Expert Moots New Economic Model For Malaysia To Evaluate Drug Prices

Belgium’s Prof Lieven Annemans says while innovative drugs are needed to treat diseases, there are limits to society’s willingness and ability to pay.

PETALING JAYA, Jan 20 – Prof Lieven Annemans, senior professor of health economics at Ghent University in Belgium, has proposed that Malaysia adopt a value-informed and affordable (VIA) price approach in buying new medicines.

Annemans said the VIA price approach not only considers the cost-effectiveness of new drugs and technologies in the health care sector, but also the disease burden on patients and the impact of the medicine on health care budgets.

Logically, the value of the product to society will increase as the disease burden on patients rises. In other words, the higher the disease burden, such as an increase in cancer cases in Malaysia, the more people are willing to pay as a society for a new medicine. However, if the product has too high of an impact on the health budget, the societal willingness to pay for the product will decrease.

Annemans said this approach provides a societal tool to send a clear signal to industries that while their innovations are wanted, there are limits to society’s willingness and ability to pay.

“Health care should be looked at not as a cost sector, but as a sector in which we have to invest to improve our society and our wellbeing. Second, we need wise investments in health, not just to invest in health, we need wise investments in health. 

“And I believe that in an ideal health care system, the policymakers are much more explicit about how much we are willing to pay for extra health and that this is also clearly communicated to the innovative industry. ‘We want your innovations, but not at any price. We have our societal limits about what we can pay to gain quality-adjusted life years (QALYs).’

“And this threshold, it should not be one threshold. It should be a modelling threshold that takes into account equity and efficiency,” Annemans said at the 6th Health Economics Forum 2022 here last November 23 organised by the Health Economics Outcomes Research (hEOR), a unit of the Galen Centre for Health and Social Policy. 

QALY is commonly used in health economic evaluations to quantify the health effect of a medical intervention or a prevention programme. One QALY is equal to one year of life in perfect health.

Annemans drew heavily from Belgium’s approach to health care economics, in particular, to determine how much finite resources a country should spend on health care. 

“The ideal goal, we formulated during Belgium’s presidency of the European Union back in 2010, the aim of the health care policy is to optimise the health care population within the limits of the available resources and with an ethical framework built on equity and solidarity – that should be the goal of health care policy.

“The goal is not to cut budgets. The goal is not to invest in health without caring about the cost of what you are doing. The goal is within the limits of the available resources, try to optimise the value to the population to make better choices.”

Annemans also underscored the need for innovative treatments that tackle “important health needs” that will benefit the patient or the health care system, while being affordable.

Annemans said innovation is needed to cure “value deficits”, or a lack of treatment in society, and be accessible to patients through the doctor-patient relationship in addition to market accessibility.

“A doctor needs to prescribe it, and the patient needs to use it for the product to become patient-accessible. Market accessibility, on the other hand, only requires the authorisation and reimbursement or payment of the product,” Annemans said.

Commenting further on QALY, Annemans said in many disease areas, QALY is not solely about extending life. “It can also be that purely by improving the quality of life during the life of the patient we can get QALYs and that should never be forgotten.”

However, relying on QALYs alone poses a problem, as it does not tell the decision-maker where to draw the line, he said. To tackle that area, Annemans pointed to two elements that play a key role in determining where the line should be drawn. 

The first is the medical needs of a person. He said if a person has a condition which causes them to fall far below the acceptable level of health, then more needs to be done to help that individual. 

Conversely, if a person is above the acceptable level of health, then the issue is more of whether the person feels comfortable or not (comfort problem) and no funding should be put towards treatment to resolve a comfort problem.

When calculating the health burden, what is important is the health burden to the patient and not the total health burden to the population. Using the Netherlands’ per capita GDP at €40,000 (RM186,745) to €45,000 per citizen, Annemans showed a graph illustrating how much the government should spend when it comes to addressing the health burdens of a patient. 

If the health burden for the patient is mild, the maximum per QALY would be €20,000; if it is moderate, it is €50,000; and if it is severe it is €80,000 and in exceptional circumstances, it would be €100,000 per QALY.  

A different way of looking at the matter would be the GRACE (General Risk Adjustment Cost Effectiveness) project which argues that cost-effectiveness must also consider the severity of the disease. 

“There are, of course, different ways to express severity. This is based on the GRACE project, which also argues that the cost-effectiveness threshold must be in [proportion] to the severity, and they provide examples of very low levels of severity and very high levels of severity, like Alzheimer’s and metastatic colorectal cancer.”

The GRACE model is a model which generalises cost-effectiveness analysis (CEA) by introducing diminishing returns to Health-Related Quality of Life (QoL). This changes the CEA practice in three ways: (1) Willingness to pay (WTP) increases exponentially with untreated illness severity or pre-existing permanent disability, and WTP ends up lower for mild diseases but higher for severe diseases compared with conventional CEA; (2) average treatment effectiveness should be adjusted for uncertainty in outcomes; and (3) the marginal rate of substitution between life expectancy and QoL varies with health state. 

While the two methods allow stakeholders to determine willingness to pay, orphan medicines require different considerations as they have very non-cost-effective results, Annemans said.

Orphan drugs are drugs that are used to treat, prevent, or diagnose an orphan disease — a rare disease or condition that affects fewer than 200,000 people in the United States.

As an example, Annemans referred to the preliminary cost per QALY for Imiglucerase, a drug used to treat type 1 and 2 Gaucher’s disease – which causes the buildup of certain fatty substances in certain organs, particularly the spleen and liver. This buildup causes the organs to become enlarged and can affect their function. 

Based on the table, the treatment would have a cost-effectiveness of about £391,200 (RM 2,126,814) per QALY, and this is with the understanding that “orphans and ultra orphans are more expensive than other medicines.”

Nonetheless, a line must be drawn as there is a limit to “societal business”, Annemans said. When it comes to determining the budget, Annemans points to the goal of health care: the optimisation of the health of the population within the limits of available resources. 

“The industry needs to have a clear description of the target population, explore super population, precision medicine, and the trade-up between cost-effectiveness and budget impact. And what I mean by that is the following: we have to find a solution to the paradox. The paradox is cost-effective, but unaffordable, which we see more and more happening.

“Yes, your treatment is cost-effective, however, it is unaffordable, and this is the solution that I propose. I call it value-informed and affordable prices (VIA).”

On the budget impact aspect of the VIA approach, if the budget impact is too high for a new treatment for Hepatitis C, for example, society’s willingness to pay will be lowered, Annemans said.

“So, even for a severe disease, where we would be willing to pay more for a QALY, if the budget impact is too high, we will again decrease our willingness to pay for a QALY.”

This theory though could also work the other way around, where the low-budget impact would lead to a higher willingness to pay. 

“In the end, it is all about finding a balance between the sustainability of our health care system and the sustainability of the innovative industry,” Annemans said. “We need to assess the value for money of that medicine, and we need to go towards value-based prices.”

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