Assessing Value for Money: A Proposal, the Controversy and Its Background

The cost of health is a topic that triggers very ambivalent feelings in Germany. Since the 1970s, healthcare spending, the level of health insurance contributions and the prices of medicines have regularly been the subject of very controversial public discussions. Doctors in practices and hospitals have long been forced to take economic aspects into account when making everyday medical decisions. However, in Germany there has so far been a lack of an accepted and transparent instrument with which the medical benefits of a treatment can be weighed against the necessary expenses. However, such a procedure is the basis for decisions about which benefits and which costs are still appropriate and reasonable.

>> With the Statutory Health Insurance Competition Strengthening Act, which came into force in April 2007, the legislature has taken a further step to close this gap. The Social Security Code now stipulates that an “assessment of the cost-benefit ratio” can take place in the future for certain medicines (but all other medical services are not excluded). This is primarily intended to help find a “maximum amount” for medicines that adequately compensates for their benefits. Even if the application is aimed at a relatively specific question, the explicit introduction of the cost-benefit assessment is a fundamental innovation for the German healthcare system with far-reaching consequences.
It was to be expected that the institute's first methodological proposal for discussion in January 2008 on how this cost-benefit assessment could be carried out would trigger controversial reactions. Many statements, especially from German health economists, were extremely critical.
The criticism is primarily a technical and methodological criticism. We have repeatedly been accused of not observing international health economics standards. We consider this criticism to be incorrect, because our proposal is undoubtedly based on very basic health economics and internationally accepted concepts and methods. We see a key reason for the rejection in the fact that the proposed method does not accept some basic agreements on which many current health economic analyzes are based. However, these are not methodological standards, but rather subjective determinations that are based solely on value judgments. Such value judgments are unavoidable, but they cannot be adopted without reflection.
While many health economists see an objectively utilitarian approach (see Lüngen) as the standard, the IQWiG proposal is an attempt to preserve the solidarity principle that is deeply anchored in German social law.
From this fundamentally different perspective it follows that it is not necessarily appropriate or fair to apply a standard measure to people with different illnesses and in very different life situations. Rather, it corresponds to the requirements of our social code, as we interpret it, that an assessment of an appropriate cost-benefit ratio should always take into account the special features of an illness.

The role of IQWiG
The founding of the institute goes back to the healthcare reform of 2004 (GKV Modernization Act, GMG), with which the legislature initiated the establishment of a professionally independent new institute within the German healthcare system. In June 2004, the Federal Joint Committee (G-BA) founded an independent foundation under private law. The exclusive purpose of this foundation is to maintain the Institute for Quality and Efficiency in Health Care (IQWiG). The institute is based in Cologne.
The main task of the institute is to support the G-BA in fulfilling its legal mandate. To this end, the institute evaluates the benefits and risks of medical procedures as well as their cost-effectiveness in order to contribute to a continuous improvement in the quality and efficiency of health care for the German population. In order to be able to process orders from the G-BA in the future that also include an estimate of the costs in addition to the evaluation of the benefit, the Institute now proposes a methodology for the cost-benefit evaluation (http://www.iqwig.de /index.736.html).
The proposal includes two elements:
1) The first element is a method called "Efficiency Frontier Analysis". This method can be used very flexibly to compare the ratio of costs and benefits of any number of therapy alternatives.
2) The concept includes a “budget impact analysis” as a second method. This analysis can be used to estimate the overall impact of a decision on healthcare spending.
In principle, all medical technologies such as surgical methods, diagnostic procedures or early detection examinations can be evaluated using these two methods. However, the law provides for a special role for the cost-benefit assessment of new drugs.

