The analytic framework needs to include a definition of the cost perspective of the budget holders who will use the budget-impact analysis. Cost perspectives are likely to vary among budget holders within a jurisdiction as well as across jurisdictions for the following reasons:
• Costs of producing health-care services are important to providers of services, while reimbursement rates for services provided may represent the costs incurred by payers.
• Fixed or variable costs within the analysis time horizon may differ among budget holders.
• Cost categories of interest, for example, direct costs (drug-related and condition- related), personal and social services costs, indirect costs, and caregiver costs, may differ among budget holders.
2.4.1 Service Delivery Cost Versus Reimbursement Rate
In determining the cost perspective to define in the analytic framework, it is important to understand the budget holder’s perspective. This is likely to vary by jurisdiction, depending on the organization of the health-care system, and will affect the cost data selected for the analysis. The data may represent production costs (the monetary amount needed for a medical practice to provide goods and services), charges (the amount that the medical practice will invoice for the goods and services), or reim- bursed amounts (the amount that a payer will pay the medical practice for its goods and services). A payer (e.g., a public or private health insurer in the USA) may be more interested in the reimbursed amount because this is what the insurer will actually pay the medical practice for the goods and services. Decision Makers acting on behalf of a health-care provider (e.g., NICE for the UK National Health Service) may be most interested in production costs because this is the amount the provider will incur in providing the service. A medical practice or hospital may be interested in under- standing the impact on their production costs in providing the services as well as the reimbursement amount, which represents their income from the services provided.
Costs may be published in the case of a public or governmental provider and/or payer, such as the UK National Health Service reference costs and the resource- based relative value scale (RBRVS) for outpatient Medicare reimbursement.
However, in the case of the private insurer making payments to the provider of health-care services, these reimbursed amounts are less accessible to the public. The reimbursed amounts are often negotiated values between the payer and the medical provider. Discounts and rebates may be offered for some medical goods and ser- vices, but may not be available for others. Variability among payers in reimbursed amounts is particularly evident in the USA jurisdiction where the payer system is dominated by many private payers, but it is also seen in jurisdictions with a single national health system. For example, NICE sometimes recommends drugs within patient access schemes in which the drug prices payable by the UK National Health
S. Wolowacz et al.
Service are not made public. We present methods for estimating drug and condition- related costs in Chap. 5 and 6, respectively.
2.4.2 Fixed Versus Variable Costs
It should be noted that in some cases, although a more effective drug may reduce resource use, this may not translate into reduced costs for all budget holders within the analysis time horizon. For example, a reduction in length of hospital stay due to lower complication rates when using a new drug may not be of sufficient magnitude to cut staffing costs for the provider, and the beds made available might not be filled with additional patients if the occupancy rate is low. This differentiation between fixed and variable costs is not often accounted for explicitly in budget-impact analy- ses. Generally, all costs are presented as if they are variable costs. Drug treatment costs are correctly considered as variable costs, but other condition-related costs may be more likely to have fixed and variable components. The budget-impact anal- ysis should include only the variable components in the analysis if the fixed costs are unlikely to change within the analysis time horizon for the budget holder. For example, if the third-party payer pays for a hospital stay using a per-case amount (such as a diagnosis-related group), then reducing length of stay will not affect their budgets unless and until the per-case amount is reduced. However, if the third-party payer pays for a hospital stay on a per diem basis, then reducing the length of stay will affect their budgets. Variable costs may be different depending on the perspec- tive for the analysis. For example, reducing the number of patients hospitalized may reduce the budget for a third-party payer but may not have much impact on the costs for running the hospital if staffing or other costs are fixed in the short run.
2.4.3 Cost Categories of Interest
In addition to an understanding of how the introduction of a new drug might affect service costs or reimbursement rates and fixed or variable costs, the analytic frame- work needs to reflect the costs encountered by the budget holders who will use the budget-impact analysis in the jurisdiction of interest. In particular, will the budget holders only be concerned with direct medical care costs, or are indirect costs (lost productivity), caregiver costs, or patients’ out-of-pocket expenses also of interest?
Within direct medical costs, will their focus be on drug acquisition costs, or will they be interested in all drug-related costs, including administration, monitoring, supportive medications, side effects, and any diagnostics that may be required prior to treatment initiation? Will they also be interested in the broader range of direct medical care costs, including condition-related costs that might change with the addition of the new drug to the formulary (e.g., cost offsets that might be expected due to a more effective treatment such as reduced hospitalizations for cardiovascu- lar events resulting from a more effective antiplatelet agent)? And are there credible data to support estimates of offsetting condition-related costs?
28
In Box 2.11, we present examples of different categories of costs included in published budget-impact analyses.
Box 2.11. Budget-Impact Analyses Considering Different Types of Costs
Budget-impact analysis Costs included Budget impact of introducing
prasugrel as an antiplatelet agent as an alternative to clopidogrel for patients experiencing acute coronary syndromes requiring an immediate percutaneous coronary intervention
In a budget-impact analysis developed for NICE (2009), the following were included:
• Drug acquisition costs
• Rehospitalizations in the year after an acute coronary syndrome episode because of lower recurrence of cardiovascular events and drug-related increased rates of bleeding (data from a head-to- head trial for the two drugs were available)
Budget impact of introducing targeted therapy with erlotinib for the first-line treatment of patients with EGFR mutation-positive advanced non-small cell lung cancer for a USA managed health-care plan
In a study by Bajaj et al. (2014), drug-related costs, including impact of improved efficacy through longer time to disease progression while on treatment, were considered. Costs included:
• EGFR testing
• Drug acquisition
• Drug administration
• Drug-related side effects
But the analysis did not estimate the extra costs needed for disease monitoring and treatment during prolonged progression-free survival Budget impact of new antiretroviral
drugs for HIV entering the market between 2015 and 2019 and the introduction of generic versions of existing drugs for the Italian National Healthcare Service
• In a study by Restelli et al. (2015), drug acquisition costs were the only costs considered.
• This study did not include any possible changes in costs for opportunistic infections because of new more effective or convenient treatment regimens or lower adherence with generic multi-tablet regimens
Budget-impact analysis of everolimus for the treatment of hormone receptor- positive, human EGFR-2- negative advanced breast cancer in Kazakhstan (Lewis et al. 2015)
In a study by Lewis et al. (2015), drug-related plus disease-related costs were considered.
Costs included:
• Drug acquisition
• Drug administration
• Grade 3 and 4 side effects
• Disease-related costs pre- and
postprogression, including subsequent lines of active anticancer therapy, hospital visits, general practitioner visits, home visits, radiotherapy, ambulance transports, hospitalizations, laboratory tests, imaging, supportive drugs, and palliative care
EGFR epidermal growth factor receptor, HIV human immunodeficiency virus, NICE National Institute for Health and Care Excellence, USA United States
S. Wolowacz et al.
Other annual costs for the population with the condition of interest that might change with the reimbursement and use of the new drug include social services costs, indirect costs associated with productivity changes, patients’ out-of-pocket expenses, and informal care costs from family members. Will the budget holders using the results of the budget-impact analysis be interested in these costs? Should they be included in the analysis?
In Box 2.12, we present examples of the full range of treatment-related and condition- related costs that could be included in a budget-impact analysis for Alzheimer’s disease and schizophrenia.