PHARMAC

What is PHARMAC?What is PHARMAC?

• PHARMAC - the Pharmaceutical Management AgencyPHARMAC - the Pharmaceutical Management Agency

• A New Zealand Government Agency (Crown Entity)A New Zealand Government Agency (Crown Entity)

• Manages the subsidisation of medicines for New Zealanders Manages the subsidisation of medicines for New Zealanders using government fundsusing government funds

• Set up in 1993Set up in 1993

• 25 staff - a mix of medical, scientific, pharmacy, and economics 25 staff - a mix of medical, scientific, pharmacy, and economics backgroundsbackgrounds

PHARMAC

PHARMAC’s PHARMAC’s Roles and ResponsibilitiesRoles and Responsibilities

PHARMAC Objective:PHARMAC Objective:

““To secure for eligible people in need of pharmaceuticals the To secure for eligible people in need of pharmaceuticals the best health outcomes that are reasonably achievable from best health outcomes that are reasonably achievable from pharmaceutical treatment and from within the amount of pharmaceutical treatment and from within the amount of

funding provided”funding provided”

PHARMAC

PHARMAC’s PHARMAC’s Roles and ResponsibilitiesRoles and Responsibilities

PHARMAC functionsPHARMAC functions

• To maintain and manage a pharmaceutical schedule To maintain and manage a pharmaceutical schedule that applies consistently throughout NZ, including that applies consistently throughout NZ, including determining eligibility and criteria for the provision of determining eligibility and criteria for the provision of subsidies.subsidies.

• To promote the responsible use of pharmaceuticals.To promote the responsible use of pharmaceuticals.

• To manage the purchasing of any or all To manage the purchasing of any or all pharmaceuticals, whether used in a hospital or pharmaceuticals, whether used in a hospital or outside of it, on behalf of DHBs.outside of it, on behalf of DHBs.

PHARMAC

PHARMAC

What’s happened to drug spending?What’s happened to drug spending?

PHARMAC

Why have there been savings?Why have there been savings?

PHARMAC

Operating FrameworkOperating Framework

• Published Operating Policies and ProceduresPublished Operating Policies and Procedures

• Independent medical advice from Pharmacology and Independent medical advice from Pharmacology and Therapeutics Advisory Committee (PTAC)Therapeutics Advisory Committee (PTAC)

• Feedback from Consultation with suppliers, medical Feedback from Consultation with suppliers, medical groups, and patientsgroups, and patients

• All decisions considered against published Decision All decisions considered against published Decision CriteriaCriteria

PHARMAC

DECISION CRITERIADECISION CRITERIA

• Health needs of eligible peopleHealth needs of eligible people

• Health needs of Maori and Pacific peoplesHealth needs of Maori and Pacific peoples

• Availability and suitability of existing pharmaceuticals and other Availability and suitability of existing pharmaceuticals and other

therapiestherapies

• Clinical benefits and risksClinical benefits and risks

• Cost effectiveness (compared to purchasing other health care and Cost effectiveness (compared to purchasing other health care and

disability services)disability services)

• Overall budgetary impact (both pharmaceutical and total health Overall budgetary impact (both pharmaceutical and total health

budget)budget)

• Direct cost to usersDirect cost to users

• Government priorities for health funding/Government objectivesGovernment priorities for health funding/Government objectives

• Other criteria (with appropriate consultationOther criteria (with appropriate consultation

PHARMAC

Pharmaceuticals Community Care

Hospital

Primary Care

Public Health

PHARMAC

Assessing value - PrioritisationAssessing value - Prioritisation

• Cost Utility Analysis (CUA)Cost Utility Analysis (CUA)

• Net Costs and BenefitsNet Costs and Benefits

• Perspective of the health Perspective of the health sectorsector

• QALYsQALYs

PHARMAC

What is CUA?What is CUA?

• Measure health outcomes in a common “currency” with and without Measure health outcomes in a common “currency” with and without

the intervention (currency used at PHARMAC is the QALY)the intervention (currency used at PHARMAC is the QALY)

• Estimate the resources used (in “$s”) with and without the Estimate the resources used (in “$s”) with and without the

interventionintervention– Cost of drug net of any savings from reduced use of other drugsCost of drug net of any savings from reduced use of other drugs– Plus any costs or savings in other parts of health sectorPlus any costs or savings in other parts of health sector– Plus any change in direct costs to patientsPlus any change in direct costs to patients

• Estimate change in costs and change in health outcomes Estimate change in costs and change in health outcomes

attributable to the proposed intervention and express results as a attributable to the proposed intervention and express results as a

ratio of costs to benefits – QALYs ratio of costs to benefits – QALYs

PHARMAC

Why use CUA?Why use CUA?

