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  • Brendan Shaw

Martians, ministers and medicines funding: the budget impact problem

I can still remember that fateful day some years ago when I was sitting with a minister for health in their office and being told the government had decided not to list several new medicines on the government’s reimbursement formulary.

This was even though the medicines concerned had all been recommended for listing by the government’s own independent, expert evaluation committee.

The reason?

The government just couldn’t afford it.

Or, rather, the government had decided to spend the money on other things instead of the new medicines recommended.

Coming a matter of weeks after the industry had completed a year’s work supporting the government on a major long-term policy reform precisely to help fund new medicines, it was something of a surprise.

The truth is I was in shock. The Minister could have told me next that Martians were invading Earth and I probably wouldn’t have heard.

It took a few days before the realisation of what had happened began to sink in.

The point of the story is that it turns out my little HG Wells moment was but an example of a broader issue facing global healthcare: how funding and budget constraints are increasingly overriding notions of ‘value for money’ and ‘cost effectiveness’ in medicines and healthcare.

Payers around the world, be they governments, private insurers or other funders of healthcare are grappling with this problem and it is particularly confronting in health systems where payers use health technology assessment (HTA), cost-effectiveness, or other such tools to assess the value of a medical technology for reimbursement.

The problem arises when, despite a medical technology being wildly cost-effective from a social and economic standpoint, either there’s just not the money to pay for it or the payers just don't want to pay for it.

For years payers, governments, health experts and academics assumed that having a cost‑effectiveness system using HTA would protect their budgets. Patients thought it meant they would get access to medicines they need and companies thought if they demonstrated the cost‑effectiveness of their treatments they would be listed on the formulary.

It turns out that wasn’t quite true.

Health funders are confronting it, companies that have invested in HTA processes are dealing with it, and those of us who are practitioners in HTA – whether in government, industry or academia – are quietly sobbing into our lattes with the growing realisation that the perfect Markov model isn’t enough to get a new medical technology over the line these days.

It seems obvious, but the money needs to be there.

At one level, this is not a new problem. Health funding is a perennial topic in conferences, WHO meetings and tabloid newspapers.

What’s changing is that over time newer medical technologies that are value-for-money are getting caught in a budget funding debate. This is due to a range of factors including:

· Science and technological development delivering new, expensive medicines and medical technologies that treat previously untreated diseases or that treat diseases where there have been no new developments for a long time

· Genetics and personalised medicine delivering treatments with higher costs and smaller patient populations which significantly changes the economics of health care

· The pursuit of universal health coverage around the world meaning payers are having to fund more of these technologies whereas in the past there was little or no expectation that they would have to fund them

· Growing and ageing populations that drive demand for new therapies when they are discovered and developed, and

· The increasing prevalence in some disease areas of old, cheap therapeutic alternatives – the technological breakthroughs of past generations – that make the budgetary jump to the newer, improved therapies all that much harder for payers to stomach.

The result is that treatments that are cost-effective or value-for-money from a health economic standpoint may not be funded due to the budgetary impact. Examples include countries delaying the reimbursement of medicines even when they have been recommended by their own HTA evaluation systems; debates about funding of new pneumococcal vaccines even when they are cost-effective from a health economic standpoint because they stop children dying from preventable diseases; significant new cures for hepatitis C that are value-for-money from a cost-effectiveness standpoint triggering huge arguments due to their large budgetary impact; and debates about funding additional of essential medicines on the World Health Organization’s Model List of Essential Medicines.

Confronted with an increasing arsenal of new therapies for diseases like cancer, hepatitis C, stroke, infectious diseases and rare genetic disorders, payers, governments and health agencies have increasingly had budgetary panic attacks. They’ve often thrown cost-effectiveness out the window as a result. This is despite the fact that medicines and devices often aren't the main reason health budgets are growing.

Industry is confronting the problem of developing next generation treatments that materially improve healthcare but may not get to patients because the budgetary impact at that point in time is too big for a payer to swallow.

Governments and payers need to take a long-term approach to funding health and move from the ‘silo’ approach to budgeting that often blinds funders from seeing the benefits of investing in health. Ministers and their departments also need to get better at advocating inside their governments for investment in health by demonstrating economic value to central economic agencies.

Patient groups need to be ready to understand the issues and to assess for themselves the reasons for delays in funding medicines. Is it that the price of a medicine is ‘too high’ as the government claims, or is it because the government has prioritised employment programs for priests or, indeed, a space mission to Mars ahead of healthcare?

International organisations need to continue taking a constructive leadership role in engaging with payers on the value of health spending, rather than just being the cheer squad for disgruntled health ministers bruised from internal government discussions with their finance departments.

Companies need to build this environment into their business planning for new medicines. This will be particularly important in cases where their medicines might be entering a disease area where there haven’t been new treatments developed for a long time or at all.

And the HTA community need to accept that cost-effectiveness evaluations don’t just happen in a vacuum. They are considered as part of a real-world decision-making process with social, economic and political factors influencing those decisions.

With 7,000 new medicines currently in the pipeline for a wide range of diseases and an increasing number of new medicines coming to the market, this problem is unlikely to go away.

Back in the minister’s office, there was a moment of clarity when the minister and I looked at each other and realised we were both battling the same problem: a budget constraint in the health portfolio.

From there, we each worked on solving the problem and finding a way forward.

It’s a lesson that resonates in the debates on funding global health today.

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