Friday, 3 November 2017

Why Pharmac might be better not to fund next-generation drugs

As reported by the New Zealand Herald earlier this week, the government is to investigate a new fund to give New Zealanders access to costly new-generation medicines:
The Cancer Society has called for an early-access scheme, and Labour's previous health spokeswoman Annette King repeatedly called for one, saying that when in Government Labour would look at what funding was needed.
New Health Minister David Clark told the Herald the Government wanted to explore how such a scheme could operate.
The United States and Britain have versions of early-access schemes to let certain patients access ground-breaking drugs.
There is a real problem with funding of these schemes for very expensive treatments. While these treatments may be effective and have highly positive outcomes for the patients that receive them, focusing on the patients who will receive the treatment ignores the opportunity costs (this is a point I have made before about Pharmac funding, here and here). The appropriate way to decide on which treatments are funded is by considering their cost-effectiveness, not by considering which treatments generate the most negative media attention for the government.

A focus on cost-effectiveness ensures that scarce healthcare resources are being used where they will generate the greatest benefit for society. A treatment is cost-effective if it increases a person's health at a lower cost than alternative treatments. Since not all treatments provide the same health benefits (and many have negative side effects, etc.), we need some way of consistently measuring the health gains from a treatment, and measuring the cost per unit of health gain. To do this, we could use Quality-Adjusted Life Years (QALYs - a measure that combines length of life and quality of life) as our measure of health gain, [*] and cost-per-QALY-gained as a measure of which treatments are most cost-effective. A treatment that provides the same increase in QALYs for lower cost, or more QALYs for the same cost, should be preferred for funding.

That might sound unfair (especially to patients who miss out on funding, or their family or friends), but the alternative is even more unfair. If we ignore cost-effectiveness and simply fund any treatment that generates negative media attention (within the same fixed budget), then the healthcare budget will generate a lower total improvement in health. Funding expensive and less-cost-effective treatments has serious costs in terms of decreases in overall health and wellbeing of the population.

Even if the government increases funding for Pharmac, that increased funding should not necessarily go to these next-generation treatments, as there may be other currently-unfunded treatments that are most cost-effective and those should be funded first. Indeed, funds for next-generation treatments are not necessarily a good thing, as the Herald article notes:
The Cancer Drugs Fund in the UK has been overspending despite budget increases, resulting in a number of treatments being taken off its list.
An analysis in the leading cancer journal Annals of Oncology found the medicine funded through the British scheme was not worth the money, as only 18 of the 47 treatments prolonged the patient's life.
One of the paper's authors, Professor Richard Sullivan of King's College London, said the fund had been a "massive health error", and the populism that drives public policy has no place in health.
We need to be careful that our healthcare decision-making is made on the basis of what will generate the greatest gains in health for the budgeted amount, rather than making populist decisions that will make us worse off.

Read more:

[*] An alternative is to measure health using the number of Disability-Adjusted Life Years (DALYs) averted. DALYs are a measure of health lost due to illness or injury, which can be used in place of QALYs (you can read more about QALYs and DALYs here).


  1. "A treatment is cost-effective if it increases a person's health at a lower cost than alternative treatments".

    You totally neglect to mention anything about some of these disease only having ONE treatment. What are your thoughts on that?

    AFTER you have thought about that, drop your "cold hard cash hat' and put on your "humanity hat", then ask yourself..."What if my Mum/partner/Dad/offspring had one of these diseases".

    Now what do you think?

    1. What I neglected to mention is that this assessment needs to be made across all treatments for all conditions, not within the possible treatments for each condition. Not all conditions should have funded treatments. If the only treatment for a condition is less cost-effective than a treatment for some other condition, it should not be funded. If reducing one person's suffering means that two or three other people must instead suffer equally, then that is never ok.

      Of course I would think differently "if my Mum/partner/Dad/offspring had one of these diseases". Every one of use values the life and wellbeing of those we know well more than the life and wellbeing of unnamed strangers. But that is exactly the reason why these decisions need to be made free of emotion, and not influenced by whichever group squeals to the media the loudest.

