Unbiased Analysis of Today's Healthcare Issues

Why don’t we rely exclusively on CEA estimates to make drug coverage determinations?

Written By: Jason Shafrin - Nov• 07•17

Cost effectiveness analyses (CEA) typically analyses the value of a new treatment relative to its cost.  If the value of the additional health benefits outweigh the additional cost, then they should be covered; if the additional cost outweighs the additional benefit, then it should not be covered, right?

There are a few issues with this argument.  First, typical analyses measure cost effectiveness for the average patient.  In many cases, a treatment that is not cost-effective can be cost effective for some patient subgroups but not others.  In theory, one could simply apply the same CEA principles to subgroups, but there are a number of problems with that approach.  First, oftentimes, not all the information about the patient’s likely treatment response–information likey available to the patient and provider–will be available to they payer making coverage decisions.  Secondly, making coverage restrictions (e.g., step therapy, prior authorization) is administratively expensive.

Another factor is that the value of different outcomes may vary by patient.  For instance, working age adults may place a high value on low toxicity and convenience so they can continue working; elderly individuals may focus less on convenience or mode of administration and more on efficacy. These are stereotypes, but they illustrate the point that patients will have different preferences over outcomes whereas QALYs assume that all patients value outcomes the same.

An interesting paper by Espinoza et al. (2017) examines the benefits and costs of centralized compared to individual choice decision-making in a collectively funded system.  Unsurprisingly, they find that:

the value a health care system will have to associate with offering choice to patients for its own sake (independent of its impact on population health) will have to be greater when it is compared with centralized decision‐making based on subgroup recommendations. This result is to be expected because when different decisions for different subgroups have been made, the expected health loss due to lack of understanding of the heterogeneity is lower and the expected population health gains are greater than the average case.

In short, to the extend that central planners can create precise subgroups that reflect patient clinical circumstances and preferences, then choice-based systems are less attractive.  In cases where there is signficiant unobserved clinical or preference-based heterogeneity, however, or in cases where it is expensive to administer treatment choice restrictions, then choice-based systems will be relatively more attractive.

The issue of allowing the maximum amount of patient choice while also managing finite resources is a key question that will require many years of additional research.


IVI Model highlights ACR Conference

Written By: Jason Shafrin - Nov• 06•17

As reported in a Academy of Managed Care & Specialty Pharmacy newsletter, titled “Mathematical Model Aims to Improve Cost-Effectiveness of Rheumatology Treatment“, the Innovation and Value Initiative’s is highlighted from the American College of Rheumatology conference.  Here is an excerpt:

Biological therapies for moderate to severe rheumatoid arthritis have significantly improved treatment and prognosis. However, the high cost of treatment may be a barrier to access. Researchers led by Devin Incerti, a health economist and data scientist at the Innovation and Value Initiative in Oakland, Calif., are developing a cost-effectiveness mathematical model to align prices with value. They shared their latest findings with attendees at the 2017 annual meeting of the American College of Rheumatology (ACR) and the Association of Rheumatology Health Professionals (ARHP).

In their abstract titled, “Open-Source Consensus-Based Models to Improve the Cost-Effectiveness of Rheumatology Care,” the authors said the literature lacks consensus on such models, and that estimates of treatment value vary widely. In addition, they said, because new evidence regarding biologics is being generated rapidly, any model that estimates value must continually evolve and update as well. They called for “transparent, flexible, and accessible cost-effectiveness models that shed light on the implications of different modeling approaches.”

The researchers developed an open-source set of cost-effectiveness models and made it publicly available on GitHub and as an R package. They also created a web application where users can run the model online, modifying their own parameter values and structural assumptions. They then applied a number of different plausible modeling assumptions to their model to compare the cost-effectiveness of a standard sequence of six biologic treatments to conventional disease-modifying antirheumatic drugs (cDMARDs).

Certainly an exciting, new approach to measuring treatment value in RA.

Links to start the week

Written By: Jason Shafrin - Nov• 05•17

Trump tax bill keeps the individual mandate

Written By: Jason Shafrin - Nov• 02•17

The Trump tax bill–potentially known as the “the Tax Cuts and Jobs Act“– includes provisions such as increasing the standard deduction and reducing the number of tax brackets from 7 to 4.  Additionally, a number of deductions are removed–such as capping local and state property tax deductions at $10,000 and only allowing mortgage interest deductions for loans under $500,000–to finance the larger standard deduction and increase the child tax credit to $1,600.

