From the Antipodes to the Motherland: Reflections on HTA Decision Makers as Budget Takers and Budget Makers

Paula Lorgelly, Deputy Director of OHE, reviews HTA decision making processes in three comparable countries, and considers the agency problem and possible solutions.

On 14th of December 2015 OHE’s new Deputy Director, Paula Lorgelly, presented an OHE lunchtime seminar on HTA decision making, comparing New Zealand, Australia and the United Kingdom in terms of the processes in place to consider affordability.  The seminar concluded with a discussion of the HTA process as an agency problem.

The decision-making criteria employed by health technology assessment (HTA) agencies differs between countries.  Researchers have previously analysed HTA decisions, in an attempt to understand the influence of specific factors on decisions, both within and across jurisdictions. 

Despite agencies effectively evaluating the same clinical evidence base, adoption decisions vary.  This could be due to different economic and health system contexts, social values, an agency’s ability to price-negotiate or the process.  Recently, it has been argued that it is time that the National Institute for Health and Care Excellence (NICE) revisited its processes or, more specifically, its criteria for making decisions.  In the current austere climate one criterion that warrants discussion is that of affordability.

While NICE, the Pharmaceutical Benefits Advisory Committee (PBAC) in Australia and the Pharmaceutical Management Agency (PHARMAC) in New Zealand may on the face of it seem similar, in one respect – that of assessing affordability – they are very different.  

NICE’s guidance is mandatory, yet it has no influence over the funding budget nor does it suggest where the money should come from to fund the technologies it recommends. 

PBAC’s remit allows them to make recommendations on listing and funding treatments, such that in their deliberations they also consider the financial cost/budget impact of listing. 

PHARMAC works within a capped budget, such that it may recommend a technology for listing but if the budget is exhausted, it then it simply cannot be funded.

Sofosbuvir for hepatitis C, Pembrolizumab for melanoma and Trastuzumab Emtansine for breast cancer were presented as case studies to understand how each HTA agency informs a listing decision and separately a funding decision.

The presentation concluded with an application of the principal-agent problem to HTA decision making.  The health service or health system is the principal and the HTA agency the agent.  An agency problem occurs if the preferences and incentives of the principal and agent do not align.  The agency problem is further complicated if we regard the general public (or patients) as the principal, the health service their agent, and the HTA agency their agent.  In effect NICE is a double agent. 

To address the agency problem we need to consider both the misspecification of the objective function (what is each party seeking to maximise and is it the same) and the misspecification of the constraint (understanding the opportunity cost by understanding the budget). 

If NICE were a threshold searcher then they would consider the budget and affordability issues when evaluating HTA decision; and not unlike PHARMAC they would need to make disinvestment decisions also.  This would mean that when looking to adopt technologies with non-marginal effects on the budget they could change the cost effectiveness threshold (which is what PBAC did for the suite of hepatitis C drugs), so the adoption decision reflects both the cost effectiveness of the technology and its affordability.  However, this requires fungible budgets.

For more information, contact Paula Lorgelly at OHE.