““. . . is far preferable to the vague notion of ‘priority . . . is far preferable to the vague notion of ‘priority groups’ whose champions are left to compete on groups’ whose champions are left to compete on unclear terms with more powerful competitors in the unclear terms with more powerful competitors in the annual scramble for resources.”annual scramble for resources.”

(A Williams 1997)(A Williams 1997)

PHARMAC

How is CUA used?How is CUA used?

• Rank proposals from best to worst at increasing QALYs Rank proposals from best to worst at increasing QALYs

(referred to as QALY league tables)(referred to as QALY league tables)

• Rankings can be used to Rankings can be used to determinedetermine what to fund OR what to fund OR

• They can act as They can act as guidelinesguidelines

• PHARMAC uses CUA as a guide, in conjunction with PHARMAC uses CUA as a guide, in conjunction with

consideration of other Decision Criteriaconsideration of other Decision Criteria

PHARMAC

Investment PrioritiesInvestment Priorities

Potential investmentPotential investment Likely cost (approx) per annumLikely cost (approx) per annum

A treatment for venous A treatment for venous thromboembolismthromboembolism

$250,000$250,000

Treatments for menorrhagia Treatments for menorrhagia (alternative to hysterectomy)(alternative to hysterectomy)

$1 million$1 million

Wider access to new treatment for Wider access to new treatment for glaucomaglaucoma

$40,000$40,000

Treatment for refractory depressionTreatment for refractory depression $3-5 million$3-5 million

Treatment for end stage renal failureTreatment for end stage renal failure $1-2 million$1-2 million

New treatment for Parkinson’s DiseaseNew treatment for Parkinson’s Disease $2-4 million$2-4 million

PHARMAC

What QALYs look likeWhat QALYs look likeBeta-interferon treatment for mulitple sclerosis

quality of life: costs incl relapses:Average pts at current criteria

Extending to lower baseline DSS

Further extending to pre-MS

average pts at current criteria

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

0 10 20 30 40 50 60

yrs

Qo

Luntreated

treated

average pts at current criteria

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

0 10 20 30 40 50 60

yrs

co

sts

(in

cl

rela

ps

es

)

untreated

treated

extending to lower baseline DSS

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

0 10 20 30 40 50 60

yrs

Qo

L

untreated

treated

extending to lower baseline DSS

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

0 10 20 30 40 50 60

yrs

co

sts

(in

cl

rela

ps

es

)

untreated

treated

further extending to pre-MS

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

0 10 20 30 40 50 60

yrs

Qo

L

untreated

treated

further extending to pre-MS

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

0 10 20 30 40 50 60

yrs

co

sts

(in

cl

rela

ps

es

)

untreated

treated

PHARMAC

Measuring beyond resource costsMeasuring beyond resource costsCosts to the Pharmaceutical Schedule of key Pharmac investment decisions (costs in year of decision) from 1998/1999 onwards (where information available)year of decision

Investment decision, where indicative cost/QALY estimates available* no. months on PS during FY

(max = 12)

gross PS cost/pt/yr

No. patients in FY

Gross Cost to Schedule in FY

hide row a b c d =b*c*a/12

1998/1999 Listing of anastrozole for oncology treatment 0.5 $7,000 50 $15,000Listing of letrozole for breast cancer 0.5 $7,000 50 $15,000Listing of atypical antipsychotics for schizophrenia* 12.0 $3,814 5,900 $22,500,000Listing of dorzolamide for glaucoma 8.1 $1,955 200 $391,000Extending access to statin drugs 5.7 $760 2,500 $1,900,000Listing of tacrolimus for liver transplant 4.0 $7,500 10 $75,000Listing of tacrolimus for renal transplant 8.0 $7,500 10 $75,000Listing of tolcapone for parkinsonism 7.2 $2,222 270 $600,000Listing of ursodeoxychotic acid for liver disease $1,192 300 $357,500Listing of azithromycin for chlamydia $13 2,000 $25,000Price increase of ceredase for Gaucher’s disease $152,000Extension of access to cyclosporin for atopic dermatitis $1,213 150 $182,000Listing of insulin lispro for diabetes patients $1 2,500 $2,000Listing of new HIV/ AIDS drugs nelfinavir and nevirapine -$6,667 60 -$400,000