One item that was not removed was the tax penalty for individuals who do not buy insurance.  The Hill reports on the decision not to eliminate the individual mandate:

The tax reform bill to be released Thursday will not include a repeal of ObamaCare’s individual mandate, sources say, despite President Trump proposing the idea on Wednesday.

Repealing the mandate would introduce a whole new area of controversy into the bill, and many Republicans think tax reform is hard enough without adding in health care…

Repealing the mandate would save around $400 billion, which could be used to help pay for tax cuts, but the Congressional Budget Office also says 15 million more people would be uninsured and premiums would rise 20 percent.
Your tax rate may change, but you’ll still need to buy insurance.


Interesting paper measuring the option value

Written By: Jason Shafrin - Nov• 01•17

One key benefit new cancer treatments is not only that they improve survival, but also–in areas with a lot of treatment innovation–they that they allow some patients to live to receive the next treatment advance.  Although this concept may make sense intuitively, it is not clear how one could quantify this value.

This is the problem that a paper by Thornton Snider et al. (2017) attempts to address.  Using data from SEER and clinical trials, they examine a novel immuno-oncology treatments for renal cell carcinoma (RCC) and both squamous and nonsquamous non-small cell lung cancer (NSCLC).

To estimate the conventional value of nivolumab, survival with the pre-nivolumab standard of care was compared with survival with nivolumab assuming no future innovation. To estimate the option value of nivolumab, long-term survival trends in RCC and squamous and nonsquamous NSCLC were measured in SEER to forecast mortality improvements that nivolumab patients may live to see.

Using this approach, they find:

Compared with the previous standard of care, nivolumab extended life expectancy by 6.3 months in RCC, 7.5 months in squamous NSCLC, and 4.5 months in nonsquamous NSCLC, according to conventional methods. Accounting for expected future mortality trends, nivolumab patients are likely to gain an additional 1.2 months in RCC, 0.4 months in squamous NSCLC, and 0.5 months in nonsquamous NSCLC. These option values correspond to 18%, 5%, and 10% of the conventional value of nivolumab, respectively.


What do cancer patients value when making treatment decisions?

Written By: Jason Shafrin - Oct• 31•17

Clearly choosing treatments that extend expected survival is important, but survival expectations are not the only factor that matters to cancer patients. A 2017 NCCN policy report–based on the findings from a working group–identifies a number of factors:

Patients, for example, may view high-value care as any combination of trust, transparency, and effective communication with providers; care coordination; survivorship care; quality of life (QOL); toxicity management; limited travel for care; and limited financial risk. To this end, patient care is highly individualized.

While patients may have their own preferences, one relevant question is whether patients really want to make these tough decisions or if they want physicians to largely pick for them. Most, but not all, research indicates that patients want information and tools to make informed treatment decisions with their providers.

Recent survey data from Cancer Support Community supports these identified gaps, finding that a quarter of the 1,046 patients surveyed did not feel confident they received the care that they needed, with more than a third of respondents indicating they would have liked to have been more involved in decisions about their care and treatment options.

The authors, thus, call for more tools to help patients make informed decisions about treatment benefits, risks and costs.

Moving forward, it is important to develop measurement capacity in a value tool framework that is sensitive to cost, distress, and the individual existential experience of the cancer care journey, thus informing and shaping high-quality cancer care.


Do HDHPs save money?

Written By: Jason Shafrin - Oct• 30•17

This is the question that Zhang et al. (2017) attempt to answer using data form people who switched to a high-deductible health plan (HDHP) compared to those who stayed in the same plan.  They found:

After enrollment in HDHPs, 28 percent of enrollees changed physicians for office visits (compared to 19 percent in the Traditional Plan group, p < .01); however, this did not result in a statistically significant reduction in price for office visits. About 25 percent of enrollees changed providers for laboratory tests (compared to 23 percent in the Traditional Plan group, p < .01), resulting in savings of about $2.09 or a 12.8 percent reduction in price per laboratory test. We found that HDHPs had lower negotiated prices for office visits but not for laboratory tests.

In short, there is some evidence for cost saving and very model price shopping effects.  Based on this study at least, demand curves do still slope down, but one shouldn’t expect the increased use of HDHPs to results in extremely large cost savings.


How to pay for cures

Written By: Jason Shafrin - Oct• 29•17

Do you want to cure cancer?   Diabetes?  HIV?  Imagine if there was a single pill for each of these diseases that one could take to cure the diseases.  That would be a clear clinical advance, it would save lives, and also save money form reducing the cost of treating these disease.

