economic appraisal in the british national health service: implications of recent developments

Pergamon Sot. Sci. Med. Vol. 38, No. 12, 1615-1623, 1994 pp.

0277-9536(93)EOO14-6 Copyright 0 1994 Elsevier Science Ltd

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ECONOMIC APPRAISAL IN THE BRITISH NATIONAL HEALTH SERVICE: IMPLICATIONS OF RECENT

DEVELOPMENTS*

CHRISTOPHER HENSHALL’t and MICHAEL DRUMMOND~

‘Research and Development Division, Department of Health, Leeds, U.K. and *Centre for Health Economics, University of York, Heslington, York YOI 5DD, U.K.

Abstract-This paper discusses the role of economic appraisal in the U.K. National Health Service, with particular emphasis on the impact of the recent reforms. A number of agencies, including the Department of Health, research councils, health authorities and industry, fund appraisals, the majority of which are carried out by academic researchers. To date there is little formal documentation of the impact of appraisals. The recent reforms should, in principle, increase the opportunities and demand for economic appraisal. The reforms establish an internal market for health care with separate roles for purchasers and providers. There are opportunities for using appraisals in deciding whether or not to place a contract, in deciding on the contract specification and in monitoring the prescribing budgets of general medical practitioners. The new NHS research and development strategy also places particular emphasis on research into the effectiveness and cost-effectiveness of health technologies, and on getting the results of research used in decision making.

Key words--cost-effectiveness analysis, decision-making, technology diffusion, incentives

1. BACKGROUND

The NHS

The NHS was introduced in 1948 to provide a comprehensive health service available to all, free at the point of delivery and financed mainly from taxation. There is a small private health care sector in the U.K., but the majority of health care is provided by the NHS. Overall responsibility for the NHS in England rests with the Secretary of State for Health who chairs the NHS Policy Board which agrees the broad policy framework within which the service operates. The Secretary of State and other Ministers receive advice on policy relating to the NHS and broader aspects of health and personal social services from policy divisions within the De- partment of Health. Management of the NHS is headed up by the NHS Management Executive, also located within the Department of Health. The Sec- retaries of State for Scotland, Wales and Northern Ireland and their respective Offices fulfil similar roles in relation to the NHS in their jurisdictions.

Responsibility for managing services is delegated as far as possible to local health authorities. Family Health Service Authorities are responsible for assess-

*Paper prepared for an EC Workshop on From Results to Action: the Role of Economic Appraisal in Developing Policy for Health Technology, Heraklion, Crete, 8-10 October 1992.

tThe opinions expressed in this paper are those of the authors and do not necessarily represent the views or policy of the Department of Health.

ing the needs of their populations for primary medical and dental care and for developing services to meet those needs, through liaison with medical and dental practitioners. District Health Authorities are responsible for assessing the needs of their populations for all other community and secondary care, and for purchasing care from public and private providers to meet these needs. An increasing number of NHS hospital and other provider units are acquir- ing the status of self-governing Trusts and are ac- countable directly to the Management Executive. Responsibility for other NHS provider units rests with District Health Authorities. Family Health Ser- vice Authorities and District Health Authorities report to Regional Health Authorities, which are responsible to the Management Executive for planning, resource allocation and monitoring the per- formance of authorities within their region.

Infrastructure and funding for medical and heaIth research

Public funding for teaching, and for the research infrastructure in universities, is provided by the De- partment for Education. Public support for specific research projects and programmes is provided by the research councils with funds provided by the Office of Science and Technology. Most research council funding for medical research comes from the Medical Research Council, but the Science and Engineering Research Council funds work in biology and engineering of relevance to medicine, and the Economic and Social Research Council funds work in the social

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1616 CHRISTOPHER HENSHALL and MICHAEL DRUMMOND

sciences relating to health and health care. The Health Departments also commission research of relevance to health and personal social services policy and to the operation of the NHS.

2. CURRENT STATUS OF ECONOMIC APPRAISAL

It is relatively easy to identify who undertakes and funds economic appraisals of health care in the U.K. Identifying who decides what work is undertaken and what impact that work has is more complex.

Who funds and undertakes appraisals?