1999/2000 Listing of alendronate for severe osteoporosis 5.0 $693 341 $98,333Listing of beta-interferon for multiple sclerosis 1.0 $19,200 156 $250,000Listing of lamivudine for chronic Hepatitis B infection 1.0 $1,900 72 $11,400Extending olanzapine for schizophrenia to new cases 7.0 $3,376 87 $172,132Access for olanzapine for schizophrenia - existing patients with risperidone failure 7.0 $3,376 2,282 $4,494,352Listing of latanoprost for glaucoma 9.0 $408 502 $153,750

2000/2001 Listing of topiramate for refractory epilepsy 12.0 $2,400 284 $320,209Listing of gabapentin for refractory epilepsy 12.0 $1,900 42 $35,870Listing of eformoterol for asthma symptom control 12.0 $169 2,117 $265,891Listing of quetiapine for schizophrenia 12.0 $1,936 208 $108,419Listing of brimonidine for refractory glaucoma 12.0 800 $287,462Listing of abacavir for HIV/AIDS 6.0 $5,586 28 $48,334Listing of efavirenz for HIV/AIDS 3.0 $5,463 79 $134,465*risperidone, clozapine and olanzapine

Total for investments during the FY of decision, where data available 14,569 $31,252,606

PHARMAC

Costs and benefits of key Pharmac investment decisions since 1998/1999 (where information available)year of decision

Investment decision, where indicative cost/QALY estimates available

Gross Cost to Schedule

(annualised)

Possible % offsets,

discounted

discounted Possible net costs to health sector

(annualised)

discounted net health sector $/QALY

(annualised)

net present value of (annualised) total QALYs gained*

d =b*c*a/12 f h =e*(1-f) k = h/j j =i*c*a/12

1998/1999 Listing of anastrozole for oncology treatment $350,000 10% $315,000 $8,500 37.1 Listing of letrozole for breast cancer $350,000 0% $350,000 $8,500 41.2 Listing of atypical antipsychotics for schizophrenia* $22,500,000 78% $4,920,563 $43,138 114.1 Listing of dorzolamide for glaucoma $582,000 0% $582,000 $4,638 125.5 Extending access to statin drugs $4,000,000 30% $2,780,846 $6,559 424.0 Listing of tacrolimus for liver transplant

Listing of tacrolimus for renal transplant $670,000 95% $33,500 $2,500 13.4 Listing of tolcapone for parkinsonism $1,000,000 57% $430,000 $10,084 42.6 Listing of ursodeoxychotic acid for liver disease

Listing of azithromycin for chlamydia

Price increase of ceredase for Gaucher’s disease

Extension of access to cyclosporin for atopic dermatitis

Listing of insulin lispro for diabetes patients

Listing of new HIV/ AIDS drugs nelfinavir and nevirapine

1999/2000 Listing of alendronate for severe osteoporosis $936,000 10% $841,625 $3,545 237.4 Listing of beta-interferon for multiple sclerosis $3,000,000 44% $1,671,032 $80,700 20.7 Listing of lamivudine for chronic Hepatitis B infection $1,660,600 84% $268,755 $1,500 179.2 Extending olanzapine for schizophrenia to new cases $790,896 47% $420,804 $27,467 4.2 Access for olanzapine for schizophrenia - existing patients with risperidone failure$11,878,501 111% -$1,266,651 -$5,748 152.4 Listing of latanoprost for glaucoma

2000/2001 Listing of topiramate for refractory epilepsy $320,209 0% $320,209 $18,500 17.31Listing of gabapentin for refractory epilepsy $35,870 0% $35,870 $15,000 2.39Listing of eformoterol for asthma symptom control $265,891 23% $205,402 $40,000 5.14Listing of quetiapine for schizophrenia $108,419 161% -$66,349 $74,995 -0.88 Listing of brimonidine for refractory glaucoma $287,462Listing of abacavir for HIV/AIDS $96,669Listing of efavirenz for HIV/AIDS $537,860

*risperidone, clozapine and olanzapine

Total for investments during the FY of decision, $48,448,386 76% $11,842,605 $8,365 1,415.7 where CUA data available

Analyses are largely indicative estimates, where the extent and depth of analysis varies according to individual policy issues and analyst resource availability (ranging from very rapid to detailed assessments). All analyses comply with PHARMAC's policies for pharmacoeconomic analyses, described on-line at http://www.pharmac.govt.nz/download/pfpa.pdf.