The framework
The method proposal was created according to a series of framework conditions that define the legal requirements and the scientific context in which methods for the economic assessment of health technologies must be developed for IQWiG. The legal requirements for assessing the cost-benefit ratio of health technologies are set out in German legislation in Section 35b SGB V [1], but offer room for interpretation.
Compared to other healthcare systems in the EU and beyond, there are no national spending limits for pharmaceuticals in the German healthcare system. In addition, for fundamental reasons, the German healthcare system does not withhold any beneficial therapeutic procedures from insured persons solely for cost reasons. Accordingly, effective treatment methods are initially adopted regardless of price. Recognizing that this approach cannot be sustained in the long term, IQWiG was commissioned to develop a methodology for health economic assessments of pharmaceuticals and other interventions.
Since the German healthcare system is not subject to a fixed national budget, the starting point for such health economic assessments in Germany differs from that of other healthcare systems: it neither includes setting priorities for the use of funds across the entire healthcare system nor are the associated exchange relationships (trade-offs ) taken into account in terms of resource consumption and effectiveness. Instead, the legislature, as interpreted by IQWiG, pursues a narrower goal, namely to set a maximum amount at which effective health technology in a given indication area should be reimbursed.
This decision is based on the assessment by IQWiG. The first step is to assess whether there is an additional benefit compared to existing treatment alternatives and only then, if this is requested, is the cost and benefit weighed up. For example, if a new, effective treatment for diabetes mellitus is being evaluated, IQWiG would first examine the additional therapeutic benefit compared to the best available blood sugar-lowering therapy methods and then estimate the impact on costs.
The result of this evaluation is provided together with statements about the benefits and costs of alternative blood sugar-lowering treatment methods on the German market to support the determination of the maximum amount. The additional benefit that could be provided in other indications or in other economic areas through the additional costs incurred is not included in the consideration.
The explicit focus of each evaluation on an indication is specific to Germany. Other concepts envisage considering the question of resource allocation across the entire health system when assessing health technologies. Therefore, we were looking for a common measurement method for determining the value of the benefit, even if comparisons are typically made within one indication. This inevitably involves value judgments about the place of diseases in relation to each other, as well as about relative benefits (albeit implicitly).
No generally accepted method for this has yet been found. Instead, the IQWiG methodology represents a pragmatic approach that aims to compare the efficiency of treatment methods in a given therapeutic area, without answering the comprehensive question of prioritization within the entire healthcare system. As a result, the evaluation focuses on ensuring that efficient treatment of the respective clinical pictures is guaranteed, without making a value decision about whether the treatment of a particular disease is preferred compared to other diseases or how many resources should be allocated to this treatment. This social assessment of value remains reserved for the legally designated decision makers.
Another important limitation is that the economic assessment only examines those health technologies that have been assessed as superior (compared to existing technologies) and that the additional therapeutic benefit to be taken into account in the cost-benefit assessment corresponds to that defined by IQWiG his published methods (based on the principles of EbM). Several implications arise from this. New, inferior treatments are not evaluated economically, even if they are significantly cheaper than existing ones.
In addition, it also means that the benefit parameters received reflect the benefit assessment carried out beforehand by IQWiG - no additional benefit parameters may be included, even if such could be derived indirectly from the EbM-based benefit assessment and the endpoints used.
Another cornerstone of the mandate for assessing the cost-benefit ratio is specified in Section 139a SGB V. It says: “The institute must ensure that the assessment of the medical benefit is carried out according to the internationally recognized standards of evidence-based medicine and the economic evaluation is carried out according to the relevant internationally recognized standards, in particular health economics.”
This combination of “internationally recognized standards of evidence-based medicine” and “relevant internationally recognized standards, in particular health economics” places special demands on future health economics methods.
The standards of evidence-based medicine have been in development for 50 years and have now matured to the point where they are no longer seriously disputed internationally. Their use has been routine for the institute since it was founded in 2004: all assessments published by the institute are based on these methodological standards.
In order to meet the second legal requirement for “authoritative internationally recognized standards, especially in health economics”, the institute has commissioned a committee of international experts in health economics and related subject areas to name such standards.
However, the expert panel's answer was varied: There are methods that are favored by one or another school of experts. However, there are definitely no standard methods for the special German situation that are as well secured as the methods of evidence-based medicine. That is why IQWiG then commissioned the international experts to develop a health economics concept based on accepted methods that takes the special circumstances in Germany into account.

