Budget impact analysis: can we afford the added value?

Cost-effectiveness analysis (CEA) – which in certain cases is used interchangeably with the term cost-utility analysis through the use of QALY-has been established as the pinnacle in decision-making in health¹. It is utilized in many national variations, either as a primary or as an adjuvant tool. Often technically intriguing and a resource-demanding process, the cost-effectiveness analysis impersonates a rather romantic aspect of pharmacoeconomics and broadcasts the opportunity cost: whether it makes sense to adopt a new treatment modality and pay an incremental cost, in the context and the boundaries of a predefined willingness-to-pay (WTP) threshold^2–3. Moreover, it addresses the maximization of population health within a fixed budget, while serving equity⁴. CEA incorporates costs and treatment benefits; costs burden payers while the health benefits are usually disseminated across the society and cannot be always redeemed-although monetarily expressed-in the health care system. For instance, the coveted increased well-being of the individual can be cashed-in by the social sector in terms of increased productivity and diminished sick leaves or allowances⁵.

CEA demonstrates another strong attribute, its comparative perspective which may also blur its connotation. The incremental aspect means that in a certain period of time, the total cost of the new treatment is compared to the previous treatments. Therefore, cost-effectiveness is not a stand-alone characteristic, but a relative one, and this hinders its unconditional extrapolation. The only restrictive factor is the WTP threshold. Specifically, the WTP denotes the opportunity costs at the margin and in this sense, it travails to extenuate the budget concerns. CEA is also intertwined with the number of entrants in the market. Assuming that every year a new product enters a specific market, and the ICER of the new product is estimated at the highest point of the acceptability curve, by the fifth year, payers reimburse a product whose price has increased 5–6 fold compared to the first year. And still, the latest product to enter the market renders an acceptable cost-effectiveness ratio, even compared to the baseline product.

To this direction, the concept of budget impact analysis (BIA) can be of significant benefit. BIA offers a different perspective and it actually assesses the short-term affordability of adopting the specific treatment modality, rather than assessing the opportunity cost. This is done through the estimation of the cost difference between two mutually exclusive scenarios on a short-term time horizon, in contrast to cost-effectiveness which yields a longer perspective. BIA takes into account current and future market share data, based on several hypothesis pertinent to the penetration of the product in the market, disease prevalence and treatment guidelines. Therefore, BIA demonstrates a quantitative trait rather than a qualitative one. The discrepancy between BIA and CEA can be challenging especially for orphan drugs, since the low prevalence of disease perpetuates to inordinate prices, which can exacerbate BIA.

In Journal of Medical Economics, a paper was published regarding the BIA of gilterinib⁶. Gilteritinib, is a novel, highly selective oral type I inhibitor of fms-like tyrosine kinase 3 gene (FLT3), with proven efficacy against both FLT3–internal tandem duplication and FLT3–tyrosine kinase domain mutations. This mutation is found in approximately 80% of AML patients. The ADMIRAL trial assessed the efficacy of gilteritinib compared to standard care (SC) in patients presenting with relapsed/refractory FLT3 ^mut+ acute myeloid leukemia (AML)⁷. It improved patient survival outcomes, with 1-year survival rates of 37% vs. 17% for SC, while the median OS was significantly higher for patients treated with gilteritinib than with SC (9.3 months vs. 5.6 months; hazard ratio for death = 0.637; p < .001), and a higher proportion of patients treated with gilteritinib achieved complete remission, than those treated with SC (21.1% vs. 10.5%).

Patients treated with gilteritinib reported improvement in quality of life, which can be attributed to its oral form, reduced hospitalization, and improved clinical outcomes. Currently, gilteritinib is positioned as a first line treatment for patients with R/R FLT3^mut + Acute myeloid leukemia (AML).

Authors estimated the budget impact of adding gilteritinib to a health plan formulary for the treatment of adult patients with R/R FLT3^mut + AML from a U.S. payer perspective. They resonated that the addition of gilteritinib to a cohort of 1 million beneficiaries exerts a minimum budget impact ($0.055–$0.091) per-member-per-month (PMPM). This is primarily imputed to cost of the drugs, cost of adverse events and subsequent transplantation costs. The cost increases were partly driven by the prolonged survival and increased treatment exposure of patients receiving gilteritinib versus alternative treatment options. We should underline that when total costs per treatment cycle were compared across different regimens, gilteritinib-treated patients incurred the lowest costs per treatment cycle compared with all alternative treatment options. In addition, the incremental costs were partially offset by a decrease in the post-progression costs (–$0.0089 to –$0.0091, PMPM) and blood and platelet transfusion costs (–$0.006 to –$0.005, PMPM). The reduction of medical costs is primarily attributed to the improved efficacy of gilteritinib in delaying disease progression relative to other treatments, and the benefit of reducing dependence on transfusion among the target patient population.