PHARMAC

Indicative overall costs and benefits of key Pharmac investment decisions 1998/2001 (where information available)Total for investments during the FY of decision, where CUA data available

no. months on PS during FY (max = 12) aGross Cost to Schedule (annualised) $48,448,386 dPossible % offsets, discounted 76% fdiscounted Possible net costs to health sector (annualised) $11,842,605 h =d*(1-f)discounted net health sector $/QALY (annualised) $8,365 k = h/jnet present value of (annualised) total QALYs gained* 1,415.7 j =i*c*a/12

No. lives saved** 146.1 e =c/9.7 yr discounted LE (dLE)statistical lives saved per $1m net health sector spending 12.3 f =1000000/(d*dLE)benefit:cost ratio, using LTSA cost/life of $2 million (willingness-to-pay approach) 24.7 g =2000000/(d*dLE)imputed value of life $81,052 h =1000000/fimputed value of life year $8,365 j =h/dLE

**Total QALY gains in patient users over time horizon during the financial year decided, at net present value (discounting at 10%)**Where each life saved is a statistical life, and each saved life is equivalent to living a full quality of life for 36.4 remaining years expected for the average New Zealand citizen, = a present value of 9.7 years (discounted at 10%).

PHARMAC

Indicative benefit:cost ratio of new investments by PHARMAC 1998/2001as rate of return on investment:

benefits of savings elsewhere in health sectorhealth sector savings $36,605,781

benefits of life years saved:QALYS 1,415.7 no. statistical lives saved 146.1 cost of life lost (LTSA) $2,000,000total cost of lives saved $292,222,724

total benefits $328,828,505costs to Pharmaceutical Schedule $48,448,386benefit:cost ratio 6.8

PHARMAC

Looking at GapsLooking at GapsNo. patients eligible for vs. recieving statins each month

175,499

66,811

78,604

92,187

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Dec

-90

Mar

-91

Jun-

91

Sep

-91

Dec

-91

Mar

-92

Jun-

92

Sep

-92

Dec

-92

Mar

-93

Jun-

93

Sep

-93

Dec

-93

Mar

-94

Jun-

94

Sep

-94

Dec

-94

Mar

-95

Jun-

95

Sep

-95

Dec

-95

Mar

-96

Jun-

96

Sep

-96

Dec

-96

Mar

-97

Jun-

97

Sep

-97

Dec

-97

Mar

-98

Jun-

98

Sep

-98

Dec

-98

Mar

-99

Jun-

99

Sep

-99

Dec

-99

Mar

-00

Jun-

00

Sep

-00

Dec

-00

Mar

-01

month

no

. p

ati

en

ts

no. eligible

total statin pmes

total statin pmes, 7-mth centred-moving average

no. patients with active SA for statins

cuml no. new SA approvals

1991 SA criteria A1:1-2,A2 >7.0, other A and B-E tc>9.0 mmol/l1997 SA criteria A1:1,A1:3-4,A2,A3 >6.0, A1:2 >5.5, B-E tc>9.0 mmol/l1998 SA criteria A1:1 >5.5, A1:2 >4.5, A1:3-4,A2,A3 >6.0, B-E tc>9.0 mmol/l

A1:1-2,A2 >7.0, other A and B-E tc>9.0 mmol/l

A1:1,A1:3-4,A2,A3 >6.0, A1:2 >5.5, B-E tc>9.0 mmol/l

A1:1 >5.5, A1:2 >4.5, A1:3-4,A2,A3 >6.0, B-E tc>9.0 mmol/l

PHARMAC

Looking at gaps (cont.)Looking at gaps (cont.)

Combining:        estimated numbers of non-uptaking eligible people, with         the consequent QALY losses from untreated cardiovascular disease (when compared with statin treatment, according to the eligibility criteria in place each month).  Statin non-uptake over the 10-year period July 1991 to June 2001:        115,000 potential QALY gains not realised        = 6,930 ‘statistical deaths’ through missed opportunities to gain QALYs (from 115,000 potential QALY gains not realised).  This number is of deaths higher than the number of road deaths reported to the LTSA during the same time period (5,499).