Universities. The majority of economic appraisals are undertaken by research workers in university departments and research units. The major centres for such work in the U.K. are the Centre for Health Economics at the University of York. the Health Economics Research Group at Brunel University and the Health Economics Research Unit at the University of Aberdeen. A Health Economics Con- sortium, also based at York, focuses on practical consultancy projects for health authorities. Although management consultancies are expanding their work in the health field, relatively few formal economic appraisals are currently undertaken by consultancies outside the university system.

Health authorities. Regional Health Authorities, District Health Authorities, and Family Health Ser- vice Authorities have little or no in-house capacity for economic appraisals, commissioning work as needed from outside contractors. Although only required by the Department of Health to undertake formal option appraisals of large capital schemes [ 11, health authorities are commissioning an increasing volume of economic appraisals of health care developments. This trend is likely to accelerate sharply in the wake of the 1991 NHS reforms and the new R&D strategy for the NHS. both of which are discussed in more detail in later sections of this paper.

Health departments. The Department of Health has its own Economic and Operational Research Division. This undertakes some in-house evaluations, a recent one relating to cholesterol measurement [2]. Its main role, however, is to act as a stimulator, commissioner and interpreter of economic appraisals for policy makers. The Department of Health currently spends around &22 million per annum on its commissioned programme of health and personal social services research. These funds are used to provide core support for research units and to support specific programmes and projects within them and elsewhere. A substantial proportion of this support is for health economics. The Depart- ment currently provides support for the Health Economics Research Group at Brunel, the Centre for Health Economics at York, and for a number of other units which have health economists on their

staff. Major economic appraisals funded by the Department include the work at Brunel in the early 1980s on heart transplantation [3], and the recently commissioned evaluation of the Picture Archive and Communications System (PACS) being installed at the Hammersmith Hospital. The Department also provides funding for the MSc course in Health Economics at the University of York. Similarly, the Scottish Office Home and Health Department funds the Health Economics Research Unit at Aberdeen and provides support for various projects and courses involving health economics.

Research councils. The majority of the Medical Research Council’s funds are used to support biomedical and clinical research, but the MRC also supports a range of health services research. A number of MRC research units either have health economists on their staff, or collaborate with them. Some project and programme grants include economic evaluations, for example a multi-centre trial of the comparative effectiveness and costs of continu- ous hyperfractionated accelerated radiotherapy. The MRC also provides funds for training in health services research, including support for courses cov- ering health economics. In response to requests from the Health Departments, the MRC has been working in recent years to expand its support for health services research. The formation of a new Health Services Research Board is expected to increase the momentum of these developments. The new Board will be taking steps to ensure that clinical trials supported by the MRC include economic evaluations where this is appropriate.

The Economic and Social Research Council has a relatively small budget but has nonetheless provided important support for economic appraisal of health care in the past, by providing core funding for the Centre for Health Economics at York, and for places on the York MSc course in health economics.

Charities. Medical research charities in the U.K. now provide about the same level of funding for medical and health research as the Medical Research Council. However, the vast majority of charitable support is channelled into biomedical and clinical research. The Wellcome Trust, now the largest of the U.K. medical research charities, has recently initiated a modest programme of support for health services research, but has not to date shown any specific interest in economic appraisal.

Industry. The pharmaceutical industry now has substantial in-house expertise in health economics, but understandably tends to commission work from independent contractors in universities when it wants independent data for demonstrating the cost- effectiveness of its products to the health service. The medical equipment industry has been slower to come to grips with economic evaluation, but can be expected to move in this direction as procurement decisions for equipment as well as drugs become more dependent on evidence of cost-effectiveness [4].

Economic appraisal in the British National Health Service 1617

As with biomedical research, industry is also show- ing itself willing to provide more general support for the research infrastructure for health economics within universities.

Who decides what to appraise?

A recent development is the interest being taken by the pharmaceutical industry in commissioning product-related economic appraisals. Not surpris- ingly, these focus on products that industry hopes to show to be good value for money. Although begin- ning as an initiative of the industry, it has recently received official encouragement in the Department of Health’s Working Paper on improving prescribing [4]. The new government document points out that there is currently little research evidence about the cost-effectiveness of alternative methods of treatment where one option involves prescribing by the general practitioner (family physician) and another option, hospital treatment. It goes on to suggest that the pharmaceutical industry can play an important role by producing clear cost-benefit and cost-effectiveness evidence for new products which are brought to the market. (This is discussed further in Section 3.) Currently many economic appraisals of pharmaceutical products are underway in the United Kingdom. In addition the Office of Health Economics has formed the Pharmaceutical Industry Health Economics Group, which has membership from most of the major pharmaceutical companies [5].

