Economic Appraisals: Overview of Key Concepts for Product Development Partnerships

Transcription

1 Economic Appraisals: Overview of Key Concepts for Product Development Partnerships Donald S. Shepard, Ph.D. Schneider Institutes for Health Policy Heller School, Room 275, MS 035 Brandeis University Waltham, MA USA Tel: Fax: Web: Population Council, New York Jan. 23, 2013

2 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 2 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

3 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 3 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

4 Definition and Purpose Definition: Descriptive analysis that measures the amount of money or economic resources a society loses as a result of a disease or condition. Purpose: Quantify the economic importance of a disease in a country or region Compare one disease or condition against others Rough guide about whether a potential preventive or curative program would be economically worthwhile 4

5 Cost of Illness: Components Amount per case Direct cost: Economic value of medical care received Indirect cost: Economic value of lost time due to premature death, reduced productivity, and reduced leisure time Total cost per case: Sum of direct plus indirect cost Aggregate cost of illness cases Total cost for all cases Prevention cost: (aggregate) Amount spent on prevention to control or reduce risk 5 of disease

6 Basic Equation Aggregate cost = Number of cases x Total cost per case 6

7 Application to dengue Acute febrile illness Transmitted primarily by Aedes aegypti mosquito Burden has been increasing Source: Arc Magazine 7

8 Dengue illness worldwide 8 Source: WHO, 2006

9 9 Expansion Factors

10 Sources of data for expansion factors Comparison of actual cases (from cohort studies active surveillance) with reported cases (from passive surveillance systems) Capture-recapture studies (comparisons between two independent data sets, such as hospital reports and surveillance systems) Special data sets FOMEMA system: screening immigrant workers Laboratory tests in the private sector Expert workshop using Delphi panel 10

11 Country-specific illustration: Cost of dengue in Malaysia* Source: Shepard DS, Undurraga E, Lees R, Halasa YA, Lum LCS, Ng C. Use of multiple data sources to estimate the economic cost of dengue illness in Malaysia. American Journal of Tropical Medicine and Hygiene 87(5): , 2012 Errata: Shepard DS, American Journal of Tropical Medicine and Hygiene, 88(Feb.) *Acknowledgments: Ministry of Health, Malaysia Financial support: Sanofi Pasteur 11

12 Reported and projected cases of dengue in Malaysia,

13 Cost of dengue illness, Malaysia Sector Indirect Ambulatory Direct Total Indirect Hospitalized Direct Total Indirect deaths* Estimated costs per case (2009 US$) Total Public , Private , Total , Estimated aggregate costs from EF-adjusted dengue cases (58% ambulatory; 2009 US $1,000s) Public 8,851 14,952 23,803 7,288 22,301 29,589 4,451 53,392 Private 7,223 6,908 14,131 5,948 20,697 26,645 3,633 40,776 Total 16,073 21,860 37,933 13,236 42,998 56,234 8, ,252 Range (17, ,637) (44,197-88,593) (77, ,657) EF = expansion factor. *The unit cost of death reported is the average cost; the actual values were estimated on the basis of the age distribution of reported deaths caused by dengue in 2009 (Ministry of Health Malaysia, unpublished data) The range corresponds to the 95% certainty levels (centered on the median) in our projections, and is given by the simultaneous variation of parameters as indicated in Table 3. 13

14 Totals: Economic burden of dengue illness in Malaysia per year Aggregate US$102 million Aggregate 95% CI: million Aggregate MYR 360 million Per capita US$3.72 (MYR 13.08) 14

15 Distribution of costs, Malaysia 15

16 Regional illustration: Dengue in Southeast Asia* Sources: Undurraga EA, Halasa YA, Shepard DS. Use of expansion factors to estimate the burden of dengue in Southeast Asia: A systematic analysis. PlosNTD, in press. Shepard DS, Undurraga EA, Halasa YA. Economic and disease burden of dengue in Southeast Asia. PlosNTD, in press. *Financial support: Sanofi Pasteur 16

17 Total reported dengue episodes in Southeast Asia,

18 Empirical and predicted reporting rates for total dengue* 18 *R 2 =0.93, HQI significant at p<0.01

19 Summary of under-reporting for 12 countries in Southeast Asia Average reporting rate 13.2% of the total symptomatic dengue episodes Expansion factor of 7.6 for converting reported cases into estimated actual cases. Analogous principles apply to other regions of the world Process extends to other diseases reported through surveillance systems. See Murray CJL et al. The Lancet 19

20 Direct costs per non-fatal dengue episode 20

21 Indirect costs per non-fatal dengue episode 21

22 Summary of burden for 12 countries in Southeast Asia We estimated annual average of 2.9 million dengue episodes and 5,906 deaths. Annual cost per capita of U$1.67 (0.02% GDP per capita) Disease burden: 373 disability-adjusted life years (DALYs from 1994 definition) per million population. DALY rate exceeds that of 18 other conditions, including Japanese encephalitis, upper respiratory infections, and hepatitis. 22

23 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 23 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