    2. You seem to have this obsession with treatments that generste negative media attention the government and you use emotive language to underscore this with expressions like squealing loudest to the media. You are an economist and it is clear when one reads your opinions why Economics is not one of the Humanities subjects. Science and mathematics are objective in their essence but when you are in Government and when you are dealing with the health of individuals you have to have qualities tjathat you can't afford to have in your chosen field. Those qualities including love compassion and empathy can't be taught at University. You either have them because you are a caring human being or you don't jave them and you become an economist. The danger though is that people like you squeal VERY loudly when you are aggected personally. You are wrong also if you think that funds are provided first to treatments that do not generate negative media attention. Pompe sufferers as well as cystic fibrosis patients have generated substantial negative media attention for the government but like you they have consistently shown that Empathy and Compassion 101 was never in their studies. We are well into the second decade since Myozyme was licensed for use in the USA to treat Pompe Disease. Yet you and your cohort of heartless bean counters stand in the way of real people receiving treatment.

    3. Micheal, you are one of the reasons this world is the way it is. Full of people without empathy and kindness. While people "squeal and suffer", governments are spending money on flag referendums, flash new cars, travel for themselves and their spouses for the rest of their lives. I invite you to come and visit me. I have a very rare disease called Pompe disease. There are only 11 of us in NZ with this disease. I would like you to speak to my 3 sons and my husband about what it is like to have bean counters deciding on whether i live or die. What date and time can we expect you? We live in Masterton.

    4. Allyson, you do raise a good point about whether it is better for the government to fund more health care, or other things. I can't claim to have a good answer for whether the government should be spending more on health, on education, on reducing child poverty, or on flag referendums (ok, I'm pretty sure we can do without that last one relative to the others).

      However, within a fixed health budget, I am arguing that the greatest health and wellbeing gains come from adopting a cost-effectiveness approach. This argument is not uniquely mine, nor uniquely favoured by economists. For instance, I recommend reading this essay by the ethicist Toby Ord:

      It's in the context of global health, but the same or similar concepts apply to national health budgets.

      Although, I will note that there may be a case to be made for what is termed variable cost-effectiveness thresholds (see this paper which is open-access: ).

    5. Michael, i didn't say the government should "fund more health care OR other things". Good health care AND education should be a fundamental given. Yes we rely on government to provide these things. Why? They relieve us of our hard earned dollar in the form of tax so that they can provide these things for ALL Kiwis. You admit that it is OK to sacrifice a few for the greater good. I wonder if you would be happy with that idea if it was you on the "not worth it" pile. Since economics is your thing rather than humanity; what are your thoughts on family budgets? Here's an example. Family of 5, Mum, Dad, 3 children. Children are starving, dirty, never go to school, very sick. No money for food. Mum and Dad buy a new big TV, lots of alcohol. What are your thoughts on that scenario from an economic standpoint?

  2. Using the logic then that created this topic, spending money on tertiary education is foolish as the basics are taught in the formative years - ie primary school and secondary school. Any education beyond that is expensive and therefore just a drain on society. People who are not good at living in the real world are paid too much to come up with silly ideas that add no real value. The money saved from not funding tertiary education would be far better spent on kindergarten and primary school teachers as they actually add value to society

    1. Also using Michaels logic, why even bother going past the invention of penicillin? Why bother with automobiles when horses were doing a great job?

  3. Even though I believe the current Pharmac system doesn't work I also dread the day that your way of thinking would be put into practice, hopefully never. The human right to health and equity to access of healthcare should always be questions that are included in the decision making of drug access. Not just cold, hard economics.

  4. The criminal justice system has a process by which victims can confront their tormentors. There are many benefits to this for the victim. One of them is that the perpetrators get to see their victims as humans.  They get to see what effect their actions have had on the victim. The victims can see their perpetrators squirm as they apologise for their actions.

    Now while rare disease sufferers are not victims in the criminal justice system they are usually the victims of a cruel accident of genetics.

    If Pharmac officials had to confront the patients with their refusals of medication in person they could explain to the person why they are refusing them life saving medication.  They could make eye contact with the vectim of chance while they explain how QALY or DALY is really fair. They could watch the victim's children's reaction when they explain that their mum or dad's life is not worth the cost to the Government.

    And people like you Michael armed with your economics degrees and no hearts could train Pharmac people how to deliver this news to the victims in such a way that they can go home to their own healthy families without any feelings of guilt or shame.