vol. 13 (suppl. 2), pp. ii54-ii58.
13
Are (current) CEAs & ICERs good proxies for cardiac
devices values? NO
•
Adapting CEAs for pharmaceuticals to devices gives a partial
picture of the true costs and benefits.
•
Drugs differ from devices:
o
•
Evidence is growing (Drummond et al., 2009; Sorenson et al., 2010;
Tarricone & Drummond, 2011) but needs support by clinicians to
contribute to the debate (e.g. 2nd Join-Action by EC).
RCTs do not work sufficiently for MDs:
o
•
Registers need to become more reliable and credible.
Benefits should encompass a wider perspective:
o
Productivity gains by patients & informal care givers
o
Returns on the economy (R&D, competitiveness, qualified employees,
…) through the multiplier effect of MedTech.
14
What might happen then?
•
We would measure the true “opportunity cost” of allocating scarce
resources in programmes other than healthcare.
•
Higher level debate might be engaged onto how and where to
allocate global public budgets, providing that benefits healthcare
programmes accrue to non-healthcare sectors also.
15
Is it out of reach?
•
John Dalli, “Better Health, Better Economy”, at Finnish
Government (February, 2011).
•
German Ministry of Economic Affairs, “We must not only regard
health care spending as a cost factor, but need the full economic
perspective”:
o
Direct medical costs have increased by €101 billion in 2003-2008 vs.
2002. This is however counterbalanced by an avoided loss of gross
national product by €123 billion in the same period, as a result of
avoided loss of productive life years.
o
Medical progress has thus a positive net impact on the economy, as a
result of lowered indirect costs such as productivity losses.
16
Where is Economics…in principle?
•
Healthcare decision-making level.
•
Bring evidence to the policy makers:
o
Health Technology Assessment
o
EHTI International Study “Linking Hospital Payments to Innovation
and Value”.
17
Linking Hospital Payments to Innovation and Value:
Research Team
•
LSE Health: Michael Drummond and Corinna Sorenson
•
Bocconi University: Aleksandra Torbica and Giuditta Callea
•
University of Lisbon: Ceu Mateus
18
Linking Hospital Payments to Innovation and Value:
Background and Aims
•
Shift towards prospective payment schemes for hospitals in a wide
range of countries.
•
Most new MDs are first introduced in the inpatient sector 
medical technology is strongly dependent on funding regulation.
•
Minimal available evidence that the value added by a device is
used in determining payment levels.
o
•
However, EHTI phase I research and the EuroDRG project both
highlight that some countries use instruments (e.g., special payments)
to provide extra payments for technological innovations.
Thus, proposed research aims at identifying ways in which the
additional value offered by devices can be directly reflected in
payments.
19
Linking Hospital Payments to Innovation and Value:
Research Questions
•
What are the characteristics of the reimbursement system (DRG
system developed locally vs. imported from elsewhere, DRG rates
developed at national vs. regional level, frequency of updates)?
•
What provisions exist for extra payments in various jurisdictions to
facilitate the adoption of new devices?
•
Are there any hospital payment schemes in Europe and elsewhere
that consider evidence of the value of new technologies when
updating DRGs and/or tariffs?
•
How is such evidence considered or incorporated into adjusted
payments? What are the challenges of this process? Who is
involved?
•
In what ways could payment schemes be changed to more closely
link payment levels to evidence on value?
20
Linking Hospital Payments to Innovation and Value:
Components of the Study
•
Literature review.
•
International survey of experts involved with
developing/administering prospective payment schemes
o
14 countries represented:

o
•
Australia, Austria, Canada, England, Finland, France, Germany, Ireland, Italy, Norway,
Portugal, Spain, Sweden, USA.
51 surveys disseminated, 33 returned to date (65% response rate).
Semi-structured interviews in England and Italy with
o
Hospital managers (ongoing)
o
Clinicians (to be performed).
21
Linking Hospital Payments to Innovation and Value:
Preliminary Results
•
Almost an even split between countries that developed their DRG
system locally vs. importing/adapting it from elsewhere.
•
Most DRG rates/tariffs are defined on the national level, although
in many countries, this is also done at the regional level.
•
Almost all countries update DRG rates/tariffs annually.
•
Minority of countries create a single DRG and rates/tariffs outside
of a general update as a response to innovative technology.
o
In cases where they have been created, volume and cost are the
principal criteria for a new code.