24 Illustrative cost per child: 3-dose pentavalent vaccination program* Input and usual payer Quantity Unit Cost Total Cost Vaccine doses (donor) 3 $2.58 $7.74 Clinic visits (country) 3 $2.00** $6.00 TOTAL $5.58 $ *Factors to consider in refinements and adjustments: vaccine wastage, cost of vaccination materials, incomplete series, price changes **Estimate

25 Number of manufacturers and price of pentavalent vaccine 25 *Pentavalent vaccine: DTP-hepB-Haemophilus influenzae type b. Source:

26 26 Cost allocation

27 Unit cost of hospital days and visits using macro costing Row Item Source UMMC 2005 UMMC (1) Admissions Hosp. Report 41,000 46,977 (2) Number of registered beds (official) Hosp. Report (3) Occupancy rate Hosp. Report 92% 69% (4) Occupied beds (2) x (3) (5) Annual bed days (4) x , ,645 (6) Ambulatory clinic visits Hosp. Report 491, ,420 (7) Emergency visits Hosp. Report 68, ,442 (8) Total ambulatory visits (6) + (7) 559, ,862 (9) Rel. cost: visit/inpatient day Shepard et al (10) Ambulatory bed-day equivalents (8) x (9) 111, ,972 (11) Total bed day equivalents (5) + (10) 405, ,617 (12) Operating expenditure, US$ million Hosp. Report * (13) Cost per bed day equivalent, US$ (12) / (11) (14) Cost per ambulatory visit, US$ (13) x (9) 36 53

28 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 28 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

29 29 Refrigerator options: annual costs* Electricity Solar Kerosene Compresse d gas I- Personnel Hours Unit Cost ($) Total Costs ($) II- Repairs Expert (number) Unit Cost ($) Local (number) Unit Cost ($) Total Costs ($) III-Source of Energy Unit of measurement kwh liters kg Quantity Unit Cost ($) Total Costs ($) IV- Capital Cost Refrigerator cost($) Useful life (years) Discount Rate (%) Annualized Cost($) $131 $610 $197 $175 Grand Total $276 $720 $387 $438 * Solar has useful life of 10 years; all others have 5 year useful life.

30 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 30 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

31 Modeling 1. Developing a logical and realistic relationship among parameters in a system 2. Calibrating that relationship with the best available data 3. Assembling data from multiple, diverse sources 4. Using the result to predict the consequences, cost, and costeffectiveness of a proposed intervention 31

32 Example: dengue progression* Population 5% *Source: Shepard DS, et al. Vaccine 2004; 22: % Infection 24% Asymptomatic Infection Mild DF 94% DF (Non-DHF) Clinical Cases Severe DF 99.2% 6% DHF/DSS Survive 0.8% Death

33 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 33 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

34 Principles Source: Shepard DS, Thompson MS. First principles of cost effectiveness analysis in health. Public Health Reports 94: , 1979; Web: brandeis.edu/ ~shepard/downloads.html 34

35 Key concepts 1. Compute net costs to the health care system of the intervention compared to status quo Note: If positive, the usual case, means that the program increases costs to the health care system 2. Compute net effects or consequences of the intervention compared to status quo. 35 Note: If positive, the usual case, means that the program improve outcomes.

36 Compute cost effectiveness (CE) ratio CE = Net costs (in monetary terms, e.g., dollars) Net health effects (in utility terms, e.g., DALYs or QALYs) 36

37 Interpretation of cost effectiveness ratio (WHO) Lower values are more favorable CE < 1 times per capita Gross National Income (GNI) is highly cost-effective CE > 1 times and CE < 3 times per capita GNI is cost-effective CE > 3 times per capita GNI is not generally cost-effective 37

38 Decision rules in cost effectiveness analysis Net effects Positive Zero or negative Net costs positive Case 1: Compute cost effectiveness ratio; select most cost-effective programs for improving health (lowest ratios) Case 3. Program benefits offset by morbidity and inconvenience. Program should generally not be implemented Net costs zero or negative Case 2: Program economically valuable. Should generally be implemented Case 4: Compute cost effectiveness ratio; select most cost-effective programs for reducing costs (highest ratios) 38

39 Example for prevention Source: Shepard DS, et al. Vaccine 2004; 22:

40 Cost of vaccination, 1 Overall cost of vaccination per child: US$ 8.28* [US$ 4.85 public sector US$ private sector] Gross cost: US$ 154/1000 population (cost allocated over the entire population) * US$ 4.14 per dose 40

41 Cost of vaccination, 2 Net cost: US$ 17/1000 population because of saving in health care costs from fewer dengue cases 41

42 Effectiveness DALYs per 1000 pop. Baseline* With vaccination program Gain from vaccination Change Total DALYs % 42

43 Cost-effectiveness ratio Net cost: US$ 17/ 1000 population Effectiveness: 0.34 DALYs saved/ 1000 population CE Ratio: US$ 50/DALY saved Per capita GNI in SE Asia: US $1083 Interpretation: Vaccine would be highly CE 43

