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IQWiG presents a concept for cost-benefit assessment methods in the German health care system

German legislature has expanded the responsibilities of the Institute for Quality and Efficiency in Health Care (IQWiG) with the latest Health Care Reform (Statutory Health Insurance [SHI] - Act to Promote Competition). So far, the assessment of drugs has been limited to their clinical benefit. In future, the Institute is also to consider the costs of therapies and place these costs in relation to the benefits determined beforehand. IQWiG has recently presented a methods proposal that will be discussed broadly with the (scientific) public in the coming months.

Decision guidance for the self-government of the German health care system

According to legislation, the results provided by IQWiG are, on the one hand, to support the Central Federal Association of Health Insurance Funds (the national umbrella organisation for SHI funds) in setting the ceiling price for specific drugs that cannot be included in a reference price group. On the other hand, they are to support the Federal Joint Committee in assessing the efficiency of medical interventions, as to date there is no transparent and formally recognised procedure in Germany by which the clinical benefit of a therapy can be balanced against the accruing costs. This however is the precondition for enabling a decision as to which costs for which benefit are appropriate and reasonable for the community of citizens insured by SHI in Germany.

In principle suitable for all medical technologies

The concept developed with the support of a group of international health economists and with the advice provided by IQWiGs Scientific Advisory Board favours a method called the Efficiency Frontier Analysis. It can be used in a very flexible manner to compare the cost-benefit relation of any number of therapy alternatives. As a second element in the assessment, the concept includes a Budget Impact Analysis. This analysis can be used to estimate how a decision may affect expenditures in the health care system as a whole.

The concept was developed as a response to the law reform that explicitly stipulates the assessment of the cost-benefit relation for drugs in 35b Social Code Book V. However, in principle, all medical technologies can be assessed with the method proposed.

The efficiency frontier describes existing cost-benefit relations

Health economists describe one intervention in comparison to another as being efficient if, at the same cost, it displays a higher benefit or is more cost-efficient at the same benefit. This efficiency frontier is presented graphically as a curve that joins the most efficient interventions.

The coordinates of these points are determined on the one hand by benefit units. These either directly illustrate aspects of a patient-relevant benefit, such as an improvement in health status or quality of life, a reduction in disease duration, an increase in life expectancy or a decrease in adverse effects. However, depending on the question posed, it may be necessary initially to infer weighting values from these direct aspects of benefit, in order to then plot them onto the benefit axis.

On the other hand, the costs determine the position of the points: The cost axis illustrates the costs that are accrued in order to achieve the specific benefit previously determined. In this way, the graphic presentation makes it clear at a glance which existing therapies are efficient and which are not.

With the help of this graph, an appropriate price for a new drug (ceiling price) can also be described: For drugs that are more beneficial but more costly than those so far used, it can be determined where their price would have to lie so that the cost-benefit relation lies within the accepted efficiency range.

Clinical benefit takes priority over costs

A cost-benefit assessment is always preceded by an assessment of clinical benefit. In this way, the benefit remains the basis for the economic decision. In addition, it is ensured that only aspects of the benefits that are actually relevant to the patient are included in the evaluation, such as, for example, a shorter disease duration or a decrease in adverse effects.

On the basis of a cost-benefit assessment performed by IQWiG, the Central Federal Association of the Health Insurance Funds can determine a ceiling price for drugs up to which the SHI funds reimburse the cost of drugs. Subsequently the manufacturers can lower the price or not. If they do not do so, the patients themselves must pay the difference between the manufacturers price and the ceiling price. However, the principle of a preceding benefit assessment ensures that only those drugs undergo a cost-benefit assessment (and subsequently may no longer be fully reimbursed) for which there is an appropriate alternative.

No comparisons spanning various therapeutic areas

Each disease is assessed individually; this means that no comparisons spanning various therapeutic areas are performed. This is because the question as to whether cancer is worse than, for example, a stroke, and might therefore justify higher expenditures, cannot be answered scientifically so far. The answer would always be influenced by subjective value judgements and could discriminate against individual patient groups.

Inclusion of all relevant therapy alternatives and costs

Several requirements have to be fulfilled in order to ensure a fair comparison when applying this method. First of all, the relevant therapy alternatives for a specific disease must be incorporated, otherwise the course of the curve could change, which would have a direct consequence on the level of the appropriate price. Moreover, the main costs must be considered; in addition to expenditures by SHI funds, these may also include patients co-payments.

Modelling serves to estimate long-term costs

When assessing the balance of costs and benefits, the period to be assessed should meaningfully reflect the course of the disease. However, clinical trials are usually designed for considerably shorter periods, which is why model calculations will be necessary for the cost side. But, as with every prediction, such model calculations are uncertain. IQWiG will review how these uncertainties may affect results.

No international gold standard available

In compliance with the requirements set by law (not only to determine benefits but also their relation to costs following internationally recognised scientific standards), IQWiG commissioned a group of leading health economists from 8 countries. These experts were to assess which approaches and tools were suitable for the specific setting in Germany.

As the experts determined, there is no internationally recognised gold standard for health economic evaluations. In addition, procedures from other countries are not usually transferable to the German setting, as health care systems differ substantially. According to the international panel, the Efficiency Frontier Analysis meets the requirements in Germany best.

IQWiG seeks a societal consensus

The current proposal presented here describes the framework of the methodology: questions of detail are not to be presented and discussed until the principle to be applied has been agreed on. The Institute Director Peter Sawicki states: As the cost-benefit assessment not only involves purely scientific but also normative issues, we need a societal consensus. Otherwise, decisions that are made later on the basis of specific cost-benefit assessments will not find the necessary acceptance. He also states that the model separates the wheat from the chaff and motivates manufacturers to develop products that are as beneficial as possible. Professor Sawicki expects that a higher price will be achieved only for these products and that in this way quality in medicine will increase.

IQWiG will accept comments in writing up to 31 March 2008 and will have discussions with committees and experts from the health care system, the science community, and politics. The first major public event, which will primarily be targeted towards interested scientific parties, will take place on 26 February 2008 in Berlin. After completion of this consultation phase, the Institute will publish the applicable version of the methods.


Contact: Anna-Sabine Ernst
Institute for Quality and Efficiency in Health Care

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