It Is Time to Reconsider the 3% Discount Rate

OBJECTIVES

Health technology assessment (HTA) guidance often recommends a 3% real annual discount rate, the appropriateness of which has received limited attention. This article seeks to identify an appropriate rate for high-income countries because it can influence projected cost-effectiveness and hence resource allocation recommendations.

METHODS

The author conducted 2 Pubmed.gov searches. The first sought articles on the theory for selecting a rate. The second sought HTA guidance documents.

RESULTS

The first search yielded 21 articles describing 2 approaches. The "Ramsey Equation" sums contributions by 4 factors: pure time preference, catastrophic risk, wealth effect, and macroeconomic risk. The first 3 factors increase the discount rate because they indicate future impacts are less important, whereas the last, suggesting greater future need, decreases the discount rate. A fifth factor-project-specific risk-increases the discount rate but does not appear in the Ramsey Equation. Market interest rates represent a second approach for identifying a discount rate because they represent competing investment returns and hence opportunity costs. The second search identified HTA guidelines for 32 high-income countries. Twenty-two provide no explicit rationale for their recommended rates, 8 appeal to market interest rates, 3 to consistency, and 3 to Ramsey Equation factors.

CONCLUSIONS

Declining consumption growth and real interest rates imply HTA guidance should reduce recommended discount rates to 1.5 to 2+%. This change will improve projected cost-effectiveness for therapies with long-term benefits and increase the impact of accounting for long-term drug price dynamics, including reduced prices attending loss of market exclusivity.

Implementing a Managed Entry Agreement Framework in Cyprus

INTRODUCTION

The aim of this study is to explore the current practice in Cyprus regarding the introduction and reimbursement of innovative pharmaceuticals through Managed Entry Agreements (MEA), assess its operational context, and suggest approaches toward spanning the knowledge gap consequential to these efforts, especially the barriers of a small country context.

AREAS COVERED

The recent introduction of a National Health System (NHS), brought about fundamental reforms in Cyprus' Healthcare sector. Among such reforms, of particular interest, has been the introduction of a Managed Entry Agreements (MEA) mechanism. The first preliminary results indicate that despite being a small and unattractive market, Cyprus can apply a substantial MEA program. Concomitantly, it annotates the need to design an operational framework which should include, the definition of important technical parameters, clear demarcation of the scope, cooperation principles ensuring the effective operation of scientific committees, and clear delineation of what 'value' is. Moreover, in the context of the unified healthcare market, budget transfers should be considered, which could alleviate the inordinate budget impact of new products, which nevertheless will cut down on hospital expenditures. Narrative synthesis and health policy analysis-related resources were used.

EXPERT OPINION

The implementation of MEA in Cyprus provides an ideal testing ground for innovative reimbursement approaches. This will streamline the country's efforts toward reimbursement of innovation, while concomitantly add to the collective MEA experience.

Understanding Health Economics in Joint Replacement Surgery

The number of arthroplasty procedures has been rising at a significant rate, contributing to a notable portion of the nation's health care spending. This growth has contributed to an increase in the number of health care economic studies in the field of adult reconstruction surgery. Although these articles are filled with important information, they can be difficult to understand without a background in business or economics. The goal of this review is to define the common terminology used in health care economic studies, assess their value and benefit in the context of total joint arthroplasty, and highlight shortcomings in the current literature. [Orthopedics. 2022;45(4):e174-e182.].

Understanding Health Economics in Spine Surgery

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The United States has faced substantial increases in health-care expenditure, with specifically large increases in spine surgery costs.

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Many different formulas are utilized to determine value in spine surgery, including cost- benefit analyses, cost-effectiveness analyses, and cost-utility analyses, with the overall determination of value being quality/cost.

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Quality often is calculated indirectly using either process measures or outcome measures and represents the potential benefit of a given intervention, usually over a specific time period to yield quality-adjusted life years.

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Costs are particularly difficult to calculate given the interhospital, regional, national, and global variability, as well as indirect costs of an intervention, and many different methods are utilized to estimate costs.

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Spine surgeons should be familiar with the elements that compose cost-effectiveness and their potential shortcomings in order for providers and health-care policy makers to identify the highest-quality studies and interventions that provide the greatest benefit to patients.

