Incremental Cost-Effectiveness Ratios

In this short video we’re going to talk about -  Incremental Cost Effectiveness Ratios or ICERs. It’s a long term for actually  quite a simple concept. So at the end of this session you should be able  to describe the role of the ICER, in decision   making by commissioners who decide what services  we buy for health systems, and the benefits   of having this, and government transparency  regarding their willingness to pay for services.

So this is what we’re talking about, this is  called an Incremental Cost Effectiveness Ratio   plane, and simplistically it’s  just two axes, the y-axis is cost,   and the x-axis is effectiveness, and as you go  up things become more costly, as you go down   less costly, go to the right more  effective, left less effective. And you can see actually if your service is more  costly - what’s currently available, and actually   less effective, there’s no way you would buy it  - that would be, not a good use of your money.

Similarly if something came onto the market a  new drug a new treatment which was better than   what was currently being used, and actually cost  less than what was currently being used, then you   definitely adopt it, because you’re saving money,  and you’re providing better care to your patients. However that’s not how the world works. Unfortunately the world generally  brings things in that are better,   and charges more for them, because  it wants to maximise profit. So the pharmaceutical industry will  invariably bring new drugs onto the market,   but they will cost more than  the current gold standard. And so you are then left in what’s called the  northeast quadrant, and the unsure area - should   I buy it or not?

because I’ve got to spend more  money, but it’s going to give me more benefit. Very occasionally, Pharma will bring  something in which is less effective,   but equally less costly, and again that puts  you in that unsure bracket so somebody might   spend billions of pounds developing a new drug  but finding out actually at the end of the day,   it doesn’t work quite as well as what’s on the  market, but you want to recoup some of that money   so what you do is release it onto the market at a  lower cost, in the hope that people will use that   first to save some money, and then if it doesn’t  work they’ll go to the normal gold standard.

So good examples here are the drug Atorvastatin. This came in after Simvastatin  treatment for cholesterol,   and when they brought that in they made it more  expensive because it was more effective, and   they wanted to maximise their profit, and so that  came on, and so communities had to decide are we   going to put in our drug formulary Simvastatin or  Atorvastatin? Simvastatin being the gold standard,   and are we going to swap to this or not? And  this is where the area of uncertainty comes in.

Similarly Fluvastatin was created  at the same time called Lescol,   which was actually less effective  than the gold standard so again   the company brought that on but  brought that on actually cheaper   than Simvastatin or Zocor as it was at the time  to get some of the markets and recoup their costs.

So what the governments very helpfully do very  often is set a bar, a threshold below which   we can afford it, above which we can’t afford it. And in the UK the threshold is one  QALY or one Quality Adjusted Life Year   for £20,000 so to gain one additional  year of perfect quality of life,   as long as it costs less than £20,000 to gain  that, then the government is willing to pay. So anything to the right of the blue line,   is - we’re allowed to have, we can afford,  anything to the left we’re not allowed on.

We use the word cost effective so you very  often see people using the term cost effective,   but they’re using it incorrectly  because they’re just using it   liberally without realising that there  are actual standards that go with that. So with the government threshold in the UK   if the cost per quality is more than £20,000 not  cost effective, less than £20,000 cost effective.

It is however more complicated this, and  actually they never actually write that   number down anywhere officially, kind of,  that’s kind of accepted what the average is. But if there’s only a few num small  number of patients the treatment   works for, then they’ll allow  it to be more expensive because   it’s not going to cost them a lot of  money to allow it onto the market. If there’s no other choice so that yours is the  only drug, you’ve got the new super treatment,   nobody else has anything else to offer, then  again they’ll be willing to pay more for that.

Similarly in your trial there’ll be lots of  estimates of you know, the effectiveness of   all the different costs involved - remember the  cost, isn’t the cost of purchasing the drug,   but it’s the cost of purchasing the drug,  plus all the other costs associated with it,   from say the perspective of the health system And in calculating that you get a high level  of inaccuracy, and if you’ve got a higher   level of inaccuracy then actually they say  - well possibly we can allow 25,000 because   20,000 is still a possibility, you  know if we did it a different way.

So just to summarise - so an ICER  just helps us to visualise the value   provided by an intervention because it it  presents cost and effectiveness together. And it’s usual for anything new to  cost more and provide additional QALYs,   that’s kind of the standard practice  or whatever the effectiveness is that   we’re measuring or your government uses  as its standard for willingness to pay. If you have a generic outcome like Quality of  Life, and Quantity of Life, combined in a QALY,   this kind of allows you to  compare anything, and compare,   you know about drugs with a with a treatment in  a surgery or changing how practitioners work,   and all those can be compared because  you have the same outcome measure.

But unless you have a threshold by your  government, you don’t know whether you,   it provides good value or not, or whether it’s  cost effective, or it’s not cost effective. So by the government saying this is our threshold,   you can then decide whether your  intervention, or whatever is your testing   is going to be affordable by the health  system in which it’s being implemented. What’s nice about it though, is  it reduces inequity in the system.

By everyone knowing this is the threshold, this  is what we can afford, commissioners say yes we’ll   have that but we won’t have that, and what that  gets rid of in a health system is what’s called a   geographical lottery - depending  where you live the commissioners   make different decisions for your local  hospitals, your local primary care systems. By having a threshold which says these things  we can’t afford, these things we can, that means   there’s more standardisation about the level of  services that are provided across a health system.