Research by OHE and the University of Washington into how uncertainty-related novel elements of value could be included in an Augmented Cost-Effectiveness Analysis has been published in Journal of Managed Care & Specialty Pharmacy. The research discusses what has been or could be done to measure these elements and looks at empirical research to date.
Elements of value of new drugs and other treatments include several economic benefits valued by individuals. These go beyond conventional value measures which focus on three key elements: net incremental costs (lifetime intervention costs minus cost-offsets), and two elements combined in Quality Adjusted Life Years (QALY) – incremental life-years gained and changes in quality of life during expected life.
Patients and citizens value reductions in uncertainty from their health systems and from the availability of treatments. These are over and above any value to the health system from decision makers having greater certainty about the benefits and costs of a treatment. This paper discusses four uncertainty-related value elements: insurance value, real option value, the value of knowing, and the value of hope. The current state of empirical research supporting these four value elements is summarised here.
This article (Garrison et al. 2020) by Lou Garrison (University of Washington and OHE Senior Visiting Researcher), Bernarda Zamora, Meng Li (USC Schaeffer Center) and Adrian Towse takes the recent ISPOR Special Task Force (STF) as the starting point and focuses on those aspects of the ‘value flower’ related to uncertainty. Even though some novel elements of value – such as severity of illness and fear of contagion – may interact with the four uncertainty-related elements analysed, the conceptual underpinning and metrics of how individuals face uncertainty is largely captured by four elements of value:
- Insurance value: The existence of a medical technology and the possibility of access through health insurance coverage provide plan members with peace of mind through both reduced financial risks and reduced physical health risks. Healthy individuals are willing to pay for insurance coverage and to include innovative treatment in the health benefits package to reduce uncertainty on the future onset of these financial and physical health risks.
- Real option value (ROV): This element values how a life extending treatment today may open up opportunities for patients to benefit from more effective treatments that will arrive in the future. The concept and name are an analogy to financial options: a payment now to provide for the opportunity to do something in the future.
- Value of knowing: This value is created by the prognostic and predictive information of diagnostic tests. Just by changing the understanding around the probability of disease – either towards confirming or ruling out the disease – diagnostic information can reduce uncertainty for the patient, generating value.
- Value of hope: The value from this element is created in certain situations when individuals would switch from their customary risk-averse stance to take gambles with the potential for a beneficial outcome (e.g. a cure or longer survival).
The research presents an overview of the empirical evidence published to date for the four uncertainty-related novel elements of value, summarising the latest relevant studies and estimates. The empirical evidence and analysis of real option value (ROV) includes recent published work by two of the authors of this article (Meng Li and Lou Garrison) who studied ROV using real-world evidence from metastatic melanoma.
The peer-review publication in the Journal of Managed Care & Specialty Pharmacy is included in the section Perspectives on Augmented Cost-Effectiveness Analysis, which also includes another viewpoint by Watkins and Tsiao. They challenge the inclusion of these elements of value in an assessment on grounds of relevance, measurability and the impact on affordability. Garrison et al. (2020) respond to these concerns, notably reinforcing the recommendation of the ISPOR STF on affordability: to ‘manage budget constraints and affordability on the basis of cost-effectiveness principles’. On this basis, there is room for the consideration of novel elements of value to better account for the relative value of new medicines, better align the reward-for-value equation, provide more consistent signals and thus the incentive to invest in more valuable innovations and in better healthcare.
This study received unrestricted funding from the Pharmaceutical Research Manufacturers of America (PhRMA).
The full article has been published as an open access licence and can be accessed on the Journal of Managed Care & Specialty Pharmacy website here. The Watkins and Tsiao response is available in the same issue as open access here.
Garrison LP, Neumann, PJ, Willke, RJ, et al., 2018. A health economics approach to U.S. value assessment frameworks—summary and recommendations of the ISPOR Special Task Force report . Value Health, 21(2), pp.161-65.
Garrison LP, Kamal-Bahl, S, Towse, A., 2017. Toward a broader concept of value: identifying and defining elements for an expanded cost-effectiveness analysis. Value Health, 20(2), pp. 213-16.
Garrison L, Mestre-Ferrandiz J, Zamora B. The value of knowing and knowing the value: improving the health technology assessment of complementary diagnostics. White paper. Office of Health Economics and EPEMED. July 2016. Available at: OHE publications
Watkins, J.B. and Tsiao, E.G., 2020. Augmenting cost-effectiveness analysis will not improve affordability. Journal of Managed Care & Specialty Pharmacy, 26(4), pp.407-408.
Posted in Health Technology Assessment, Innovation, Value-Based Pricing | Tagged External publications