Making Cost Effectiveness Analysis of Health Policy Choices Mandatory: Ramesh Bhat

Guest Author: Ramesh Bhat, Expert: Healthcare Finance, New Delhi

An alumnus of Harvard T.H. Chan School of Public Health and the University of Delhi. Researched and taught corporate finance and health finance for 37 years at IIM Ahmedabad, University of North Carolina at Chapel-Hill, IIM Udaipur, IMI New Delhi, NMIMS Mumbai, Institute of Chartered Accounts of India and Shri Ram College of Commerce.

The application of Cost Effectiveness Analysis (CEA) methodology helps in making appropriate choices in health. At present, CEA has a marginal role in health policy making in India. Many health care interventions have been introduced in the country without doing appropriate and contextual CEA. Introduction of various interventions, drugs, and procedures have used CEA methodology in a very limited manner. We have not paid attention to developing adequate capacities in this area and as a result, capacity in this domain remains scarce. Indian health policies have not made it a point to include CEA as a necessary requirement of introducing new technologies and interventions. Over the years India has compromised introduction of new and expensive technologies without doing contextual CEA, and as a result, we have adopted practices which are responsible for passing on an increasing proportion of costs to patients and in the absence of insurance protection to a large section of population, this has led to high OOP expenditures on health.

The recent example of cardiac stents and drugs which were brought under the purview of price control signal that payers may now question the transparency and force providers in making choices more apparent. This indicates an important role and need for CEA. We are now at tipping point. Indian Medical Association (IMA) report of the core-committee for revision of the national list of essential medicines (NLEM) in November 2015 had some interesting observations on this, and I hope they will be taken to their logical end. Among other things, the report suggested:

When more than one medicine are available from the same therapeutic class, preferably one prototype/medically best suited medicine of that class to be included after due deliberation and careful evaluation of their relative safety, efficacy, cost effectiveness.

The observations of the report also suggest that the price of total treatment be considered and not the unit price of medicine. This will require a massive effort of developing system of ascertaining cost of “care cycle” and not just some components of the treatment. This is an important and all stakeholders need complete understanding on this. Fixed Dose Combination (FDC) are not included unless the combination has unequivocally proven advantage over single compounds administered separately, in terms of increasing efficacy, reducing adverse effects and/or improving compliance. The medicine in NLEM will be based at primary, secondary and territory levels of health care according to treatment facilities and training, experience and availability of health care personnel at these levels. These are welcome observations from IMA. We need a strategic plan to ensure CEA capacities are created to achieve these goals.

The CEA analysis is an important instrument to inform various value-based decisions and by using the evidence produced by the CEA helps in giving access to critical medical technologies and interventions. CEA is a well-discussed approach that helps in quantifying the relative value of competing treatments by estimating the additional cost of generating an addition unit of health outcome. And based on this, CEA provides information that allows policy makers to judge whether the incremental benefit is worth the incremental cost. Of course, if we have to start integrating CEA, we have a repository of a lot of global experience in this area and initiating the process can be leveraged on this experience.

Indian Council of Medical Research (ICMR) recently took the lead in organizing a two-day workshop on March 3-4, 2017 for their senior scientists to apprise them about the CEA methodology. In the absence of a centralized agency responsible for conducting CEA, ICMR can play a pivotal role in taking this initiative forward and preparing the vision for next five years by describing areas where CEA could be initiated. Apart from having many advantages of this effort, the tasks would include standardization of methods, addressing various biases that may creep in such analysis, keeping the analysis objective and free from various vested interests, organization structure, and processes. Along with the capacity building, the strategy would also need developing collaborative linkages across various institutions and make the participation of health economists possible in this initiative.

The other stakeholders also have a vital role in the system. For example, private insurance market and IRDA must also contribute to this effort and institute framing guidelines for making CEA of interventions a mandatory requirement for all health interventions. People who buy voluntary insurance spend about Rs 22,000 crore in 2015-16 on covering their hospitalization risks. Government sponsored insurance schemes contribute about Rs 2,500 crores.  Both these put together cover about 36 crores of the population. For both these segments, insurance companies have settled claims to the tune of Rs 21,760 crores in 2015-16. The payers and those who pay premium have right to know whether their contributions are being spent on correct and cost effective medical procedures and interventions. In a system where insurance is growing at CAGR of 17 percent, CEA provides information which payers would need to judge the relative value of competing interventions and opportunity cost of these interventions. Insurers must insist on CEA information to inform their critical decisions.

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