22
Preliminary Results of the International Survey:
Use of Evidence of Value
4
14
Number of Countries
12
Therapeutic
Benefit
10
8
Yes
6
No
Uncertain
CostEffectiveness
(V4$)
Both
2
4
2
0
0
Use of Evidence of
Value
If Yes, Type of Evidence
Considered
*Yes: England, France, and Portugal
23
Preliminary Results of the International Survey:
Perceived Impact of DRGs on Uptake of Innovative
Technologies
Australia
Austria
Canada
England
Finland
France
Germany
Ireland
Italy
Norway
Portugal
Spain
Sweden
US
No impact
Modest impact
Moderate impact
Significant impact
Extremely
Significant impact
24
Preliminary Results of the International Survey:
Type of Impact
•
“Depends on how the tariff is set – too low
and innovation is inhibited”.
•
“If no DRG specific to a given treatment,
then use by clinicians can be limited”.
•
“DRG values in the US mostly encourage
surgical/procedural innovations, which have
high tariffs and now much in the medical
DRGs (e.g., stroke) that have much lower
tariffs”.
•
“Depends on the design of the DRG system.
R&D as well as early innovation need to be
funded as separate programmes”.
•
“Tariffs are set annually; hospitals ahead of
the adoption curve take the risk that their
higher costs will not be reimbursed in the
first years – this slows adoption. But, as a
medical innovation disseminates across the
system, these costs are absorbed into the
costings that form the basis of DRG tariffs,25
reflecting patterns of adoption”.
14
Number of countries
12
10
8
6
4
2
0
Type of Impact
Encourage
Inhibit
Both
No impact
Linking Hospital Payments to Innovation and Value:
Drawbacks of DRGs to Supporting Uptake and Diffusion
of Innovation
•
Time lag between:
o
Introduction of the new MDs
o
Update of classification system: “The integration of innovation into the
DRG tariff cannot be determined as long as there is no possibility to code the
innovation separately”
o
•
Update in DRG rates/tariffs
Hospital motivation:
o
•
“Generally, DRG systems lag behind in reflecting innovative health
technologies, which are initially expensive, and therefore hospitals are unlikely
to invest if they are primarily motivated by DRG payment in the short term”.
Perspectives:
o
“A limited picture – one needs to consider the overall costs of the DRG. While
a new technology may have a higher cost, it may result in a shorter LOS”.
26
Linking Hospital Payments to Innovation and Value:
Special Payments
•
About 70% of countries surveyed use some form of special
payment for specific technologies.
o
•
•
Most commonly in the form of payments in addition to the tariff or a
payment negotiated outside of the DRG.
Typical criteria for these payments include:
o
High costs
o
Defined specialist services/interventions or diagnoses
o
Level of activity (i.e., found in a number of DRGs)
o
New innovation.
MoH and regional authorities/hospitals most often involved in
determining or negotiating special payments.
27
Linking Hospital Payments to Innovation and Value: Use
of Evidence of Value in Special Payments
6
14
Number of Countries
12
10
Therapeutic
Benefit
4
8
CostEffectiveness
(V4$)
Both
Yes
No
6
2
4
2
0
0
Use of Evidence of Value
*Yes: Australia, England, France, Germany,
Portugal, Sweden, US
If Yes, Type of Evidence
Considered
28
Linking Hospital Payments to Innovation and Value:
Special Payments Processes
•
In the majority of countries, it takes between 1-2 years to
determine special payments.
•
Payments are generally reviewed annually and/or when a given
technology can adequately be incorporated into an existing DRG.
•
All respondents deemed such payments an effective mechanism to
integrate technologies into the health system.
29
Preliminary Results of the International Survey:
Technologies Where Special Payments Have Been
Applied
Drug-eluting stents
AU, EN, FR, DE, IE, IT
Transcatheter Heart Valve (TAVI)
AU, EN, FR
Neuromodulation Implants
EN, FR, NO, PT, IT
Ambulatory Volumetric Pumps
FR
Gastric bands
EN, FR, PT, SP
Cochlear implants
AU, FR, IE, NO, PT, SP, IT
Hip prosthesis
AU, FR, SP
Knee prosthesis
AU, FR, SP
Bladder band
FR
30
Conclusions
•
Very preliminary results.
•
Next steps:
•
o
Complete interviews with hospital managers in England and Italy and
analyze data.
o
Interview clinicians.
If any of the participants to the EHRA Policy Conference is willing
to contribute to the Research, please send an email to
[email protected] to receive the questionnaire.
31