Applying Programme Budgeting Marginal Analysis in the health sector: 12 years of experience

Pricing strategies, executive committee power and negotiation leverage in New Zealand's containment of public spending on pharmaceuticals

This paper explores policy mechanisms behind New Zealand's remarkable track record of cost containment in public pharmaceutical spending, contrasting with most other advanced economies. We drew on a review of official policy documents and 28 semi-structured expert interviews. We found that decision making in pricing and reimbursement policy was dominated by a small group of managers at the Pharmaceutical Management Agency (PHARMAC), the country's drug reimbursement and Health Technology Assessment Agency, who negotiated pharmaceutical prices on behalf of the public payer. In formal negotiation over patented pharmaceutical prices these managers applied an array of pricing strategies, most notably, 'bundling' consisting of discounted package deals for multiple pharmaceuticals, and 'play-off tenders', whereby two or more pharmaceutical companies bid for exclusive contracts. The key pricing strategy for generic drugs, in contrast, was 'blind-tenders' taking the form of an annual bidding process for supply contracts. An additional contextual condition on bargaining over pharmaceutical prices was an indirect strategy that involved the cultivation of the PHARMAC's 'negotiation leverage'. We derived two cost containment mechanisms consisting in the relationship between pricing strategy options and various reimbursement actors. Our findings shed light on aspects of the institutional design of drug reimbursement that may promote the effective use of competitive negotiations of pharmaceutical prices, including specific pricing strategies, by specialist public payer institutions. On this basis, we formulate recommendations for countries seeking to develop or reform policy frameworks to better meet the budgetary challenge posed by pharmaceutical expenditure.

An evidence-based framework for identifying technologies of no or low-added value (NLVT)

OBJECTIVE

To synthetize the state of the art of methods for identifying candidate technologies for disinvestment and propose an evidence-based framework for executing this task.

METHODS

An interpretative review was conducted. A systematic literature search was performed to identify secondary or tertiary research related to disinvestment initiatives and/or any type of research that specifically described one or more methods for identifying potential candidates technologies, services, or practices for disinvestment. An iterative and critical analysis of the methods described alongside the disinvestment initiatives was performed.

RESULTS

Seventeen systematic reviews on disinvestment or related terms (health technology reassessment or medical reversal) were retrieved and methods of 45 disinvestment initiatives were compared. On the basis of this evidence, we proposed a new framework for identifying these technologies based on the wide definition of evidence provided by Lomas et al. The framework comprises seven basic approaches, eleven triggers and thirteen methods for applying these triggers, which were grouped in embedded and ad hoc methods.

CONCLUSIONS

Although identification methods have been described in the literature and tested in different contexts, the proliferation of terms and concepts used to describe this process creates considerable confusion. The proposed framework is a rigorous and flexible tool that could guide the implementation of strategies for identifying potential candidates for disinvestment.

A Cost Analysis of Haemodialysis and Peritoneal Dialysis for the Management of End-Stage Renal Failure At an Academic Hospital in Pretoria, South Africa

BACKGROUND

Haemodialysis (HD) and peritoneal dialysis (PD) are commonly used treatments for the management of patients with end-stage renal disease (ESRD). The costs of managing these patients have grown in recent years with increasing rates of non-communicable diseases, which will adversely impact on national health budgets unless addressed. Currently, there is limited knowledge of the costs of ESRD within the public healthcare system in South Africa.

OBJECTIVE

The aim of this study was to examine the direct costs of HD and PD in South Africa from a healthcare provider's perspective.

METHODS

A prospective, observational study was undertaken at a leading public hospital in South Africa. A micro-costing approach was applied to estimate healthcare costs using 46 adult patients with ESRD who had been receiving HD and PD for at least 3 months.

RESULTS

The highest proportion of patients (35%) were aged 40-50 years. Patients aged 29-39 years were mostly on HD (28% vs. 21% on PD) while those aged 51-59 years mostly used PD (29% vs. 16% on HD). The average age of patients on HD and PD were 41 and 42 years, respectively. Fixed costs were the principal cost driver for HD ($16,231.45) while variable costs were the principal cost driver for PD (US$20,488.79). The annual cost of HD per patient (US$31,993.12) was higher than PD (US$25,282.00 per patient), even though the difference was not statistically significant (p = 0.816).

CONCLUSION

HD costs more than PD from the provider's perspective. These cost estimates may be useful for carrying out future cost-effectiveness and cost-utility analyses in South Africa.

Using decision methods to examine the potential impact of intersectoral action programs

Objectives

In public health today, there is a widespread call for intersectoral action (ISA) programs, in which two or more sectors cooperate to address a problem. This trend raises a question of how to appropriately assess the effectiveness and cost-effectiveness of ISA programs. To assess the impact of ISA, evaluation methods should provide a framework for simultaneously considering the impact of two or more interventions when selecting from a portfolio of programs. There is a gap in literature on such methods. In this research note, from a narrative review, we report and describe methods that could be useful for evaluating ISA programs. Subsequently, we present a hypothetical case study to demonstrate the use of these methods.