What health economics
should reach
Health economics is a means to an end. Its mission is to use limited resources sensibly and fairly to achieve a socially agreed goal. From the point of view of economists, healthcare also involves a standard question: How do I get the maximum return on an investment? What makes health economics tricky is that the “return” is measured in categories such as “longer life,” “shortening the duration of illness,” “relief of symptoms,” and “higher quality of life,” among other things. In other words: money should be used to achieve humanitarian goals. Health economics should ultimately help create a living environment that is important to a society based on solidarity.
But that also means: Every society can (and must) agree on goals that it wants to achieve through its economy. Every cost-benefit assessment must include value judgments in many places that cannot be made by the institute but must be left to society.
Looking at other countries only helps to a limited extent. What a society considers “fair” depends not only on the cultural and historical background that shapes the values of the population, but also on the country’s economic performance. And the answer to the question of what is economically “sensible” depends largely on how the healthcare system is structured.
The interaction of the institutions, the size of the budget and the existing instruments for cost control cannot be changed overnight. In other words: every society must develop its “own” combination of methods of health economics that suits its goals and structures.
Since April 2007, the Social Code has provided self-administration with the maximum amount as a further tool for cost control (Section 31 Paragraph 2a SGB V). In the future, the self-government can award maximum amounts for medicines that cannot be included in a fixed price group because they offer medical advantages over alternative preparations.
Maximum amounts are intended to find a reasonable reimbursement price for this additional benefit. This is exactly where the method of cost-benefit assessment will be used in the future.
The consequences of maximum amounts for patients depend on the decisions made by the manufacturers. Pharmaceutical companies are not forced to lower their prices to a set maximum. For example, if the self-administration sets a maximum amount for a drug at 500 euros, but the manufacturer continues to leave its price at 900 euros, affected patients would have to pay the 400 euros difference out of their own pockets.
This could mean that overall costs are not limited at all, but are increasingly borne by patients. Maximum amounts would make it particularly difficult for economically disadvantaged patients to access medicines that have a certain additional benefit compared to cheaper alternatives.

steps
If there is at least one effective treatment alternative, the new drug X must undergo a comparative assessment of its benefits. In this benefit assessment, methods of evidence-based medicine are used to check whether X has a sufficiently reliably proven additional benefit compared to the existing therapy(s). The measure of “additional benefit” is always so-called patient-relevant advantages.
The institute particularly takes into account the improvement of the state of health, a shortening of the duration of the illness, an extension of lifespan, a reduction in side effects and an improvement in the quality of life.
Maximum amounts become important when X is better than A. The question then arises for self-government as to how high the additional expenditure should be that the greater benefit is “worth”. Only in this constellation does it make sense to follow the benefit assessment with a cost-benefit assessment.
Completely different instruments are required for this health economic assessment than for the purely medical benefit assessment. For example, for the economic assessment, it may be necessary to look at a period of ten years or more, even though X has only been tested in medical studies that lasted a few months. In such situations, health economists use so-called model calculations.
However, like all predictions, the results of such model calculations depend heavily on the assumptions. Therefore, the results can be very different depending on the choice of these assumptions. Uncertainties cannot be avoided here.
The IQWiG proposal for a cost-benefit assessment therefore means that the process should be as transparent as possible.

Choice of alternatives: Therapy alternatives relevant to patient care must be included in the analysis of the relationship between benefit and costs. Since such analyzes have practically not existed in Germany to date, this means that in the cost-benefit assessment, therapy alternatives for a disease that have been common for a long time have to be analyzed for the first time.

Completeness of costs: In order to estimate costs, it is usually not enough to just take the price of a medication into account. Rather, costs that may arise from check-ups, treatment of side effects or hospital stays must also be taken into account.

Choice of perspective: The cost-effectiveness assessment calculates the cost of treating an individual patient. To estimate these costs, the perspective of the insured community of the statutory health insurance companies is usually chosen. In addition to the expenses of the health insurance companies, the additional payments made by the insured can also be included in the calculations. Depending on the order, the perspective can also be expanded to take into account, for example, time off work, pensions and the financial burden on relatives.

Choice of time horizon: For the cost-benefit assessment, time periods should be set that correspond to the course of the disease in question. Since studies usually have relatively short durations, model calculations are often necessary.
Choice of models: Because they are easy to influence, the model calculations used must be transparent. They themselves and the initial values used must be based on comprehensible and reliable estimates and must be subject to strict assessment.

Summary and comparison of various aspects of benefit: A problem that has generally not been solved satisfactorily in health economics is comparing different categories of benefit with one another. For example, it may be that drug X is better at preventing strokes than A; A, on the other hand, is better at preventing heart attacks than X. In order to weigh heart attacks against strokes, value judgments are necessary. How such judgments should be made fairly and who should do so still needs to be further researched and discussed.

