Who reaps the value of medical innovation? The case of hepatitis C in Sweden
In 2015 the Swedish government decided to allocate 1.5 billion SEK to the county councils in order to fund treatment of hepatitis C. This was triggered by the substantial developments in the field with new therapies showing cure rates in excess of 90 % with very few side effects.
The aim of our project is to study productivity changes in this field. Traditionally, the cost-effectiveness of new drugs are assessed then they are launched. This gives a snap-shot of the current situation but in order to understand the full effects to society it is necessary to study the innovation from a life-cycle perspective. This highlights questions about profitability and how the benefits are distributed.
To capture the value of a new innovation not only the procurement cost but also cost changes inside and outside of the health care sector needs to be included. In addition, the value of the obtained health benefits needs to be estimated. We use a modelling approach to estimate producer- and consumer surplus drawing on data from Swedish medical. This is complemented with measurements of quality of life and valuation of health.
In addition to analyzing the case of hepatitis C which has large societal relevance, we expect that our project will lead to important contributions to the methods employed when analyzing societal value and dynamic cost-effectiveness and for design of policy instruments, including payment models that optimize the tradeoff between static and dynamic efficiency.
The aim of our project is to study productivity changes in this field. Traditionally, the cost-effectiveness of new drugs are assessed then they are launched. This gives a snap-shot of the current situation but in order to understand the full effects to society it is necessary to study the innovation from a life-cycle perspective. This highlights questions about profitability and how the benefits are distributed.
To capture the value of a new innovation not only the procurement cost but also cost changes inside and outside of the health care sector needs to be included. In addition, the value of the obtained health benefits needs to be estimated. We use a modelling approach to estimate producer- and consumer surplus drawing on data from Swedish medical. This is complemented with measurements of quality of life and valuation of health.
In addition to analyzing the case of hepatitis C which has large societal relevance, we expect that our project will lead to important contributions to the methods employed when analyzing societal value and dynamic cost-effectiveness and for design of policy instruments, including payment models that optimize the tradeoff between static and dynamic efficiency.
Final report
Purpose:
In 2015, the Swedish government decided to support the county councils (now the regions) with SEK 1.5 billion to finance the treatment of patients with hepatitis C, a support that has since been continuously extended. This unique initiative was triggered by the rapid pace of innovation in this area, where the newest medicines heal over 90% of infections with very few side effects. Although very effective, the medicines initially came with a high cost per treatment. Despite this, the new treatments were considered cost-effective, but since there was a large group of patients who were candidates for treatment, displacement effects could arise if the funds for treatment had to be taken out of the county councils' budgets.
Our project aimed to study the development of productivity in this area. At present, cost-effectiveness analyses are carried out when introducing new drugs. However, these analyses only provide a snapshot. In order to understand the effects on society as a whole, the effects of innovation from a life cycle perspective need to be studied. This highlights issues of profitability and how the benefits of innovation are distributed, which can be expressed as consumer and producer surplus, but it is also important to understand how different components of the consumer surplus contribute.
Briefly about the implementation:
In order to fully study the value of a new innovation, consideration needs to be given to both (1) the cost of the innovation, (2) other cost changes inside and outside the health system, and (3) the value of the health effects achieved. These data are combined into a computational model in which cohorts of hypothetical patients can be followed over time and the effect of different treatments on costs, quality of life and the value of health benefits can be followed.
We retrieved data on treatment from the quality register for hepatitis and combined this with data taken from the national registers of the National Board of Health and Welfare and the Swedish Social Insurance Agency to calculate resource consumption associated with different degrees of disease severity. Utilizing a difference-in-difference model we also studied differences in sick leave rates after starting treatment with the drugs previously used and the new generation drugs that have a significantly milder side effect profile. These data were combined with data from the literature on disease progression (primarily from Swedish sources whenever possible), treatment efficacy and impact on quality of life in a so-called Markov model. This model was then used to estimate the long-term consequences of the new preparations.
The health benefits were evaluated based on how many quality-adjusted life years the treatment generated in the same way as traditionally done when reimbursement decisions on new drugs are made by Swedish authorities. We also conducted a survey based on a random sample of the population where we with a so-called willingness to pay study examined whether the valuation was influenced by what perspective is taken (who is covered by the treatment and when the payment for this is made).
Main results:
Patients treated with either of the two older treatment strategies had about the same number of days of sick leave the year before treatment as those who received today's treatment (106 and 85 days versus 94 days). In the year following the start of treatment, sick leave increased in those with older treatment (to 150 and 140 days, respectively) while remaining unchanged (88 days) in patients with today's treatment. Valued with the human capital method, this corresponds to a saving of SEK 70,000 – 100,000. Although some caution needs to be exercised as there may be differences between the cohorts we did not catch due to them being used at different timepoints, it is clear that indirect costs as this type of cost is called in health economic terminology are an important component here and not taking them into account risks greatly undervaluing new treatments.
