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IQWiG presents a method for evaluating the relation between cost and benefit

After nearly two years of development and extensive discussion in the scientific community, the Institute for Quality and Efficiency in Health Care (IQWiG) presents its methods for evaluating the relation between cost and benefit. The Institute can now apply these methods when working on certain commissions awarded by the Federal Joint Committee (G-BA). The method developed by IQWiG is suitable for passing on recommendations to the GKV-Spitzenverband [National Association of Health Insurance Funds] for establishing maximum reimbursable prices. Moreover, in line with legislation, it ensures that medically necessary interventions will not be withheld from patients for financial reasons.

As the Institute's director, Peter Sawicki, explains, "The 'analysis of the efficiency frontier' is the most suitable method for the German system. During the various submission of comments procedures, no participants came up with a better alternative proposal. Contrary to what some critics maintain, we are not following a different course to other countries. While our procedure is quite different to that in the UK, there are a lot of similarities with Australia."

Benefit always comes before cost

The method selected by IQWiG should enable the GKV-Spitzenverband in particular to establish a maximum reimbursable price, up to which the health insurance funds can reimburse the cost of new drugs. In order to avoid a situation where patients are burdened with additional costs for actual improvements in therapies, these maximum reimbursable prices may only be set under two conditions in accordance with the legislation:

1) The drugs must have an additional benefit compared to other therapies;

2) Drugs that have no real alternative are excluded from the assessment.

In order to ensure that these conditions are met, IQWiG selected a two-step procedure. The first stage is the analysis of the medical benefit of a drug compared to therapy alternatives using evidence-based medicine (EBM) methods. Only when an additional benefit is identified in this benefit assessment, should a health economic evaluation be carried out.

In the second stage, the scientists ascertain the costs and compare the major benefit and cost aspects. Efficiency frontiers can be derived from the relation between cost and benefit and presented in easy-to-read diagrams, which enable efficient interventions to be identified.

IQWiG provides recommendations for appropriate maximum reimbursable prices

Ultimately, the Institute uses the efficiency frontier to formulate a recommendation as to the appropriate price of a drug. However, it is the GKV-Spitzenverband which is responsible for setting the actual maximum reimbursable price. In doing so, it must also take into consideration the manufacturer's research and development costs. In addition, it can include other aspects such as the severity or frequency of the disease.

According to legislation, the purpose of the health economic evaluation is to set a maximum reimbursable price for certain drugs that is "appropriate" to the increase in benefit. IQWiG assumes that it is appropriate if the new therapy is at least as efficient as the existing therapies for the disease in question.

Impact on total expenditure of health insurance funds estimated

Even if the price for a new health technology is "appropriate", this does not mean that it can be paid by the SHI community and thus be considered reasonable. Consequently, IQWiG will also carry out a budget impact analysis to estimate the impact that a given maximum reimbursable price might have on the total expenditure of the SHI community.

Here the costs are generally described from the perspective of the SHI community. However, depending on the disease, other costs can be included, such as nursing care from the perspective of the social insurance scheme or productivity losses from the societal perspective.

No general threshold level for all indications

In contrast, for example, to the National Institute for Health and Clinical Excellence (NICE) in the UK, IQWiG compares the relation between cost and benefit for each individual disease. There is no general threshold level for all indications - i.e. a uniform upper cost limit independent of the type of disease. Such a threshold would not be in keeping with the German Social Code Book. Moreover, in IQWiG's view there is a fundamental cultural difference between the two countries. Peter Sawicki is convinced that the utilitarian mindset which underpins the British approach would not be accepted in Germany. According to the Director, "This benefit maximization ethic leads, for example, to cancer patients not receiving the expensive drug Avastin, because the costs are seen as too high in relation to extending life. On the other hand, despite doubts surrounding their additional benefit, diabetes patients are prescribed insulin analogues because the higher costs seem reasonable in the face of the supposed increase in quality of life. In Germany, this would be seen as unfair."

German parallels with the Australian approach

Even if Germany is taking a different route from the UK, viewed internationally, IQWiG is certainly not entering virgin territory with its "efficiency frontier analysis". Firstly, IQWiG is using instruments that are internationally recognized in health economics. Secondly, there are in fact countries with similar procedures to the German method. There are clear parallels with Australia, the country with the longest experience in matters concerning health economic evaluation. Our counterpart in Australia, the Pharmaceutical Benefits Advisory Committee (PBAC), has been recommending maximum reimbursable prices for drugs based on the relation between cost and benefit since 1993. As IQWiG will be doing in the future, the PBAC presents the costs of achieving a particular additional benefit from a new therapy compared to existing alternatives.

The Australian institute first considers only the direct costs incurred in the health sector in connection with the particular disease. Further financial repercussions, such as the impact on caregiving or on productivity, are presented in supplementary analyses. IQWiG also focuses primarily on the perspective of the SHI community.

Like IQWiG, the PBAC also uses clinical outcomes such as mortality or quality of life. While our British colleagues work more or less exclusively with QALYs (Quality Adjusted Life Years), in Australia these are used with restrictions. The QALY unit is used to offset extended life against the quality of life of the patient. However, after 15 years' experience, the Australian institute has warned that there is a high price to pay for carrying out general therapeutic comparisons using QALYs. The utility weightings required for this are often based on many ambiguous assumptions. This introduces more potential uncertainty into the health economic assessment than would be the case with clinical outcomes.

Draft versions of the Methods have been widely discussed

Together with national and international experts, IQWiG has worked on the methods for about two years. All stakeholders in the German health care system were given the opportunity to contribute constructive criticism and comments at several stages of the submission of comments procedures. "The discussion of our draft methods took up a lot of time. But if one wants a transparent process where industry, health insurance funds, physicians, hospitals, patients, and politicians all have ample opportunity to participate in hearings, then you have to accept that it will take time", explains Peter Sawicki. It was necessary to take different approaches, both the medical and economic perspective as well as that of law and ethics. According to the Director of IQWiG, "These disciplines each have their own language and their own specifications. Communication therefore takes longer than it would within one field."

However, Peter Sawicki feels that the efforts have paid off. "At present we have a method that ensures that nobody is denied necessary medical care. This cannot continue, especially not as long as we still spend money on medical treatment that is not only unnecessary, but superfluous."

Analysis of efficiency frontiers continues to be developed

The present methods paper serves as the basis for working on commissions issued by the Federal Joint Committee (G-BA) with the aim of passing on the recommendations for setting maximum reimbursable prices to the GKV-Spitzenverband. The G-BA gave notification of the first health economic assessment commission shortly after the paper was completed. As with the benefit assessment methods, the health economic methods will also be continually revised to keep up-to-date with current requirements and developments in research and health care.

The method was developed to give the GKV-Spitzenverband a recommendation for setting maximum reimbursable prices. However, in addition to this aim, which is defined in the German Social Code Book V (35b), it is also suitable for determining appropriate cost to benefit ratios for any therapy. Thus, if the legislation was amended, it could be conceivable that all newly approved drugs are assessed by this method in order to establish a reasonable price.

An appraisal of comments on the draft Methods version 2.0 together with the Working Papers on "Costs" and "Modelling" were published simultaneously with the "General Methods on Evaluating the Relation between Cost and Benefit" on 19 October 2009. An English translation of the Methods and Working Papers is available as of 30 November 2009.


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

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