The focus of work funded by the Health Depart- ments, Health Authorities and the Research Councils reflects a complex interplay between those responsible for setting general policy directions, those responsible for managing health service budgets, those responsible for providing care, and those undertaking the economic appraisals. With no formal commitment until recently to the economic evaluation of the vast majority of the drugs, devices and procedures used in health care, Drummond and Hutton [6], in a review for the European Community, pointed out that the majority of evaluations were initiated by independent researchers. Projects in the Department of Health’s research programme are commissioned in response to requirements identified by the Department’s policy divisions, but these requirements are formulated in the light of discussions with research workers and the health care professions as well as the broader policy framework. Work commissioned by health authorities reflects the concerns of those responsible for planning services and managing resources. Until recently the health care professions, and hospital doctors in particular, have played a large role in defining this agenda, both through the formal structure of medical advisory committees and by pressing NHS management for funds for service developments. The NHS reforms and the new R&D strategy for the NHS, discussed in detail in the following sections of this paper, require health authorities to take a strategic view of all the services they arc

purchasing for their populations and to consider and prioritise their research needs in the light of this.

Economic appraisals funded by the research councils almost always involve collaboration between health economists and clinicians, and the original idea for a proposal may arise from either. The Economic and Social Research Council’s decision making processes rely on advice mainly from social scientists. The bulk of the Medical Research Coun- cil’s advice comes from biomedical and clinical research workers, but views are also sought from social scientists and health service managers. The MRC takes account of the Health Departments’ interests in reaching funding decisions.

In summary, the topics selected for economic evaluations supported from public funds reflect central concerns about the development of a cost-effective, up-to-date health service, local management’s concerns about managing resources, health care professionals’ interests in state-of-the-art health care, and research workers’ interests in publications and career development. One of the aims of the new Research & Development strategy for the NHS is to introduce a more systematic and transparent mechan- ism for setting priorities for economic appraisals and other research commissioned by, or for, the NHS.

What impact do appraisals have?

There is little formal documentation of the impact of economic appraisals undertaken in the U.K. and their effects are difficult to judge. Health care decisions are the result of a complex interplay of social, political and economic forces. It is therefore difficult to guage the extent to which decisions are or are not influenced by economic appraisals. Even when a decision appears contrary to the results of an evaluation, the decision maker may be fully aware, through the evaluation, of the consequences for efficiency of introducing, for example, equity considerations.

Where bodies such as the Department of Health commission evaluations, there is evidence that the results are considered when the decision is made. However, the link between appraisal and decision making is less pronounced than in situations, like option appraisal, where the evaluation is part of the formal decision making procedure. The link between economic appraisals and decisions is weakest for studies initiated by researchers independently of decision makers. Where such studies have an impact it is usually because they are particularly timely, or because a clinical practitioner involved in the study is able to change his or her own practice as a result.

Some anecdotal evidence on impact is available from those involved in conducting studies. For example, the economic evaluation of alternative ways of providing domiciliary oxygen therapy probably had some influence in the decision to allow general practitioners to provide a rental to an oxygen concen- trator instead of repeat prescriptions for cylinder


oxygen [7]. Also, following an economic appraisal in the contact lens department of Moorfields Eye Hospi- tal in London [8], the policy for stocking contact lenses was changed.

It is currently too early to assess the impact of industry-sponsored economic evaluations of medicines. Economic evaluations are not formally required for new pharmaceutical products in the U.K., but there are a number of potential decisions to which economic data could pertain: setting of the original price of the drug; defending the price once set; and, encouraging adoption of the drug by individual clinicians and drug formulary committees [9].

3. IMPACT OF THE REFORMS TO THE NHS

Recently the U.K. has implemented a number of major reforms to the NHS [lo]. The central feature of the reforms is the separation of the roles of purchaser and provider. Health authorities are now allocated funds to purchase care from their own directly managed units or from other public and private providers. The range of independent providers has been increased by the establishment of a number of NHS trusts, which are mainly hospitals that have chosen to opt out of district health authority control. Purchasing will be carried out by health authorities placing contracts with providers. It is hoped that this will encourage competitive forces within the health care system, as purchasers seek to secure the best deal and alternative providers tender for contracts.