Valuation of the treatment effects varied greatly depending on the perspective adopted (social perspective including the individual himself, social perspective excluding the individual himself or only the individual), however, the willingness to pay was not dependent on whether the payment was assumed to be made for treatment directly (which can be interpreted as a tax financing option) or for treatment at some point in the future (an insurance option). Regardless of which perspective was adopted, it can be stated that hepatitis C treatment generates a significant societal value.
Our calculations show that the transfer from state to regions helped generate a substantial surplus for both consumers and producers despite a concern about the cost of treatment. Saving costs outside the health system plays a significant role. Several new drugs within the same group were introduced in a relatively short period of time: Competition for an existing limited pool of patients led to reduced prices that eventually came to be lower than the price of the older drugs available on the market, which further contributed to an increased consumer surplus, while producer surplus decreased over time. A similar solution could be used in the future to address situations where treatments are cost-effective but where significant budgetary impacts are expected.
New research questions:
The financing model for hepatitis C appears to be successful as it generated significant surpluses even before competition sharply lowered the price of the drugs. It could therefore stand as a model for dealing with similar situations where a significant group of patients are candidates for treatment, causing an immediate budget challenge. Decision-making in the case of hepatitis C was facilitated by the fact that there was very little uncertainty about the efficacy of the treatment. The clinical studies that were conducted showed substantial efficacy within a short time. However, for many new preparations, there is considerable uncertainty about the long-term effects. Models that deal with this uncertainty, for example by linking payment to outcomes, constitute an interesting field to study.
Dissemination and collaboration:
During the course of the project, various aspects of it have been presented and discussed at several international and national conferences. This includes the International Health Economists Association's (iHEA) World Congress 2019, the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) annual meeting 2020 and the Swedish Association for Health Economics Annual Meeting 2019. The project has also been presented to a wider audience at the IHE Policy Meeting IHE Forum 2022 and the medical profession at the Infection Days 2021 (both of these originally planned for 2020 but postponed due to the pandemic). Discussions have also been held in IHE's network for health economists and in the research groups Health Outcomes and Economic Evaluation and Health Economics and Economic Evaluation at Karolinska Institutet.
During the project, we have had a good cooperation with the national quality register for hepatitis (InfCare Hepatitis).
List of publications and links:
Results from the project have been presented in two academic papers and one working paper, all freely available.
Lindgren P, Löfvendahl S, Brådvik G, Weiland O. Reduced work absenteeism in patients with hepatitis C treated with second-generation direct-acting antivirals. Journal of Viral Hepatitis 2021 28(1):142-146. https://doi.org/10.1111/jvh.13398
Lindgren P, Löfvendahl S, Brådvik G, Weiland O, Jönsson B. Value appropriation in hepatitis C. European Journal of Health Economics 2021 (e-pub ahead of print) https://doi.org/10.1007/s10198-021-01409-7
Olofsson S, Hjalte F, Persson U, Lindgren P. The importance of perspective when eliciting preferences for health – A study of the willingness to pay for hepatitis C treatment. IHE Report 2022:7. IHE: Lund, Sweden. https://ihe.se/publicering/the-importance-of-perspective-when-eliciting-preferences-for-health-2/
In 2015, the Swedish government decided to support the county councils (now the regions) with SEK 1.5 billion to finance the treatment of patients with hepatitis C, a support that has since been continuously extended. This unique initiative was triggered by the rapid pace of innovation in this area, where the newest medicines heal over 90% of infections with very few side effects. Although very effective, the medicines initially came with a high cost per treatment. Despite this, the new treatments were considered cost-effective, but since there was a large group of patients who were candidates for treatment, displacement effects could arise if the funds for treatment had to be taken out of the county councils' budgets.
Our project aimed to study the development of productivity in this area. At present, cost-effectiveness analyses are carried out when introducing new drugs. However, these analyses only provide a snapshot. In order to understand the effects on society as a whole, the effects of innovation from a life cycle perspective need to be studied. This highlights issues of profitability and how the benefits of innovation are distributed, which can be expressed as consumer and producer surplus, but it is also important to understand how different components of the consumer surplus contribute.
Briefly about the implementation:
In order to fully study the value of a new innovation, consideration needs to be given to both (1) the cost of the innovation, (2) other cost changes inside and outside the health system, and (3) the value of the health effects achieved. These data are combined into a computational model in which cohorts of hypothetical patients can be followed over time and the effect of different treatments on costs, quality of life and the value of health benefits can be followed.