Differential discounting in the economic evaluation of healthcare programs

Background

The question of appropriate discount rates in health economic evaluations has been a point of continuous scientific debate. Today, it is widely accepted that, under certain conditions regarding the social objective of the healthcare decision maker and the fixity of the budget for healthcare, a lower discount rate for health gains than for costs is justified if the consumption value of health is increasing over time. To date, however, there is neither empirical evidence nor a strong theoretical a priori supporting this assumption. Given this lack of evidence, we offer an additional approach to check the appropriateness of differential discounting.

Methods

Our approach is based on a two-goods extension of Ramsey's optimal growth model which allows accounting for changing relative values of goods explicitly. Assuming a constant elasticity of substitution (CES) utility function, the growth rate of the consumption value of health depends on three variables: the growth rate of consumption, the growth rate of health, and the income elasticity of the willingness to pay for health. Based on a review of the empirical literature on the monetary value of health, we apply the approach to obtain an empirical value of the growth rate of the consumption value of health in Germany.

Results

The empirical literature suggests that the income elasticity of the willingness to pay for health is probably not larger but rather smaller than 1 and probably not smaller but rather larger than 0.2. Combining this finding with reasonable values of the annual growth rates in consumption (1.5-1.6%) and health (0.1%) suggests, for Germany, an annual growth rate of the consumption value of health between 0.3 and 1.5%.

Conclusion

In the light of a two-goods extension of Ramsey's optimal growth model, the available empirical evidence makes the case for a growing consumption value of health. Therefore, the current German practice of applying the same discount rate to costs and health gains introduces a systematic bias against healthcare technologies with upfront costs and long-term health effects. Differential discounting with a lower rate for health effects appears to be a more appropriate discounting model.

Cost-effectiveness analysis of using onasemnogene abeparvocec (AVXS-101) in spinal muscular atrophy type 1 patients

Background: Spinal muscular atrophy type 1 (SMA1) is a devastating genetic disease for which gene-replacement therapy may bring substantial survival and quality of life benefits. Objective: This study investigated the cost-effectiveness of onasemnogene abeparvovec (AVXS-101) gene-replacement therapy for SMA1. Study design: A Markov model was used to estimate the incremental cost-effectiveness ratio (ICER), expressed as cost/quality-adjusted life year ($/QALY), of AVXS-101 versus nusinersen over a lifetime. Survival, healthcare costs and QALYs were estimated using natural history data for SMA patients who achieved motor milestones (sitting/walking). Health utility weights were obtained from the CHERISH trial. Setting: USA; commercial payer perspective Participants: SMA1 infants Interventions: AVXS-101 was compared to nusinersen. Main outcome measure: The primary outcome was the ICER. Results: Expected survival (undiscounted) over a lifetime predicted by the model was 37.20 life years for AVXS-101 and 9.68 for nusinersen (discounted QALYs, 15.65 and 5.29, respectively). Using a potential AVXS-101 price range ($2.5-5.0M/treatment), the average lifetime cost/patient was $4.2-6.6M for AVXS-101 and $6.3M for nusinersen. The ICER range was (-$203,072) to $31,379 per QALY gained for AVXS-101 versus nusinersen, indicating that AVXS-101 was cost-effective with prices of ≤$5M. Conclusion: Single-dose AVXS-101 was cost-effective compared to chronic nusinersen for SMA1 patients.

Using quantitative systems pharmacology for novel drug discovery

INTRODUCTION

Over the past three decades, the predominant paradigm in drug discovery was designing selective ligands for a specific target to avoid unwanted side effects. However, in the last 5 years, the aim has shifted to take into account the biological network in which they interact. Quantitative and Systems Pharmacology (QSP) is a new paradigm that aims to understand how drugs modulate cellular networks in space and time, in order to predict drug targets and their role in human pathophysiology.

AREAS COVERED

This review discusses existing computational and experimental QSP approaches such as polypharmacology techniques combined with systems biology information and considers the use of new tools and ideas in a wider 'systems-level' context in order to design new drugs with improved efficacy and fewer unwanted off-target effects.

EXPERT OPINION

The use of network biology produces valuable information such as new indications for approved drugs, drug-drug interactions, proteins-drug side effects and pathways-gene associations. However, we are still far from the aim of QSP, both because of the huge effort needed to model precisely biological network models and the limited accuracy that we are able to reach with those. Hence, moving from 'one molecule for one target to give one therapeutic effect' to the 'big systems-based picture' seems obvious moving forward although whether our current tools are sufficient for such a step is still under debate.