Results

We identified four methods that have potential to assess the joint impact of multiple interventions: economic evaluation, portfolio analysis, multiple-criteria decision analysis, and programme budgeting and marginal analysis. To keep pace with the desire to use strong evidence to inform the selection and design of ISA programs, methods must evolve to support these initiatives. This research note seeks to begin a dialogue on existing decision methods which may be used to assist decision makers with funding and resource allocation decisions of ISA programs.

Electronic supplementary material

The online version of this article (10.1186/s13104-018-3609-x) contains supplementary material, which is available to authorized users.

Disinvestment and Value-Based Purchasing Strategies for Pharmaceuticals: An International Review

Pharmaceutical expenditure has increased rapidly across many Organisation for Economic Cooperation and Development (OECD) countries over the past three decades. This growth is an increasing concern for governments and other third-party payers seeking to provide equitable and comprehensive healthcare within sustainable budgets. In order to create headroom for increasing utilisation, and to fund new high-cost therapies, there is an active push to 'disinvest' from low-value drugs. The aim of this article is to review how reimbursement policy decision makers have sought to partially or completely disinvest from drugs in a range of OECD countries (UK, France, Canada, Australia and New Zealand) where they are publicly funded or subsidised. We employed a systematic literature search strategy and the incorporation of grey literature known to the authorship team. We canvass key policy instruments from each country to outline key approaches to the identification of candidate drugs for disinvestment assessment (passive approaches vs. more active approaches); methods of disinvestment and value-based purchasing (de-listing, restricting treatment, price or reimbursement rate reductions, encouraging generic prescribing); lessons learnt from the various approaches; the potential role of coverage with evidence development; and the need for careful stakeholder management. Dedicated sections are provided with detailed coverage of policy approaches (with drug examples) from each country. Historically, countries have relied on 'passive disinvestment'; however, due to (1) the availability of new cost-effectiveness evidence, or (2) 'leakage' in drug utilisation, or (3) market failure in terms of price competition, there is an increasing focus towards 'active disinvestment'. Isolating low-value drugs that would create headroom for innovative new products to enter the market is also motivating disinvestment efforts by multiple parties, including industry. Historically, disinvestment has mainly taken the form of price reductions, especially when market failures are perceived to exist, and restricting treatment to subpopulations, particularly when a drug is no longer considered value for money. There is considerable experimentation internationally in mechanisms for disinvestment and the opportunity for countries to learn from each other. Ongoing evaluation of disinvestment strategies is essential, and ought to be reported in the peer-reviewed literature.

'Real-world' health care priority setting using explicit decision criteria: a systematic review of the literature

Background

Health care decision making requires making resource allocation decisions among programs, services, and technologies that all compete for a finite resource pool. Methods of priority setting that use explicitly defined criteria can aid health care decision makers in arriving at funding decisions in a transparent and systematic way. The purpose of this paper is to review the published literature and examine the use of criteria-based methods in ‘real-world’ health care allocation decisions.

Methods

A systematic review of the published literature was conducted to find examples of ‘real-world’ priority setting exercises that used explicit criteria to guide decision-making.

Results

We found thirty-three examples in the peer-reviewed and grey literature, using a variety of methods and criteria. Program effectiveness, equity, affordability, cost-effectiveness, and the number of beneficiaries emerged as the most frequently-used decision criteria. The relative importance of criteria in the ‘real-world’ trials differed from the frequency in preference elicitation exercises. Neither the decision-making method used, nor the relative economic strength of the country in which the exercise took place, appeared to have a strong effect on the type of criteria chosen.

Conclusions

Health care decisions are made based on criteria related both to the health need of the population and the organizational context of the decision. Following issues related to effectiveness and affordability, ethical issues such as equity and accessibility are commonly identified as important criteria in health care resource allocation decisions.

Electronic supplementary material

The online version of this article (doi:10.1186/s12913-015-0814-3) contains supplementary material, which is available to authorized users.

Ahead of its time? Reflecting on New Zealand's Pharmac following its 20th anniversary

New Zealand's Pharmaceutical Management Agency (Pharmac) was created in 1993. Unusual in international terms, Pharmac's objective is to work within a fixed budget while ensuring the New Zealand public receives an adequate range of government-subsidised medicines. Following its 20th anniversary, this article reflects on Pharmac's development and role within the New Zealand health system, various changes over time to the agency's scope and activities, its performance and its present challenges.

Identifying priority medicines policy issues for New Zealand: a general inductive study

OBJECTIVES

To identify priority medicines policy issues for New Zealand.

SETTING

Stakeholders from a broad range of healthcare and policy institutions including primary, secondary and tertiary care.

PARTICIPANTS

Exploratory, semistructured interviews were conducted with 20 stakeholders throughout New Zealand.

PRIMARY AND SECONDARY OUTCOME MEASURES

The interviews were digitally recorded, transcribed and coded into INVIVO 10, then compared and grouped for similarity of theme. Perceptions, experiences and opinions regarding New Zealand's medicines policy issues were recorded.

