The Increasingly Complex Fourth Hurdle for Pharmaceuticals

There are three known criteria that underlie drug reimbursement decisions: therapeutic value, cost effectiveness and burden of disease. However, evidence from recent reimbursement decisions in several jurisdictions points to residual unexplained variables, one of which may be budget impact. An economic rationale for carrying out budget impact analyses is opportunity cost, measured by the economic benefits foregone by using resources in one way rather than another. Under certain assumptions, cost-effectiveness analysis accounts for opportunity cost while conveying to the decision maker the price of maximising health gains, subject to a budget constraint. However, the underlying assumptions are implausible, particularly in the context of pharmaceutical care.

Although drugs that are cost effective may lead to unambiguous health gains among patient groups for whom the drugs are indicated, the opportunity costs could conceivably lead to a reduction in aggregate health gains, or failure to meet different kinds of equity considerations. The pertinent policy question is where to find the resources to fund new innovations, such as cost-effective pharmaceuticals, or drugs targeting severe diseases. It may be a matter of redeployment of resources across healthcare sectors, cancelling the funding of (older) pharmaceuticals that are less cost effective, or delisting drugs that are cost effective but target less burdensome conditions.