Industry Solutions To High Cost Technologies

1. Industry Solutions To High Cost Technologies Dr Jacqui Miot Discovery Health

2. Health Funder’s Role: • Fund healthcare: • High quality care ~ including promoting medical advances • Care that is affordable and sustainable • To ensure the continued existence of a viable healthcare sector

3. Specialty Drugs Monoclonal antibodies, oncology drugs Devices, equipment and supplies PET-CT scans Medical and surgical procedures Cyber knife Also include existing technologies What are High Cost Technologies?

4. Biotech & complex in nature Treat rheumatoid arthritis, MS, cancer, hepatitis C, etc Require supervision, monitoring & testing Administration support & storage issues Most Injection or Infusion (some oral) Side effects more frequent & serious Expensive AND often not cost-effective What are Specialty Drugs?

5. Health insurance prices > salary inflation - increasing % salaries spent on healthcare costs - less people buy health insurance What is driving these costs? better informed public & healthcare providers Soaring market-entry costs for new treatments Lack of legislative bodies to control price and quality of new health treatments Existing mechanisms to manage costs associated with new expensive technologies inadequate What is the problem?

6. Ave. annual total cost per case Patient Type % of Pts Total Costs • Acute • Low grade chronic • Worried well $1,200 1/3 90% $5,600 • Prevalent chronic (e.g.. Asthma, diabetes) • Procedures (e.g. surgery, childbirth) 1/3 $71,600 • Rare chronic (e.g. transplant, hemophilia, MS, Gaucher’s) • Multiple co-morbidities 1/3 9% 1% Driving Healthcare Costs

7. International Trends – Specialty Drugs

8. International Trends

9. Tidal Wave – coming to our shores

10. Dramatic impact on local industry

11. Impact of Excessive Increases 40% 30% % of scheme with drawing 20% 10% +5% +10% +15% +20% +25% Increase in excess of salary inflation

12. Impact of Excessive Increases 40% 30% % of scheme withdrawing 20% 10% +5% +10% +15% +20% +25% Increase in excess of salary inflation

13. Impact of Excessive Increases Rate increases required to compensate for selective lapsation +0% to 2% 40% 30% % of scheme with drawing 20% 10% +5% +10% +15% +20% +25% Increase in excess of salary inflation

14. Impact of Excessive Increases Rate increases required to compensate for selective lapsation +0% to 2% +4% to 7% 40% 30% % of scheme with drawing 20% 10% +5% +10% +15% +20% +25% Increase in excess of salary inflation

15. Impact of Excessive Increases Rate increases required to compensate for selective lapsation +0% to 2% +4% to 7% +8% to 12% 40% 30% % of scheme with drawing 20% 10% +5% +10% +15% +20% +25% Increase in excess of salary inflation

16. Health Economics Decline/Approve Limiting access Reference pricing Disease budgets Some Industry Solutions

17. Require detailed clinical and economic modeling to have a good chance of making the right health care funding decision for particular therapy to ensure equitable access Critical to informing funding decisions Some specialty drugs are cost-effective – need to cf. those that are vs. that are not Can suggest price at which drug will become cost-effective The Role of Health Economics

18. Threshold determines yes / no Does one threshold over value some therapies and compromises others? Societal preference varies between conditions - we need a few thresholds, not one ~ reflective of implicit values Comparative Analyses: new technology vs. current practice Indicative Thresholds R 90,000 R 80,000 R 70,000 R 60,000 R 50,000 R 40,000 Average R 30,000 R 20,000 R 10,000 R 0 preventive acute revers. chronic illness oncology palliation 1 2 3 4 5 HE – not a simple yes or no Hypothetically….

19. Simple yes/no answer based on clinical and cost-effectiveness of the product Advantages: No financial risk Pressure to reduce price Clarity in decision making Disadvantages: Negative impact on relationships Ethical dilemma Inequity for members Decline/Approve

20. Limit risk by limiting access through high barriers to entry with CEC, complicated processes etc Advantages Full price of treatment – no co-pay “We are funding treatment” Limited backlash Disadvantages May not be cost-effective No pressure to reduce prices Access denied to some eligible members Not transparent Inconsistent Limited Access

21. A cost effective or reference price (RP) determined based on health economics evaluation SEP – RP = Co-pay Advantages: Willingness to fund new interventions at appropriate price Transparency Pressure to defend high prices Sets a price for future costing Disadvantages: High co-pay (up to 70 or 80%) Specific to each product Target for future pricing Reference Pricing

22. Allocate budget for a clinical condition or treatment based on historical and future costs. Total vs Partial vs SpecificTx Advantages: Capped risk Provider’s autonomy retained Providers are forced to make value based decision Changes relationship of stakeholders Disadvantages: New concept for providers Dependant on all buy-in or DSP Performance measures and clinical outcomes No precedence in South Africa ? Compliance with SEP legislation Budget

23. Principles of Discovery High Cost Drug Funding Approach • Thorough clinical and financial evaluation • Ensure access to the latest health care technology • Ensure benefit remains sustainable • Prevent anti-selection & achieve appropriate plan selection • Maintain pressure on price • Create incentives for appropriate choices • Create certainty and transparency

24. Thank You Dr Jacqui Miot