RESULTS

A large proportion of stakeholders appeared to be unaware of New Zealand's (NZ) medicines policy. In general, the policy was considered to offer consistency to guide decision-making. In the context of Pharmaceutical Management Agency's (PHARMAC's) fixed budget for procuring and subsidising medicines, there was reasonable satisfaction with the range of medicines available-rare disorder medicines being the clear exception. Concerns raised were by whom and how decisions are made and whether desired health outcomes are being measured. Other concerns included inconsistencies in evidence and across health technologies. Despite attempts to improve the situation, lower socioeconomic groups (including rural residents) Māori and Pacific ethnicities and people with rare disorders face challenges with regards to accessing medicines. Other barriers include, convenience to and affordability of prescribers and the increase of prescription fees from NZ$3 to NZ$5. Concerns related to the PHARMAC of New Zealand included: a constraining budget; non-transparency of in-house analysis; lack of consistency in recommendations between the Pharmacology and Therapeutics Advisory Committee. Constraints and inefficiencies also exist in the submission process to access high-cost medicines.

CONCLUSIONS

The results suggest reasonable satisfaction with the availability of subsidised medicines. However, some of the major challenges include access to medicines in vulnerable groups, increasing costs and demand for new medicines, access to prescribers, budgetary constraints, cultural and health literacy, patient affordability and evidence requirement for gaining subsidy for medicines.

Priority setting in healthcare: towards guidelines for the program budgeting and marginal analysis framework

Economists' approaches to priority setting focus on the principles of opportunity cost, marginal analysis and choice under scarcity. These approaches are based on the premise that it is possible to design a rational priority setting system that will produce legitimate changes in resource allocation. However, beyond issuing guidance at the national level, economic approaches to priority setting have had only a moderate impact in practice. In particular, local health service organizations - such as health authorities, health maintenance organizations, hospitals and healthcare trusts - have had difficulty implementing evidence from economic appraisals. Yet, in the context of making decisions between competing claims on scarce health service resources, economic tools and thinking have much to offer. The purpose of this article is to describe and discuss ten evidence-based guidelines for the successful design and implementation of a program budgeting and marginal analysis (PBMA) priority setting exercise. PBMA is a framework that explicitly recognizes the need to balance pragmatic and ethical considerations with economic rationality when making resource allocation decisions. While the ten guidelines are drawn from the PBMA framework, they may be generalized across a range of economic approaches to priority setting.

Reorienting programme budgeting and marginal analysis (PBMA) towards disinvestment

BACKGROUND

Remarkable progress has been made over the past 40 years in developing rational, evidence-based mechanisms for the allocation of health resources. Much of this progress has centred on mechanisms for commissioning new medical devices and pharmaceuticals. The attention of fund-managers and policy-makers is only now turning towards development of mechanisms for decommissioning, disinvesting or redeploying resources from currently funded interventions. While Programme Budgeting and Marginal Analysis would seem well-suited to this purpose, past applications include both successes and failures in achieving disinvestment and resource release.

DISCUSSION

Drawing on recent successes/failures in achieving disinvestment and resource release via PBMA, this paper identifies four barriers/enablers to disinvestment via PBMA: (i) specification of the budget constraint, (ii) scope of the programme budget, (iii) composition and role of the advisory group, and (iv) incentives for/against contributing to a 'shift list' of options for disinvestment and resource release. A number of modifications to the PBMA process are then proposed with the aim of reorienting PBMA towards disinvestment.

SUMMARY

The reoriented model is differentiated by four features: (i) hard budget constraint with budgetary pressure; (ii) programme budgets with broad scope but specific investment proposals linked to disinvestment proposals with similar input requirements; (iii) advisory/working groups that include equal representation of sectional interests plus additional members with responsibility for advocating in favour of disinvestment, (iv) 'shift lists' populated and developed prior to 'wish lists' and investment proposals linked to disinvestment proposals within a relatively narrow budget area. While the argument and evidence presented here suggest that the reoriented model will facilitate disinvestment and resource release, this remains an empirical question. Likewise, further research will be required to determine whether or not the re-oriented model sacrifices feasibility and acceptability to obtain its hypothesised greater emphasis on disinvestment.

Comments on "Simoens, S. Health economic assessment: a methodological primer. Int. J. Environ. Res. Public Health 2009, 6, 2950-2966"-New Zealand in fact has no cost-effectiveness threshold

The Journal recently incorrectly ascribed cost-effectiveness thresholds to New Zealand, alongside other countries. New Zealand has no such thresholds when deciding the funding of pharmaceuticals. As we fund pharmaceuticals within a fixed budget, and cost-effectiveness is only one of nine decision criteria used to inform decisions, thresholds cannot be inferred or calculated. Thresholds inadequately account for opportunity cost and affordability, and are incompatible with budgets and maximising health gains. In New Zealand, pharmaceutical investments can only be considered ‘cost-effective’ when prioritised against other proposals at the time, and threshold levels must inevitably vary with available funds and the other criteria.