Pharmac vs. Keytruda - The sequel

Back in 2015 I wrote a post about Pharmac's decision not to fund the drug Keytruda for melanoma patients. Keytruda is back in the news this week:

A 44-year-old father of four given six to nine months to live when he was diagnosed with lung cancer has seen his tumour halve in size thanks to a new treatment he describes as a "miracle drug".

Patients and advocates are calling on Keytruda to be publicly funded for lung cancer, the country's biggest form of cancer death which claims five lives a day, because many patients could not afford the tens of thousands of dollars required to pay for it...

Pharmac director of operations Sarah Fitt said they had received funding applications for Keytruda, also known as pembrolizumab, for the first and second-line treatment of advanced non-small cell lung cancer and would continue to review evidence.

Clinical advisers would now review extra information requested to decided (sic) on funding for it as a first-line treatment.

I'll simply reiterate some of the points that I made in that 2015 post (and note that this issue is quite timely given that my ECON110 class covered the health economics topic just this week).

It is worth starting by noting that Pharmac has a fixed budget to pay for pharmaceuticals. If it agrees to pay for Keytruda for lung cancer, at a cost of tens of thousands of dollars per patient, then that is tens of thousands of dollars that cannot be spent on pharmaceuticals for other patients. There is an opportunity cost to funding this treatment.

Now, that problem could be mitigated by the government increasing Pharmac funding by enough to pay for the Keytruda costs. But if Pharmac receives additional funding, is Keytruda the best use of that funding? Are there other treatments that could be funded instead? Even with extra resources, Pharmac's budget would still be limited, so how should we decide whether Keytruda is the best use of that additional funding?

Fortunately, there is a solution to these tricky questions: work out which treatments are most cost-effective and fund those first. Health economists use cost-effectiveness analysis to measure the cost of providing a given amount of health gains. If the health gains are measured in a common unit called a Quality-Adjusted Life Years (QALYs) then we call it cost-utility analysis (you can read more about QALYs here, as well as DALYs - an alternative measure). QALYs are essentially a measure of health that combines length of life and quality of life.

Using the gain in QALYs from each treatment as our measure of health benefits, a high-benefit treatment is one that provides more QALYs than a low-benefit treatment, and we can compare them in terms of the cost-per-QALY. The superior treatment is the one that has the lowest cost-per-QALY.

You might disagree that cost-effectiveness is a suitable way to allocate scarce health funding resources. I refer you to the Australian ethicist Toby Ord, who makes an outstanding moral argument in favour of allocating global health resources on the basis of cost-effectiveness (I recommend this excellent essay).

Finally, here's what I wrote about funding Keytruda in 2015 (for melanoma, but the same points apply in terms of Pharmac funding the drug for lung cancer):

Of course, it would be good for the melanoma patients who would receive Keytruda free or heavily subsidised. But, in the context of a limited funding pool for Pharmac, forcing the funding of Keytruda might mean that savings need to be made elsewhere [*], including treatments that provide a lower cost-per-QALY. So at the level of the New Zealand population, some QALYs would be gained from funding Keytruda, but even more QALYs would be lost because of the other treatments that would no longer be able to be funded.

Unfortunately, New Zealand doesn't have an equivalent of the UK's National Centre for Health and Care Excellence (NICE), which calculates cost-effectiveness of potential treatment options for the National Health Service and ranks them against an objective standard cost-per-QALY (of £30,000) to work out which options should or should not be funded. That makes so many of Pharmac's decisions subject to political interference, which really could end up costing us in terms of overall health and wellbeing.