In a new paper led by OHE, an international team of co-authors considers the evidence for supply-side cost-effectiveness thresholds, providing a set of recommendations for policymakers. In this blog post, Chris Sampson provides an overview of the findings and key messages.
Twenty years ago, OHE published a collection of papers exploring the economic and ethical challenges associated with adopting cost-effectiveness thresholds in the NHS. The articles highlight many issues that are still relevant today, but the intervening years have seen a startling shift in focus. Back then, “opportunity costs” and “cost-effectiveness thresholds” were rarely spoken about in the same breath. That’s hardly a surprise; cost-effectiveness thresholds were being considered as a practical tool for policymaking, while opportunity cost was a conceptual device for microeconomic theory.
The past ten years have seen researchers worldwide embracing the idea of opportunity cost on the premise that it’s something that we might be able to estimate. These estimates have become known as ‘supply-side’ cost-effectiveness thresholds because they are derived from data describing the current health care supply. To this end, researchers have sought to estimate such metrics as ‘marginal productivity’ and ‘average displacement’ as indicators of opportunity cost, which might then be adopted as cost-effectiveness thresholds.
In a new review paper published in Applied Health Economics and Health Policy, we take stock of the research on supply-side cost-effectiveness thresholds. And we do so with policymakers in mind. Recent research to estimate supply-side thresholds is notoriously complex and significant limitations remain, which makes translating this research into policy a challenging proposition. Our objective was to provide some actionable recommendations to policymakers considering the use of supply-side cost-effectiveness thresholds to support decision-making.
Our paper starts by setting the scene, highlighting that empirical estimates of opportunity cost have had a somewhat limited impact on policy. National estimates for England, Spain, and Australia have been available for several years, and yet these studies’ central estimates have not been adopted by policymakers. Part of the challenge is that the translation of this evidence into a cost-effectiveness threshold relies on various assumptions, and the relevant assumptions depend on the interpretation of the evidence and what a threshold is intended to represent. In our paper, we open up a more nuanced conversation about the various metrics that might inform cost-effectiveness thresholds, such as ‘marginal productivity’ and ‘average displacement’, and how these relate to opportunity costs.
Several literature reviews have been conducted on this topic, so we do not review every relevant study in detail. Instead, we consider the evidence base as a whole, focusing on the policy implications and the limitations of the evidence base concerning the theory, methods, and data underlying estimates. Theoretically, published estimates appear not to align with the use of thresholds in practice, most notably the routine use of multiple thresholds or threshold ranges. The most substantial methodological challenge is to identify causal effects for the impact of spending on health outcomes, in the absence of experimental conditions. Studies have tended to rely on cross-sectional analyses because of the reverse causality that undermines time-series analyses. Furthermore, there are limitations in the available data, most notably the absence of routinely-collected health outcomes data and the consequent reliance on mortality data to quantify the impact of expenditure.
We set out four recommendations for policymakers:
1. Define the decision scope. That means being clear about how thresholds will be used and communicating that scope to researchers and other stakeholders. In our paper, we propose a series of questions to which policymakers should provide answers, such as ‘on which decision-makers’ perspective(s) will the threshold be based?’ and ‘to which technologies and services will the threshold be applied?’
2. Develop an evidence assessment process. This will enable policymakers to take new evidence on board as it becomes available and judge its sufficiency as a basis for determining policy changes. We propose that such a process should be systematic, critical, transparent, and inclusive, addressing various questions about the quality and relevance of the evidence.
3. Maintain flexibility. Cost-effectiveness thresholds are a blunt instrument for decision-making because they do not capture all that is relevant to resource allocation decisions. Policymakers should maintain flexibility in their use of thresholds to recognise i) uncertainty, ii) the actual health opportunity cost of decisions, iii) accounting for non-QALY sources of value, and iv) moral principles.
4. Support (local) decision-makers. Evidence suggests that different decision-makers across health systems do not operate with the same priorities. Therefore, if the use of thresholds is to achieve its desired goal of attaining the best health outcomes possible, it will be necessary for policymakers to support the local implementation of national decisions based on a cost-effectiveness threshold.
So, where are we now? Opportunity cost remains a tool for economic analysis and decision-making but an elusive quantity in the reality of health care. Policymakers should be more transparent about the purpose and use of cost-effectiveness thresholds in decision-making and their approach to considering the available evidence. Crucially, the implementation of cost-effectiveness thresholds must maintain flexibility as researchers bring new evidence to the table.
At OHE, we’ll continue our work on thresholds. The state of play will likely be very different in another twenty years. Our proposals provide a foundation for future researchers and policymakers to support decisions that enable health services to achieve the best outcomes for patients, health care systems, and society.
This blog post summarises a study funded by an unconditional grant from the Association of the British Pharmaceutical Industry (ABPI). The funder had no role in establishing the writing group, the decision to publish, or the preparation of the manuscript.
Sampson, C., Zamora, B., Watson, S., Cairns, J., Chalkidou, K., Cubi-Molla, P., Devlin, N., García-Lorenzo, B., Hughes, D.A., Leech, A.A. and Towse, A., 2022. Supply-Side Cost-Effectiveness Thresholds: Questions for Evidence-Based Policy. Applied Health Economics and Health Policy. 10.1007/s40258-022-00730-3.
Berdud. M., Ferraro. J., Towse. A. 2020. A Bargaining Approach: A Theory on ICER Pricing and Optimal Level of Cost-Effectiveness Threshold. OHE Consulting Report. Available at: https://www.ohe.org/publications/bargaining-approach-theory-icer-pricing....
Cubi-Molla, P., Mott, D., Henderson, N., Zamora, B., Grobler, M. and Garau, M., 2021. Resource Allocation in Public Sector Programmes: Does the Value of a Life Differ Between Governmental Departments? OHE Research Paper. Available at: https://www.ohe.org/publications/resource-allocation-public-sector-progr....
Cubi-Molla, P., Errea, M., Zhang, K. and Garau, M., 2020. Are Cost-Effectiveness Thresholds fit for Purpose for Real-World Decision Making? OHE Consulting Report. Available at: https://www.ohe.org/publications/are-cost-effectiveness-thresholds-fit-f....
Karlsberg Schaffer, S., Cubi-Molla, P., Devlin, N. and Towse, A., 2016. Shaping Research Agenda to Estimate Cost-effectiveness Thresholds for Decision Making. OHE Consulting Report. Available at: https://www.ohe.org/publications/shaping-research-agenda-estimate-cost-e....
Zhang, K. and Garau, M., 2020. International Cost-Effectiveness Thresholds and Modifiers for HTA Decision Making. OHE Consulting Report. Available at: https://www.ohe.org/publications/international-cost-effectiveness-thresh....
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