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The potential economic benefit of maintaining a healthy workforce should be considered when valuing health technologies

A green American carEstablishing the value of medical technologies to paying audiences is critical to the success of all products, but current established methods do not always capture the full economic benefit. An alternative approach, described here, is gaining acceptance with academics and policy makers and could potentially help marketing directors overcome payer challenges.

The relationship between health and economic outcomes such as increased productivity and economic growth is established in both the disciplines of medicine and economics. There is good reason to believe that this relationship will become increasingly important in coming years because of the challenges posed by ageing populations and the demands placed on working age populations. As the number of working-aged people starts to decline, or shrink proportionally to the non-working aged population, nations may struggle to maintain living standards. With a shrinking number of working-aged people it will be necessary to get the most out of every available worker in an effort to increase productivity levels and maintain economic living standards. In this context, it is worth considering the role of investing in health to maintain a healthy workforce and the possible implications of this for developing and commercialising medical technologies.

The knowledge that health gains can improve national prosperity has long been advocated by NGOs such as the World Health Organisation. Increasingly the relationship between health and economic growth is being discussed in the context of developed countries where, it was suggested in a report to the European Commission, "policy-makers who are interested in improving economic outcomes (eg on the labour market or for the entire economy) would have good reasons to consider investment in health as one of their options by which to meet their economic objectives." 

Measuring benefits
If healthcare expenditure is an investment, then how much money should nations spend on health programmes and which services offer the best return on investment to optimise these economic outcomes? Furthermore, if health services start to embrace a health investment framework for evaluating technologies, what types of products should pharmaceutical and medical technology firms deliver to the market to optimise economic growth? Equally importantly, if companies apply a health investment perspective to development strategies, will these innovations be recognised by health authorities for their economic stimulating effects as well as their associated clinical benefits?

In addressing these questions, it is worth understanding what is meant by health investment framework and how it differs from current economic-based approaches for valuing health technologies. The health investment framework is based on the idea that health is a form of human capital that can be used to produce economic value – namely in the form of labour force participation – and normally valued using labour wage rates. The health investment framework often looks beyond health improvement and non-monetary values that people assign to the commodity 'good health'. Instead, health investment focuses on what happens when an individual returns to work as a result of improved health or avoids a catastrophic health event, and the resulting economic benefits of these outcomes.

The health investment framework shares similarities with technology appraisal organisations like the National Institute for Health and Clinical Excellence (NICE), with some notable exceptions. The major difference lies in the analytical perspective; NICE emphasises the health service perspective, whereas health investment emphasises the importance of improved health status on the economy and, therefore, takes the societal perspective. NICE also prefers to measure health benefits in quality-adjusted life years (QALY), which can't be translated into an economic reality that people understand. In contrast, the health investment framework draws upon human capital theory and values health improvements in economic terms. While both health valuation approaches play an important role in decision making, the health investment framework is better equipped to communicate health improvements in economic terms to a range of different audiences eg, politicians, media and the public.

A clear advantage of the health investment framework is that it emphasises the importance of a healthy workforce, available to supply labour to the market and pay taxes to support the growing number of elderly people. This is particularly relevant as governments start to increase – or are considering increases – to the age of retirement, which can only be achieved if people are healthy enough to continue working. Because health is often the most important determinant of whether or not older people continue working, enabling people to work longer, whether through improved health or other labour market reforms, offers numerous economic benefits that can reduce demands on public resources. 

Setting economic priorities
If the health investment framework becomes more widely accepted among health services, it is worth considering whether some health services – such as tax-funded national health services under the influence of government ministers – are better positioned to optimise economic outcomes when using these health services. As economies grow, all things being equal, governments could benefit from an expanding economy and increase tax revenues, even while holding tax rates constant. From this perspective, governments could allocate resources through a national health service to programmes likely to yield the best economic outcomes. However, this is more difficult than it sounds because using the health service to achieve "economic priorities" will often clash with what is customarily considered a "health priority" based on medical need.

An example of this clash of ideals can be seen with respect to commissioning in-vitro fertilisation (IVF) in the UK where infertility is often considered a low healthcare priority with limited funding available. However, a study has shown that NHS funded IVF treatments yield an 8-10-fold discounted return on investment for government, suggesting there is a strong economic case for funding IVF. The analysis was based on the lifetime future tax revenue of an IVF conceived child once they enter the workforce and start paying taxes. Using this example, it is easy to make an economic case for funding IVF. However, the prevailing mood among commissioners is that infertility is not a life-threatening health priority. 

The IVF example likely represents an atypical case of investing in health. However, the same tax-based approach can be applied to any health improvement that gets people back to work, improves productivity or keeps people in employment for longer. The example also suggests that tax-funded health services are better positioned to prioritise health funding aligned with other government programmes regarding employment, retirement, or family policy. In contrast, private health service providers that operate with different objectives in mind and are not given incentives to meet national economic goals are likely to have other objectives in mind. 

The IVF example also illustrates that many investments in health, whether in obstetrics, vaccination or IVF treatments, for example, can take many years before they show economic benefit. Because the time between investment and the return on investment can take generations, health authorities need to take these longer timeframes into consideration when making funding decisions. Unfortunately budgetary cycles and short-term political goals overlook these fundamentals.

No doubt many will argue against an economic framework for allocating resources – suggesting that it is inappropriate to use the health service to stimulate economic growth and take resources away from more worthy disease priorities. However, there are no fixed rules about how to allocate resources, about what is considered a priority, or about whether or not "economic growth" is considered an appropriate goal. Furthermore, rallying against using the health service to achieve economic goals fails to recognise that the economic rewards can be redistributed in society and that social welfare can still be preserved.   

Additionally, it is worth noting that governments regularly allocate resources to non-health programmes for the purposes of stimulating economic growth, so why can't the same economically-focused principles apply to tax-funded national health service?

The major issue in applying a health investment framework to evaluate technology is that it clearly disadvantages people who are not working or are retired. This concern is valid, but it is also important not to disregard economic sustainability and misallocated vast resources to treatments without considering the return on investment. Health services will always be about compassion, improving quality of life and equity, but these goals should not be pursued to the detriment of economic outcomes and sustainability.

Adopting a health investment framework does not necessarily suggest the need to abandon technical efficiency and the delivery of cost-effective care. Rather, a health investment framework for evaluating technologies should be considered in conjunction with those technical efficiency goals championed by organisations such as NICE. Applying the health investment framework helps to ensure that obvious choices, with clear economic outcomes, are not under funded or classified as low healthcare priorities.

Taking the above into consideration, how should companies commercialise new products? In many respects, much of the thinking is currently in place. However, organisations should think more clearly about how their product will influence population dynamics and, consequently, economic goals once they enter the market. Whether this is through improved productivity, increased labour force participation or even better education that influences earnings and economic growth, all need to be considered. When benefits are observed beyond timeframes normally considered in clinical studies, there is a need to model future economic outcomes.

Furthermore, an appropriate communication strategy is also critical for describing the return on investment from health expenditure. In many cases the strategy should look beyond traditional health ministries and consider making appropriate economic-based arguments to labour ministries, family ministries and even the Inland Revenue Services, which is acutely aware of the tax value of an individual.

The Author
Mark Connolly is managing director of Global Market Access Solutions and holds a guest researchship with the University of Groningen in the Netherlands.
To comment on this article, email

22nd September 2009


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