In addition, the government has strengthened the measures available to promote rational prescribing by general practitioners. These include the more intensive feedback of prescribing information, the establishment of indicative drugs budgets and the encouragement of locally -based formularies, possibly at the individual practice level. The likely impact of these measures is hard to gauge at this stage, but the government is keen to exert a downward pressure on drug costs and to encourage the greater use of generic products.

Finally, some larger general practices have joined a voluntary fund-holding scheme, whereby the practice budget will be under the general practitioners’ direct management. Expenditures on the fund will then be made for drugs, investigations and certain elective hospital procedures. Thus, the fundholding practices also become purchasers of care. The scheme is currently in its infancy, but if a significant number of practices do manage their own budget there may be major impacts on resource utilization as a result of the changed incentives. For example, if a practice saves on pharmaceuticals or other resources, the savings can be redeployed to improve the range of services offered by the practice. Therefore, although there are no direct financial savings to the practitioner there is clearly an economic incentive, since otherwise the expenditure for improvements in ser-

vices would have to come from the practice itself. Also, in the longer term such improvements might lead to an increase in the number of patients enroled with the practice, which could further increase the practitioners’ income.

There are a number of ways in which the reforms could increase the opportunities and demand for economic evaluation. These are discussed in turn below.

(a) Deciding whether or not a purchaser should place a contract

There is scope here for economic evaluation to inform priorities for health care. For example, Williams [ 1 l] pointed out that coronary artery bypass grafting for severe angina with left main disease gave much better value for money (El040 per quality-adjusted life-year gained in 1983-84 prices) than CABG for mild angina with two vessel disease (f12,600 per QALY gained).

Under the current arrangements the priorities within open heart surgery are decided solely by the clinicians concerned. The health authority merely decides the level at which it is prepared to fund its surgical unit. One would expect that, all things being equal, clinical priorities would determine that the most serious cases are operated upon first, with broader and broader indications being accepted as funding becomes more widely available. However, this is not currently an explicit agreement between management and the clinical staff. Indeed, it is possible that some clinicians would treat cases which they find particularly interesting or challenging from a clinical viewpoint, rather than those which offer the most returns (in terms of health improvements) in relation to the cost. Many surgical waiting lists comprise large numbers of simple, low cost, procedures. For example, an analysis of ophthalmology waiting lists has shown that the vast majority of patients are waiting for cataract extraction [12]. How- ever, crude calculations of the cost per QALY gained from cataract extraction show this to be a high value for money procedure [13]. A similar situation exists in orthopaedics, where hip replacement has been demonstrated to give good value for money [ll].

In order to provide more information to purchasers the DH has commissioned two series of research reviews. The first, a series of (initially nine) Bulletins on Effective Health Care discuss the cost- effectiveness of specific interventions such as hor- mone replacement therapy and treatments for glue ear. The second series of 26 Epidemiologically Based Needs Assessments discusses health care needs in communities arising from common conditions such as diabetes and coronary heart disease and the cost- effective provision of services to meet those needs.

The DH has also recently compiled a registry of economic appraisals, from the U.K. and elsewhere, with estimates for cost per life-year or cost per quality-adjusted life-year gained [14]. The objective is


to provide assessments of alternative treatments and programmes in terms of relative value for money. In compiling the list, adjustments have been made for the fact that studies were undertaken in different countries and at different times. The key concern, in releasing such data to purchasers, is that they will be interpreted intelligently. That is, they represent merely a guide to relative cost-effectiveness and, in deciding what services to purchase, purchasers need to take into account local factors. Mooney and Gerard [15] have already pointed to some of the potential pitfalls in interpreting such rankings.

(b) Deciding upon the contract speciJication

With the advent of contracts, a specification for the care to be provided will be drawn up. The level of detail in this specification is currently not clear, and there are at present very few examples of contracts 116-181). Drummond et al. [16] argue that it is important to specify contracts in considerable detail, including the client group to be served, the treatment methods to be applied, the standards of care to be achieved and the arrangements for monitoring.

Since a key feature of the contract will be the stated price, this gives an excellent opportunity for compari- sons of options. For example, different treatment technologies may have different cost-effectiveness. Taking a simple case, there may be evidence that day-care or short-stay surgery is just as effective, but of lower cost than, traditional surgery [19,20]). Therefore, providers ought to be able to agree to contracts for these services at a lower price. Costs may also vary with volume. Although this has been relatively under-explored by economists [21], pre- sumably those providers concentrating on certain clinical services may be able to agree large contracts at a lower implied unit price. An example of this would be the concerted efforts to clear the cataract backlog [22].

