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Cost of living

Focusing on curbing drug expenditure disregards the true value of patient care

Weighing scales showing cost on one side and value on the otherAs governments across the world pour billions into the financial markets to help prevent a global depression, the budgetary pressure on services is becoming even greater. This is particularly true for healthcare, already a front-of-mind topic for governments and their citizens.

Across markets, regardless of the methods of healthcare financing, pharma faces continued scrutiny over its product pricing policy. A clearly earmarked drug spend is an easy target when reviewing healthcare expenditures and is much less politically sensitive than doctors' pay or the amount spent to remedy medical errors.

To prepare for the ever mounting pressure to reduce drug prices, industry and healthcare funders alike should ask: what is the true value of pharmaceuticals and is this a sound investment?

UK Market
The UK market is one of the most aggressive in defining value because of the National Institute of Health and Clinical Excellence (NICE). The UK's Office of Fair Trading further pressed the question of the value of pharmaceuticals in its 2007 report. Given this focus on drug value and well reported public data from the Department of Health and OECD, the UK's National Health Service (NHS) can be used as a starting place to review pharmaceuticals as a healthcare investment and question if that investment should continue.

Over the past ten years, the spend on drugs in England as a percentage of total healthcare expenditure declined to 10.3 per cent in 2007. Factors beyond drug utilisation are at play, but when spend over ten years is viewed against changes in health and quality of life outcomes, it is clear that pharmaceuticals are a high-return investment that has benefited the healthcare system (in terms of reduced costs) and, even more so, patients.

Cancer therapies are the most publicly debated and one of the most emotive. Despite being the disease with the highest global spend, total expenditures in England on cancer drugs are less than other therapy classes, such as cardiovascular diseases and respiratory diseases. NICE has developed over 60 appraisals on cancer, more than in any other disease. The NHS has ruled that if patients opt to pay out of pocket for any non-NICE approved drug, they effectively recuse themselves from the NHS and have to pay for their entire treatment, including doctor visits.

This focus on controlling cancer spend is warranted, but the metrics applied are questionable. The total cost of all cancer drugs prescribed in England increased by 127 per cent (£144.6m in 1998 to £328.2m in 2007). This is a result of significant investment by the pharma to bring new drugs to the market such as Herceptin and Eloxatin in 2000, and Glivec in 2001. However, other treatments – such as Avastin, which is indicated for number of solid tumours, and targeted kidney cancer therapies including Avastin, Nexavar, Sutent, and Torisel – have effectively been 'banned' from the UK. Given all this, is investment in oncologics prudent?

Patients (and patient groups) say yes. The R&D investment into oncology over the past decade has enabled patients to live longer and better quality lives. Overall, one-year survival rates in England and Wales increased by a weighted average 2.9 percentage points between 1996–1999 and 2000–2001, meaning that more than 21,000 additional patients were alive after one year following diagnosis and treatment. Herceptin can lead to increases of 33 per cent in overall survival and a 50 per cent in disease-free survival for breast cancer patients. Similar results were found for MabThera, a drug for non-Hodgkins lymphoma and Glivec, a drug for chronic myelogenous leukaemia.The kidney cancer drugs that have been blocked by NICE have demonstrated a potential to increase overall survival by five to six months, or at least 20 per cent longer than without the therapies.

Many rightly say that most new and expensive cancer therapies have not cured cancer and only prolong life for a short time. However, this end-of-life period has very high value for many patients, and reductions in mortality rates for patients and shortened hospitalisation rates such as the average length of inpatient stay should not be dismissed. A study shows that colorectal cancer patients receiving treatment with Xeloda as compared to the previous standard of care not only had improvements in disease free survival and overall survival, but also had fewer hospitalisations and medications that contributed to a cost savings of £3,700 per patient for the NHS.

Other cancer therapies work to improve quality of life and have no direct impact on the cancer itself. For example, anti-nausea drugs in the NK-1 class such as Emend make chemotherapy more manageable for high-need patients, thereby improving the likelihood of success for the primary therapy. Should supportive care be valued less than improvements in mortality?

Cancer drugs are costly but valuable, and patient access has been restricted because of the £30,000 cost per QALY threshold imposed by NICE. Without such restriction – based on a figure developed years ago and now applied across all disease states – more value could have been provided to patients who likely place a high premium on the value of additional months of life.

In addition, many treatments are studied first in late-stage patients where they may not demonstrate their full long-term potential – Herceptin has shown significant value in progressively earlier-stage patients in the years since it launched.