Cost-effectiveness and affordability of community mobilisation through women's groups and quality improvement in health facilities (MaiKhanda trial) in Malawi

BACKGROUND

Understanding the cost-effectiveness and affordability of interventions to reduce maternal and newborn deaths is critical to persuading policymakers and donors to implement at scale. The effectiveness of community mobilisation through women's groups and health facility quality improvement, both aiming to reduce maternal and neonatal mortality, was assessed by a cluster randomised controlled trial conducted in rural Malawi in 2008-2010. In this paper, we calculate intervention cost-effectiveness and model the affordability of the interventions at scale.

METHODS

Bayesian methods are used to estimate the incremental cost-effectiveness of the community and facility interventions on their own (CI, FI), and together (FICI), compared to current practice in rural Malawi. Effects are estimated with Monte Carlo simulation using the combined full probability distributions of intervention effects on stillbirths, neonatal deaths and maternal deaths. Cost data was collected prospectively from a provider perspective using an ingredients approach and disaggregated at the intervention (not cluster or individual) level. Expected Incremental Benefit, Cost-effectiveness Acceptability Curves and Expected Value of Information (EVI) were calculated using a threshold of $780 per disability-adjusted life-year (DALY) averted, the per capita gross domestic product of Malawi in 2013 international $.

RESULTS

The incremental cost-effectiveness of CI, FI, and combined FICI was $79, $281, and $146 per DALY averted respectively, compared to current practice. FI is dominated by CI and FICI. Taking into account uncertainty, both CI and combined FICI are highly likely to be cost effective (probability 98% and 93%, EVI $210,423 and $598,177 respectively). Combined FICI is incrementally cost effective compared to either intervention individually (probability 60%, ICER $292, EIB $9,334,580 compared to CI). Future scenarios also found FICI to be the optimal decision. Scaling-up to the whole of Malawi, CI is of greatest value for money, potentially averting 13.0% of remaining annual DALYs from stillbirths, neonatal and maternal deaths for the equivalent of 6.8% of current annual expenditure on maternal and neonatal health in Malawi.

CONCLUSIONS

Community mobilisation through women's groups is a highly cost-effective and affordable strategy to reduce maternal and neonatal mortality in Malawi. Combining community mobilisation with health facility quality improvement is more effective, more costly, but also highly cost-effective and potentially affordable in this context.

Differential time preferences for money and quality of life

BACKGROUND

This study provides an empirical investigation into differential time preferences between money and quality of life. Thus far, time preference investigations in health have mostly involved life-years gained and lives saved. However, the quality-adjusted life-year, which is recommended by several bodies, is a multiplicative measure of life duration and quality of life. To our knowledge, our study is the first to follow this approach specifically for quality of life.

METHODS

A questionnaire was developed to elicit time preferences for quality of life and for money, and it was distributed to a representative sample of the Dutch population. We also investigated the impact of population characteristics, such as current health state, optimistic/pessimistic future views or gender, on time preferences.

RESULTS

We found that discount rates for both money and quality of life decrease with increasing time of delay, with rates of the former being consistently at least two times higher than those of the latter. Similar trends in time preferences were observed across the subgroups, with the exception of the relatively high education subgroup.

CONCLUSION

In agreement with the results of other studies, our empirically derived discount rates are higher than the rates featured in national guidelines for health care economic assessment. Our empirical study adds to the evidence for differential discounting, both with regards to money and health, as well as in time.

Economic evaluation of vaccines: specificities and future challenges illustrated by recent European examples

This study reviews the current challenges in the economic evaluation of vaccines with a focus on European countries. In particular, the type of clinical evidence generally available, the impact of discounting for time preference and the use of modeling to derive valid cost-effectiveness assessments are considered. First, the characteristics of evidence for vaccines are discussed, as well as potential difficulties faced when using evidence-based medicine applied to curative drugs to interpret vaccine evidence. Then, discounting is considered and specific examples illustrating issues with different types of discounting are described, taking HPV as the example. Finally, the need for sometimes complex dynamic models for vaccines is explored, and specific types of models are reviewed, keeping into consideration the adage "complex when needed, straightforward if allowed."