Finally, there may be occasions where there is an explicit tradeoff between higher costs and higher quality. This may be in terms of amenities in hospital wards, or in the actual clinical care provided. For example, some surgical implants may have a greater durability or offer greater freedom of movement to the patient than others. In cataract surgery a pos- terior chamber intraocular lens offers a greater quality of eyesight than aphakic spectacles [23]. Here, the contracting process should allow the purchaser to make explicit decisions about the level of quality required. In essence, this requires assessment of whether the extra benefits exceed the higher costs. Providers may decide to offer a range of options at differing prices.

(c) Managing the general practice fund

In general concept the general practice fund-holding scheme is similar to that of the health maintenance organization (HMO) in the United States. Whilst not nearly as extensive, it embodies several of

the same incentives, such as to improve the range and quality of one’s own services in order to attract more patients and to review carefully the appropriateness of utilizing certain hospital services. Whereas the Department of Health working paper dealing with this topic points out that ‘the scheme will be struc- tured to ensure that GPs have no financial incentives to refuse to treat any category of patient’, it is well known that in the U.S.A. HMOs reduced the number of hospital admissions dramatically. They also made much greater use of other health care professionals, such as nurse practitioners [24]. Whether or not these changes, whilst reducing costs, also brought about a reduction in the quality of care is open to debate [25].

Much of what was said above about contracts for clinical services also applies to GPs managing their own funds. They will have an interest in knowing that the treatment technologies used in the secondary care sector are the most cost-effective available. Addition- ally, GPs will be able to consider whether it is more cost-effective to refer patients to the hospital at all, or to handle the care themselves. An obvious option would be the substitution of careful management by the GP through ambulatory care, rather than request- ing hospital admission. Also, some GPs already undertake minor elective surgery. Perhaps this will increase if it can be shown, in an economic evaluation, to bc equally effective but of lower cost.

Another major item of GP care is pharmaceutical consumption. The drug component of the practice budget will be allocated in accordance with the principles outlined for indicative budgets (discussed below). However, it will have extra meaning for GPs operating the practice budget scheme since increased expenditure on drugs will mean that other items of expenditure, such as elective admission to hospital, are reduced.

For example, it has recently been shown that a new drug (misoprostol), if used prophylactically, can reduce the incidence of non-steroidal anti-inflammatory drug (NSAID) associated ulcers in those patients taking these drugs for their arthritis [26]. Should the GP prescribe the additional drug? This question can be answered in part by an economic evaluation of the prophylactic use of misoprostol [27]. This showed that savings in other health care expenditure, in GP ambulatory care and in hospital admissions, balanced the extra costs of the drug under most assumptions. Similarly, prescribing long-term medication for elev- ated blood pressure or serum cholesterol will reduce the number of fatal and non-fatal coronary heart disease events. An economic evaluation could investi- gate the costs and benefits of such actions to the GP and to the health care system more widely [28].

(d) Monitoring indicative prescribing budgets for gen - era1 medical practitioners

The development of the indicative prescribing scheme needs to be considered alongside two other initiatives; the feedback of information on prescrib-

1620 CHRISTOPHERHENSHALL and MICHAELDRUMMOND

ing behaviour to GPs through PACT (prescribing analyses and cost) and the development of community formularies. Therefore, whereas prescribing budgets will inevitably be set in the aggregate (taking into account local social and epidemiological factors), both PACT and formularies are much more likely to lead the GP to consider why a particular drug, and not an alternative including no drug, should be given in a particular instance. Both PACT and formularies will give information to GPs on drug costs. This is to be welcomed. However, Drummond [29] has pointed out that there are dangers in drawing up formularies in a too simplistic way, merely considering the comparative costs of the drugs themselves.

First, it is possible that a too narrow definition of comparative costs would be used. This should not only consider the costs of the drugs but the other medical care that is required. For example, a slightly cheaper drug may require a more expensive route of administration, require more frequent patient monitoring, or lead to more side effects. Secondly, it is possible that costs in the longer term may be ignored. This is particularly true of drugs that are used prophylactically, such as lipid lowering agents. These may require additional costs now, but the costs of coronary heart disease occurring in the future may be reduced. (Although in an economic evaluation costs occurring in the future have less weight, since they are discounted to present values.) Thirdly, it is possible that differences in the effectiveness of drugs will be ignored in the quest for cost-cutting. It was men- tioned earlier that one must distinguish between economic efficiency and cost-cutting. Therefore, it is conceivable that a higher cost drug would be worth- while, compared to the alternative, if it had much higher effectiveness. Nevertheless, some branded products may offer only marginal advantages over much cheaper generics.