This begs the question, is the NICE threshold even applicable to a therapy area as complex as oncology?

CVD therapies
Closely following oncologics, lipid regulators account for over 5 per cent of global sales. It is also an important therapeutic class for healthcare providers being the primary combatant against cardiovascular disease (CVD), a leading cause of death. From 1998 to 2007, the amount spent on drugs treating CVD increased in England by 93 per cent (from £940.3m to £1813.4m). This trend was fuelled by the launches of blockbusters such as Lipitor in 1997 and Plavix in 1998. Although this was a significant investment, the fundamental question is whether patients and the NHS benefited from this allocation of resources.

In the past decade, the death rates for ischaemic heart diseases and myocardial infarctions in the UK declined by 34 per cent and 44 per cent respectively. Although a decline in national smoking levels would have contributed to this trend, studies find that pharmaceuticals such as Plavix, ACE inhibitors and statins also lead to lower mortality. These positive changes would further translate into financial savings for society, especially when considering the production losses from cardiovascular deaths.

Health and social benefits have been shown to be direct consequences of greater investment in appropriate pharmaceutical utilisation. A study based on twenty OECD countries from 1995–2003 finds that countries that invested more in cardiovascular drugs had consequently larger reductions in hospitalisations and mortality due to CVD. By not investing in cardiovascular drugs, per capita hospitalisation costs in these countries would have been an astounding 70 per cent higher in 2004.

The case for cardiovascular drug budgets appears very well justified in both healthcare and societal terms, it is also important to note the amount spent on CVD globally has fallen in 2007 by almost 7 per cent. This fall in spend is because of expiration of patents such as Lipostat in 2004 and Zocor in 2006. These agents therefore still represent a valuable investment with an even higher rate of return, but it will be important for the NHS to continue to support new branded agents that offer incremental value in managing CVD, and not merely to rest on the laurels of the pharmaceutical industry's past drug development success.

Although only the fifth largest therapeutic class globally, pharmaceutical management of diabetes is growing worldwide and England has invested heavily in this area. Total expenditures on diabetes drugs increased by 256 per cent (£167m in 1998 to £594.1m in 2007). It is easy to associate the dramatic increase in spending on new drug launches such as long-acting insulins (Lantus and Levemir), as well as Actos and Avandia in the thiazolidinedione class. It must also be noted that the patient population has increased by about 80 per cent over the same time period and that the use of combination therapies as standard care has increased.

Looking beyond surrogate end points such as HbA1C reduction, therapies have been successful in controlling and managing this disease. The average length of inpatient stay because of diabetes declined by 19 per cent, and the number of emergency visits and admissions as a percentage of patient population declined by 31 per cent and 47 per cent respectively. This substantial decline of in-patient care allows hospitals to shift resources elsewhere, effectively filling budget gaps from the savings created by better diabetes management.

Some critics choose solely to focus on the metrics of mortality as opposed to reduced A&E visits and hospital admissions. However, this is an ill-suited metric for the disease, as patient mortality is more likely to be caused by costly co-morbidities such as coronary heart disease, nephropathy, retinopathy and neuropathy.

Value to society
The focus on the cost of pharmaceuticals continues unabated, but relatively less attention is given to the value they have delivered to individuals, the healthcare system, and all of society over a period of many years. Based on this review, and despite a recognition that many factors can affect the real health outcomes discussed here, investing in biopharmaceutical therapy clearly does have strong positive clinical and economic benefits. In this context it is fair to change the familiar question targeting innovative drug manufactures from: "should the money spent on drugs be reduced or reallocated?" to: "Should drug budgets be increased?"

Over the past 10 years there have been simultaneous and positive correlations in England between expenditures on pharmaceuticals in high-burden disease areas such as cancer, CVD and diabetes, and important clinical and resource utilisation metrics in the same disease states. With the support of objective and rational evaluations such as this, pharma can seek to shift the debate from overly generalised and ill-informed attempts to curb pharmaceutical budgets and utilisation, to widening access to appropriate pharmacotherapy as determined by metrics and outcomes most relevant to each disease state. While the Department of Health and the Association of British Pharmaceutical Industry hammer out the remaining 'value' negotiations regarding the Pharmaceutical Price Regulation Scheme (PPRS), it will be necessary for industry and government to take a lesson from the financial markets and examine their risk exposure before allocating finite investment resources.

The Authors:
Morgan Long and Soraiya Shroff are part of the global value strategy team at PriceSpective
To comment on this article, email

12th November 2008


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