Discussion

This study gives a new perspective pertinent to the affordability of a new product, since most of the economic evaluations underpin CEA and broadcast the incremental value of the product. The new landscape of pharmaceuticals is defined by a diversified portfolio targeting untreated diseases. This escalates to high ICERs and relaxed WTP stemming out of the rare indications of the products and consequently potentially cost- effective products. This does not put a foothold in the affordability of these products. On the contrary, it states that in the long-term, this modality is efficient⁸. However, it does not corroborate on the short-term ability to fund this treatment. The ability of health care systems to safeguard their financial viability has been distorted by the tendency to focus solely on cost-effectiveness. BIA assumes that there is a certain budgetary headroom, which should be considered when assessing new technologies. Nevertheless, BIA entails certain limitations. Several input variables such as practice setting, competitive products their and market penetration, number of eligible patients, and new clinical data are crucial and in certain cases they are highly uncertain and poorly available. In particular, the baseline market-share is often unknown (or very rapidly evolving) for many rare diseases in many countries, which is attributed to low awareness as well. Another area for concern is the silo mentality, which underpins the reduction of one input i.e. pharmaceuticals in order to stay within the budget, an action which may be a stepping stone for greater expenditure in other healthcare cost centers, with a cumulative negative financial impact.

A BIA in a disease management program could be intertwined with CEA and also with an array of managed entry agreements (MEA) such as value or volume cap, or even value-based pricing, with the aim to provide equitable access to expensive treatment modalities. There is an overarching need to interfere in the rare disease field since the main focus is nested in the affordability and equity, instead of the CEA. Nevertheless, we could also ponder treatment modalities with high up-front fixed costs, such as the CAR-T, while in the short-term their economic profile is horrendous: even cost-effective alternatives are unaffordable⁹. On the other hand, if we focus unequivocally on BIA, this may perpetuate to unequal treatment of healthcare programs that yield long-term benefits, in favor of corresponding ones with short-term payback.

Technically, the CEA of rare diseases' drugs culminate to non-cost-effective products, which spiral to non-efficient use of resources. In this case, payers have a vested interest to assess BIA.

When assessing the affordability of medicines, and specifically for rare diseases, we should bear in mind that in other sectors of public governance, the rule of rescue is invoked¹⁰. The rule of rescue entails the need to save individual lives, even in cases that from a merely technical perspective, the money would be more efficiently spent elsewhere. Some authors remonstrate with this approach and contend that on a societal level we are willing to pay a considerable amount of money to rescue sailors and mountaineers from life-threatening situations, albeit in nonessential activities. This mindset conflicts with the reluctancy to reimburse orphan drugs, solely on grounds of costs.

The identification of costs centers, across the whole health care spectrum should escalate to consequent budget adaptations and would mitigate the fiscal burden on the pharmaceutical sector. Moreover, we should also consider the social services sector. The impact of well-being is redeemed through reduced allowances or benefit receivers and an adjustment, in the form of funds transfer or funding correction, could comprise a solution.

The complex equilibrium between BIA and CEA should be on the spotlight, since diverging conclusions and decisions ensue each approach. A possible way forward is to amalgamate the long-term value rendered to system by CEA with the short-term financial impact, as assessed by BIA. To this direction, several other schemes are emerging, as nexus of individual approaches, such as the Multicriteria Decision Analysis (MCDA) and the six Delta platform, which could help to further optimize this field¹¹. Indicatively the consolidation of BIA and CEA in the context of MCDA could constitute a feasible approach, as attested by Kolasa et al. Moreover, budget reallocation across healthcare and social services should be considered¹². Finally, a broader approach should be pursued and the value instilled to the system, should be considered and measured sufficiently.

Transparency

Declaration of funding

There is no funding to declare for this research.

Declaration of financial/other relationships

JME peer reviewers on this manuscript have no relevant financial or other relationships to disclose.

Acknowledgements

None stated.