It can be seen, therefore, that the choice of drug is not a simple matter. Certainly, greater efficiency would not be achieved by the use of the cheapest available product in each case. Thus, there is a clear role for economic evaluation in investigating the relative cost-effectiveness of prescribing options [4]. Some studies have already been undertaken [30] and others are in progress. It is unrealistic to expect GPs to fund such studies, although some have been undertaken by central government [2]. It is much more likely that the pharmaceutical industry will support such analysis as it perceives its interests as being threatened [lo].

4. IMPACT OF THE NEW NHS R&D STRATEGY

The R&D strategy

In 1988 a Parliamentary Committee on Science and Technology published a report, ‘Priorities in Medical Research’. The report recognised the strength of much medical and related research in the U.K., but

identified the need to increase funding for health services research and to place the NHS in the mainstream of research by developing mechanisms to allow it to articulate its research needs and to transfer research findings into practice. The Government re- sponded by creating a new senior post, Director of Research & Development in the Department of Health, from 1 January 1991. An R&D strategy for the NHS was launched later that year, and is currently being developed and implemented.

The objective of the strategy is to ensure that the content and delivery of care in the NHS is based on high quality research relevant to improving the health of the nation. The strategy seeks to develop an R&D infrastructure to underpin all aspects of NHS activity including the formulation of policy, management, the provision and purchasing of health care, the assessment of health care needs and the measurement of outcomes and quality. A programme of NHS R&D will be developed, addressing NHS needs, to comp- lement the existing programmes of the Health De- partments, research councils and other funders. To promote the integration of R&D with the general management of the NHS, responsibility for commissioning and managing NHS research is being de- volved to Regional Health Authorities, each of which is appointing a Director of Research & Development and a Research & Development Committee. A new national committee, the Central Research & Develop- ment Committee, was established in the autumn of 199 1 to advise on a strategic framework within which regional programmes will be developed and coordi- nated. The Committee brings together senior aca- demics, medical and non-medical health care professionals, social scientists (including a health economist) and managers, with input from industrial R&D and the public. The Committee is currently developing mechanisms to identify and prioritise problems within the NHS that can appropriately be addressed by R&D.

The NHS R&D strategy will increase work in the U.K. on the economic appraisal of health care, focus this work on areas of importance to the NHS, and promote the uptake of its findings within the service.

Increased emphasis on economic appraisal

It has been estimated that the NHS is currently spending around 1.0% of its total budget on R&D and related activities. Ministers have agreed that expenditure on R&D should be increased towards a target of 1.5% of the NHS budget over a 5 year period as the R&D strategy brings the funds involved under strategic control. The NHS will continue to provide service support for research funded by the MRC and the charities, and the remainder of its expenditure on R&D will fund a range of research activities. As noted in the previous section, however, the NHS reforms are creating a greatly increased demand for reliable information on the cost-effectiveness of health care. The general increase in R&D


expenditure can therefore be expected to lead to an increase in funding for economic appraisals. The Department of Health has for some years funded a programme of work on the development of methodologies for economic appraisals of health care. The need for further work of this kind will be considered as priorities for NHS R&D are agreed. The NHS programme will also be addressing the issue of training and retention of research workers with expertise in economic appraisal.

Focusing work on NHS needs

A Priorities Working Group of the Central Re- search & Development Committee is coordinating work on the identification of NHS needs and priorities for R&D. These are being considered from six perspectives: disease-related problems (e.g. mental health, cardiovascular disease); the organisation and management of services (e.g. the integration of primary and secondary care, workforce issues); client groups (e.g. physically disabled people, elderly

people); consumer perspectives (e.g. patient involvement in decision making); health technologies (particularly rapidly emerging technologies, and technologies applicable to more than one disease category or client group, e.g. minimally invasive surgery); and research methodologies. Within each perspective, key areas are being identified and prioritised, and then reviewed in depth to identify specific needs for R&D. The Central Research & Development Committee, its Priorities Working Group, and the expert review groups convened to look at key areas all include members drawn from NHS management. In addition, mechanisms are being developed to strengthen the input from mainstream management to the identification of NHS needs. Regional workshops at which managers discuss problems with research workers are an example.