Can we expect to see these cures?  This is partly a question of science and partly a question of finance.  On the science side, curing complex diseases is difficult and this fact should not be underestimated.  On the finance side, however, innovators have less an incentive to invent cures than to invent treatments.  For instance, let us say that someone had a drug that would treat diabetes, but patients had to pay $1000 per month over 50 years (60 months) in order to keep the disease in reemission.  This means that patients and health plans will spend $600,000 ($1000 x 50 years x 12 months) over this time period.  If someone could invent a drug that had the same efficacy in terms of long-term, 50-year disease remission, the treatment would be worth at least $600,000.  However, health plans may not be able to afford spending $600,000 per patient in the short-run.  Even if they could afford this price, many health plan enrollees leave the system after only a few years and thus health plans that pay for the $600,000 will not accrue the full benefit.

One clear solution to the first issue is to just finance the purchase of the cure with debt.  Many individuals want to own a house, but most people cannot afford to make a lump sum payment for the house.  The solution is that people take out a mortgage and spread the payments over time.  Tomas Philipson and Andrew von Eschenbach have proposed debt financings of high-value cures.  This approach, however, does not solve the free rider problem that occurs if there is frequent health plan turnover.

Another innovation is the concept of a HealthCoin developed by Basu (2015).  In this approach, the health advantages of a cure turn into an asset.  For instance, by giving someone Sovaldi to cure Hepatitis C, a health plan could earn a “HealthCoin.”  If a person who received Sovaldi later leaves the plan, he new plan where the person was enrolled would need to pay the original plan the value of the HealthCoin. A more general description is below from Yeung et al. (2017).

HealthCoin is a potential tradable currency that would be backed by Medicare, wherein Medicare guarantees payment to the private payer for each treated person entering the Medicare program.20 This option incentivizes private payers to invest in upfront coverage for cures, since cured individuals would likely have lower morbidity, and the private payer can sell the remaining value of the HealthCoins when the member switches plans

Although the concept of a HealthCoin may seem esoteric, managed care pharmacists seem to appreciate the value of this idea, once it is clearly explained to them.

Regardless if you think HealthCoins are the right answer, we need to have the right incentives in place to make sure innovators have the incentive to develop cures for highly prevalent, high-burden diseases.


Will CVS buy Aetna for $66 billion?

Written By: Jason Shafrin - Oct• 27•17

CVS is in talks to buy Aetna for $66 billion.  This would be a merger between one of the largest pharmacy benefits managers (PBM) in the country and the third largest insurer.

A successful deal could push millions of Aetna’s members toward CVS’s retail pharmacies, walk-in Minute Clinics, and services such as home visits for infusion drugs at a time when retail pharmacy companies are facing stiff competition.

It would also give Aetna the ability to move deeper into the lives of the 44.7 million people it serves and manage their health more efficiently. For example, the insurer might be able to get better insight into whether patients are taking their drugs by gaining access to data from CVS clinics and retail counters.

However, there may be another reason for the deal.  Amazon may be entering the medical device and even eventually the PBM business.

Amazon has received approval for wholesale pharmacy licenses in at least 12 states, including Nevada, Arizona, North Dakota, Louisiana, Alabama, New Jersey, Michigan, Connecticut, Idaho, New Hampshire, Oregon and Tennessee.

However, the CVS-Aetna deal may never happen. According to Bruce Japsen of Forbes:

Anthem just last week said it was forming its own pharmacy benefit management company, IngenioRx, with CVS, which operates a PBM. That was seen as a way to compete with the nation’s largest health insurer, UnitedHealth Group, which owns the PBM OptumRx.

But  for  CVS to operate a PBM with Anthem, the No. 2 health insurer, while owning Aetna, the No. 3 insurer, would be highly unusual coming off a period of intense antitrust scrutiny of the health insurance industry. Aetna and Humana, the nation’s fourth-largest insurer, pulled the plug on their merger last year after intense antitrust scrutiny over the potential creation of a monopoly purchaser of health services.

The health care market is rapidly evolving.  In the words of Heraclitus, “you cannot step twice into the same stream” or put more simply, “The only thing that is constant is change“.

HWR is up

Written By: Jason Shafrin - Oct• 26•17

Health Wonk Review: Disaster edition is freshly posted by David Williams at the Health Business Blog.  Check it out!