44 Example: Combination of diagnostic and therapeutic products Source: Zeng W et al. Modeling the returns on options for scaling up malaria programs in Ethiopia. Unpublished,

45 Results for combination example Situation National cost ($ million) Deaths (children <5) CE ratio Baseline $ ,711 Bundled $ ,158 Increment - $1.0-16,553 - $60 Baseline: Ethiopia's existing malaria control program. Bundled: Hypothetical policy with: improved supply of antimalarials and antibiotics in health facilities, widespread access to two diagnostic tools: rapid diagnostic test for malaria and respiratory rate timer for pneumonia; and highly compliant health workers who follow test results carefully. 45

46 Sensitivity analysis for alternative rates of compliance (main assumption, 100%) 46

47 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 47 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

48 Principles of cost-utility analysis Variant of cost-effectiveness analysis Quality of life ratings follow theoretical principles of time tradeoff Allows a rigorous combination of quality of life and length of life gained by an intervention. 48

49 Example for treatment Boston Ocular Surface Prosthesis (BOSP) 49

50 Cost-effectiveness of BOSP Shepard, D.S., Razavi, M., Stason, W.B. Jacobs, D.S., Suaya, J.A., Cohen, M., Rosenthal, P. Economic appraisal of the Boston ocular surface prosthesis. American Journal of Ophthalmology 148(6): , Web: S (09) /abstract Companion paper: Stason, W.B., Razavi, M., Jacobs, D.S., Shepard, D.S., Suaya, J.A., Johns, L., Rosenthal, P. Clinical benefits of the Boston ocular surface prosthesis. American Journal of Ophthalmology 149(1):

51 51 Schematic diagram of BOSP

52 Composite scores of VFQ: with ectasia/irregular astigmatism or ocular surface disease before and after receiving a BOSP 52

53 53 Relationship between time VF-14 and tradeoff

54 54 Economic cost per patient fitted with a BOSP at Boston Foundation for Sight (BFS)

55 Cost-effectiveness analysis of BOSP: mean values by baseline visual function questionnaire 55

56 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 56 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

57 Principles of willingness-topay analysis Survey approach that asks the respondent the amount he/she would be willing to pay for a good or service Used to place an economic value on a product not currently for sale Particularly useful for public goods, such as parks and environmental benefits, which cannot be sold individually 57

58 Example for willingness to pay Source Halasa YA, Shepard DS, Wittenberg E, Fonseca DM, Farajollahi A, Healy S, Gaugler R, Strickman D, Clark GG. Willingness-to-pay for an area-wide integrated pest management program to control the Asian tiger mosquito in New Jersey. Journal of the American Mosquito Control Association 28(3): ,

59 Willingness to pay question: Decision tree 59

60 Results : Perceived monetary benefit of an area-wide integrated pest management program 60 Item 1 Both counties No. of responses excluding protest zero (N) 29 Monthly average WTP excluding protest zero ($, PPPM) 0.79 SEM ($, PPPM) 0.24 Annual per capita WTP excluding protest zero ($) 9.54 SEM (annual) 2.88 Aggregate perceived monetary benefit per year ($, mean) 2 9,610,000 SEM ($, aggregate) 2,900,000 Willing to pay through tax mechanism (N) 18 Willing to pay higher tax (% share of respondents excluding protest zero) 62 Estimated number of residents in Monmouth and Mercer counties willing to pay a higher tax 625,000 Aggregate WTP among respondents willing to pay through higher tax ($, per year) 3,390,000 Average WTP per person willing to pay through tax mechanism ($) budget for all mosquito control ($) 2,615, budget per person per year ($) 2.60 % increase in tax over 2008 budget WTP, willingness-to-pay; PPPM, per person per month. 2 Mean maximum amount respondents in Monmouth and Mercer counties study sites were willing to pay, excluding protest zeros, 2008.

61 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 61 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

62 Principles of cost-benefit analysis Variant of cost-effectiveness analysis Quality of life ratings follow theoretical principles of time tradeoff Allows a rigorous combination of quality of life and length of life gained by an intervention. 62

63 Cost-effectiveness analysis of BOSP: mean values by baseline visual function questionnaire 63

64 64 Extension to benefit-cost study

65 Improved school attendance and performance: Outcome for insecticide-treated wall liner in Kenya

66 Topics A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 66 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system

67 Example for broader impacts on health system Source Shepard, D.S.; Zeng, W.; Amico, P.; Rwiyereka, A.K.; Avila-Figueroa, C. A controlled study of funding for Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome as resource capacity building in the health system in Rwanda. American Journal of Tropical Medicine and Hygiene 86(5): Web: 86/5/

68 Preventive care index,

69 Curative care index,

70 Summary: when to use each tool A. Descriptive tools 1. Cost of illness 2. Cost of an intervention or program 70 B. Comparative (analytical) tools 1. Cost minimization 2. Modeling 3. Cost-effectiveness analysis 4. Cost-utility analysis 5. Willingness to pay 6. Cost-benefit analysis 7. Broader impacts on health system