Some of the NHS needs and priorities that are identified for R&D will be addressed in work commissioned by the NHS itself. Others will be brought to the attention of other funders to help to ensure that medical and health research in the U.K. in general is informed by an understanding of the needs of the NHS, thereby increasing the volume of work of direct value to the service. Under the terms of the Concor- dat, a memorandum of understanding between the Health Departments and the Medical Research Council, the Council takes account of Departmental and NHS priorities when reaching decisions on policy and funding. As noted in Section 2 of this paper, the Council is currently seeking to expand its support for health services research and to increase economic evaluations in trials.

Dissemination and use of research findings

A number of recent developments will promote the uptake within the NHS of the findings of economic evaluations. The implications of the NHS reforms, and in particular the new purchasing role for District

Health Authorities and budget-holding general practices, has been discussed in the previous section of this paper. The NHS R&D strategy will further promote the uptake of research findings by encouraging ‘own- ership’ of R&D by the NHS. Managers and clinicians will be involved through the mechanisms described above in setting the R&D agenda, and NHS R&D will be funded largely from local budgets and commissioned and managed locally. In addition, a strategic framework is being developed for systems to improve the availability of information on research findings, addressing in particular the needs of managers and ordinary clinicians for up-to-date and accessible overviews of findings in key areas (e.g. the ‘Effectiveness Bulletins’ referred to in the previous section).

5. ISSUES FOR THE FUTURE

The NHS reforms and R&D strategy highlight a number of issues surrounding the development of economic appraisal in the U.K. and elsewhere. These are discussed under three headings: can reliable and relevant economic data be generated; can economic data be targeted to the appropriate decision makers and; can adequate resources be made available to conduct appraisals and to disseminate results?

5.1. Can reliable and relevant economic data be generated?

There is a growing acceptance amongst health economists and others that economic appraisals need to be based on good medical evidence, such as that generated by clinical trials. Those implementing the new R&D strategy will need to ensure that, where appropriate, the relevant economic data are collected as part of research protocols funded by the NHS and other research or funders. Clearly not every trial would be a candidate for economic evaluation. Also, it will be important to ensure that the collection of economic data does not unnecessarily complicate the research design nor impose excessive burdens on the clinical researchers. This having been said, practical steps need to be taken to ensure that economic expertise is brought to bear early enough in the design of trials and that adequate funding is made available.

Secondly, economists need to debate further the major unresolved methodological issues in economic evaluation, since uncertainty over these points may both lessen the impact of economic appraisal results and cause confusion when economists liaise with clinical researchers and NHS decision makers. Four methodological areas should have priority: (i) dis- counting of health benefits; (ii) valuation of health states; (iii) relevance of, and measurement of, indirect costs and benefits, and (iv) methodological issues in integrating economic appraisal with clinical research.

Thirdly, economists need to develop the methods of dealing with uncertainty in economic appraisals. This is particularly important in the case of rapidly


emerging technologies, such as lasers and minimally invasive surgery.

Finally, more research needs to be done on increasing the generalizability of economic appraisal across settings (within countries and between countries). This is important because there will never be the resources to evaluate every technology in every setting, yet purchasers need guidance on which treatments and procedures give good value for money in their own setting. Attention should be given to design- ing studies in a way that facilitates such generaliz- ation [3 11.

5.2. Can economic data be targeted to the appropriate decision makers?

In reporting economic appraisal results it is first important to highlight the strengths and weaknesses of the methodology employed and the key assumptions made. A good case in point is QALY ‘league tables’. Whilst such data are highly relevant, if inap- propriately used they could do more harm than good.

Secondly, in communicating economic data it is important that economists understand the practical concerns of decision makers, in particular their differing perspectives on costs and benefits. This will become increasingly important in the U.K. following the health service reforms, e.g. the management of a self-governing trust can be expected when taking decisions to give more weight to the direct interests of the trust than to the costs and benefits to society as a whole. Thus, while providers will need information on the cost-effectiveness of interventions for conditions for which they offer treatment, purchasers will be a key audience for all economic appraisals, since it is they who will be taking a broad view of the health needs of their population, and making sure that providers compete to produce health care that is cost-effective in the broad sense.