Further details of the method depend, among other things, on the specific therapy to be evaluated.

The result of
cost-benefit assessment
Since there has not yet been a legally required cost-benefit assessment in Germany, a significant part of the work will consist of evaluating relevant therapy alternatives in addition to X. This can include other medications, but also surgical procedures. Often there will be not just one, but several alternatives.
The cost-benefit evaluation should ultimately produce a comparison for X and all alternatives considered.
In a simple case, for example, this could be the number of heart attacks that can be prevented by treating 1,000 patients. These relationships can be clearly represented by entering them in a simple figure (Fig. 1).
Conclusions can be drawn just from the position of the points in relation to each other. Let's assume A is the standard therapy against which the new drug X is being compared. Now four situations are possible:
If X is to the left above A it is better and cheaper. Here it makes sense to use X clearly preferentially; perhaps A could be completely replaced by X.
The most unfavorable situation arises if X is below to the right, then it is worse and also significantly more expensive. There is no reason to accept X here, at least A should be strongly preferred.
A question of trade-off arises when X lies below An to the left. Then it's worse, but significantly cheaper. Here it depends on further details whether it is justifiable to use X.
The evaluation of costs and benefits is aimed at the fourth situation: Here X is to the right above A: X is better, but more expensive. Two questions arise here: 1. Are the higher costs commensurate with the additional benefits? And 2: How can these costs be influenced by setting a maximum amount? (Fig. 2)

The analysis of
efficiency frontier

The following procedure is used to evaluate such mappings in order to find an appropriate maximum amount for X: the “analysis of the efficient frontier”.
This process looks step by step for the most efficient therapies possible: A therapy is “efficient” compared to another if it provides more benefit for the same cost or is cheaper for the same benefit. Graphically, this is reflected in the slope of the connection between two therapies: the “steeper” the connection between two therapies, the greater the difference in efficiency between them.
The analysis begins with the situation “no therapy”, i.e. at the origin point of the axes in Fig. 3. From this origin point, therapy C turns out to be the one that can be achieved through the steepest connection. So the first step leads to C. From therapy C, therapy E is then the best choice. And from E the choice leads to A.
The total path from the origin point to A is called the efficiency frontier (Fig. 4): everything above this line is more efficient, everything below this line is less efficient than the “best” available therapies on the frontier.
Additional useful information can be gleaned from the efficiency frontier. In this example the border is composed of three sections. The first section for therapy C is the “steepest” of the limit (Fig. 4). So here there is the highest benefit per “euro”. The final jump in efficiency to A is the “flattest” section of the boundary (Fig. 4). Here the benefit per “euro” is lower, but it is still accepted.
In this way, the efficiency frontier shows the range in which the relationship between costs and benefits for this disease, which is accepted as efficient, lies. After these preparations, the position of X can now be better interpreted. The costs of X were initially estimated based on the manufacturer's price specifications. Health insurance companies can change these costs by setting a maximum amount.

budget impact
analysis
The efficiency frontier is based on the costs required to treat a single patient. However, in order to be able to estimate the financial consequences of introducing a particular innovation, information is also required about the total costs that the system will incur. Even the best technology must remain affordable for German payers. In order to be able to evaluate this aspect, an economic evaluation is required that examines the influence on expenditure.
It is important for healthcare decision makers to understand these financial implications in order to make informed decisions. In certain circumstances, the cost-benefit assessment may indicate that the technology is efficient, i.e. at or above the efficient frontier, while the results of the budget impact analysis suggest that affordability may become an issue. In such situations, there is no scientific guideline to resolve this dilemma.

No competition
of diseases
A special facet of the methods proposed by IQWiG is that each disease is assessed on its own merits. This restriction prevents diseases from competing with one another, meaning that, for example, expenses for breast cancer have to be offset against those for heart attacks.
A comparison across disease boundaries would inevitably force a decision as to whether one disease is “worth” using an innovation for affected patients compared to another, and if so, at what cost. Such decisions would have to be based on very subjective judgments. To date, there is no instrument that can give a fair answer to questions such as whether cancer is “worse” than a stroke. The methodology proposed by IQWiG avoids such value decisions. <<