We retrieved data on treatment from the quality register for hepatitis and combined this with data taken from the national registers of the National Board of Health and Welfare and the Swedish Social Insurance Agency to calculate resource consumption associated with different degrees of disease severity. Utilizing a difference-in-difference model we also studied differences in sick leave rates after starting treatment with the drugs previously used and the new generation drugs that have a significantly milder side effect profile. These data were combined with data from the literature on disease progression (primarily from Swedish sources whenever possible), treatment efficacy and impact on quality of life in a so-called Markov model. This model was then used to estimate the long-term consequences of the new preparations.
The health benefits were evaluated based on how many quality-adjusted life years the treatment generated in the same way as traditionally done when reimbursement decisions on new drugs are made by Swedish authorities. We also conducted a survey based on a random sample of the population where we with a so-called willingness to pay study examined whether the valuation was influenced by what perspective is taken (who is covered by the treatment and when the payment for this is made).
Main results:
Patients treated with either of the two older treatment strategies had about the same number of days of sick leave the year before treatment as those who received today's treatment (106 and 85 days versus 94 days). In the year following the start of treatment, sick leave increased in those with older treatment (to 150 and 140 days, respectively) while remaining unchanged (88 days) in patients with today's treatment. Valued with the human capital method, this corresponds to a saving of SEK 70,000 – 100,000. Although some caution needs to be exercised as there may be differences between the cohorts we did not catch due to them being used at different timepoints, it is clear that indirect costs as this type of cost is called in health economic terminology are an important component here and not taking them into account risks greatly undervaluing new treatments.
Valuation of the treatment effects varied greatly depending on the perspective adopted (social perspective including the individual himself, social perspective excluding the individual himself or only the individual), however, the willingness to pay was not dependent on whether the payment was assumed to be made for treatment directly (which can be interpreted as a tax financing option) or for treatment at some point in the future (an insurance option). Regardless of which perspective was adopted, it can be stated that hepatitis C treatment generates a significant societal value.
Our calculations show that the transfer from state to regions helped generate a substantial surplus for both consumers and producers despite a concern about the cost of treatment. Saving costs outside the health system plays a significant role. Several new drugs within the same group were introduced in a relatively short period of time: Competition for an existing limited pool of patients led to reduced prices that eventually came to be lower than the price of the older drugs available on the market, which further contributed to an increased consumer surplus, while producer surplus decreased over time. A similar solution could be used in the future to address situations where treatments are cost-effective but where significant budgetary impacts are expected.
New research questions:
The financing model for hepatitis C appears to be successful as it generated significant surpluses even before competition sharply lowered the price of the drugs. It could therefore stand as a model for dealing with similar situations where a significant group of patients are candidates for treatment, causing an immediate budget challenge. Decision-making in the case of hepatitis C was facilitated by the fact that there was very little uncertainty about the efficacy of the treatment. The clinical studies that were conducted showed substantial efficacy within a short time. However, for many new preparations, there is considerable uncertainty about the long-term effects. Models that deal with this uncertainty, for example by linking payment to outcomes, constitute an interesting field to study.
Dissemination and collaboration:
During the course of the project, various aspects of it have been presented and discussed at several international and national conferences. This includes the International Health Economists Association's (iHEA) World Congress 2019, the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) annual meeting 2020 and the Swedish Association for Health Economics Annual Meeting 2019. The project has also been presented to a wider audience at the IHE Policy Meeting IHE Forum 2022 and the medical profession at the Infection Days 2021 (both of these originally planned for 2020 but postponed due to the pandemic). Discussions have also been held in IHE's network for health economists and in the research groups Health Outcomes and Economic Evaluation and Health Economics and Economic Evaluation at Karolinska Institutet.
During the project, we have had a good cooperation with the national quality register for hepatitis (InfCare Hepatitis).
List of publications and links:
Results from the project have been presented in two academic papers and one working paper, all freely available.
Lindgren P, Löfvendahl S, Brådvik G, Weiland O. Reduced work absenteeism in patients with hepatitis C treated with second-generation direct-acting antivirals. Journal of Viral Hepatitis 2021 28(1):142-146. https://doi.org/10.1111/jvh.13398
Lindgren P, Löfvendahl S, Brådvik G, Weiland O, Jönsson B. Value appropriation in hepatitis C. European Journal of Health Economics 2021 (e-pub ahead of print) https://doi.org/10.1007/s10198-021-01409-7
Olofsson S, Hjalte F, Persson U, Lindgren P. The importance of perspective when eliciting preferences for health – A study of the willingness to pay for hepatitis C treatment. IHE Report 2022:7. IHE: Lund, Sweden. https://ihe.se/publicering/the-importance-of-perspective-when-eliciting-preferences-for-health-2/