Thirdly, all decision makers ought to know enough about economic appraisal methods to be able to interpret study results intelligently. This may imply training needs for some groups, with an emphasis on the appreciation of economic appraisal, rather than detailed instruction in methods.

Finally, there has to be a recognition that, in reaching a decision, economic appraisal results need to be combined with other considerations, e.g. equity of health care provision. Research needs to be undertaken to assess the pros and cons of doing this formally, through the application of multi-criteria approaches, or informally through the decision making process itself.

5.3. Can adequate resources be made available to conduct appraisals and to disseminate results?

Even in the United Kingdom, which has an established track record in health economics, there is still a shortage of individuals with the skills and experi- ence to undertake economic appraisals. Although this shortage can partly be addressed by training, it is also

important to establish an appropriate career structure for those who wish to undertake this kind of research. The NHS R&D strategy has acknowledged this need and is currently developing proposals to enhance training for health services research.

However, public funding for economic appraisals in the U.K. is not open-ended. Therefore, industry needs to be encouraged to fund appraisals of its projects and appropriate partnerships forged between industry and government, as in the field of drug licensing. Both government and industry has a shared interest in maintaining good methods for economic appraisal, without making the demands for economic data excessive, with consequent resource implications.

On a European level there may also be scope for more collaboration to ensure that the appropriate economic studies are undertaken in a timely and efficient fashion, with the greatest scope for generaliz- ation. The need and opportunities for such collabor-

ation will grow with greater European harmonization

in health care systems.

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REFERENCES

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Drummond M. F., Marchment M. and Crump B. Taking the bit between your teeth. Hlth Service J. 14, 1126-l 128, 1989. 25. Central Birmingham Health Authority. Annual report of the Department of Public Health. Birmingham, CBHA, 1989. 26. Department of Health. Operating Contracts. DH, London, 1990. Russell I. T., Devlin H. B., Fell M. et al. Day-care surgery for hernias and haemorrhoids: a clinical, social 27. and economic evaluation. Lancet i, 844847, 1977. Wailer J. et al. Early Discharge From Hospital for Patients with Hernia or Varicose Veins. HMSO, London, 1978. Labelle R. J. Planning for the provision and utilization 28. of new health care technologies. In Health Cure Tech- nology: Effectiveness, Eficiency and Public Policy (Ed- ited by Feenv D., Guvath G. and Tugwell P.). Institute for Research on Pubiic Policy, Halifax (N.S.), 1987. Thomas H. F.. Darvell R. H. J. and Hicks C. ‘Operation 29.

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cataract’: a means of reducing waiting lists for-cataract operations. Br. Med. J. 299, 961-963, 1989. 30. Davies L. M., Drummond M. F., Woodward E. G. and Buckley R. J. A cost-effectiveness comparison of the intraocular lens and contact lens in aphakia, Trans. 31. Ophthalmol. Society United Kingdom 105, 3043 13, 1986.

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the NHS: lessons from abroad. Hlth Policy 9, 83-96, 1988. Ware J. et al. Comparison of health outcomes of a health maintenance organization with those of fee-for- service. Lancer i, 1017-1022, 1986. Graham D. Y., Agrawal N. W. and Roth S. H. Preven- tion of NSAID-induced gastric ulcer with misoprostol: multicentre, double-blind placebo-controlled trial. Lancer II, 1277-1280, 1988. Knill-Jones R., Drummond M. F., Kohli H. and Davies L. M. Economic evaluation of gastric ulcer prophylaxis in patients receiving non-steroidal anti- inflammatory drugs. Postgraduate Med. J. 66, 639646, 1990. Drummond M. F. and McGuire A. The economics of lipid-lowering drugs. In The Social and Economic Con - texts of Coronary Heart Disease Prevention (Edited by Lewis B. et al.). Current Medical Literature, London, 1990. Drummond M. F. The economics of drug formularies. Pharmaceut. J. 15, 451452, 1989. Drummond M. F., Teeling Smith G. and Wells N. Economic Evaluation and the Development of Medicines. Office of Health Economics, London, 1988. Drummond M. F., Bloom B. S., Carrin G., Hillman A. L., Hutchings H. C. et al. Issues in the cross-national assessment of health technology. Inf. J. Technol. Assess. Hlth Care 8, 4, 671682, 1992.

economic appraisal in the british national health service: implications of recent developments

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