NICE cost effectiveness for public health

NICE uses cost−utility analysis (CUA) as its main method for assessing cost effectiveness. This method expresses the outcomes of an intervention in terms of QALYs.

The QALY combines information on life expectancy and health-related quality of life.

A number of factors are considered when measuring someone’s quality of life, in terms of their health. They may include, for example, the level of pain the person is in, their mobility and their general mood. The quality of life rating can range from negative values below 0 (states regarded as being worse than death) to 1 (which represents the best possible health state). A value of 0 is equivalent to being dead.

CUA using the QALY was originally adopted to ensure baseline comparability across the UK healthcare sector and across NICE’s programmes (that is, technology

appraisals and clinical guidelines). The Public health methods manual (NICE (2009)) states it also helps to prioritise which recommendations should be implemented locally. Wanless (2004) suggested that: “To achieve the objective of allocating funding more efficiently between health care and public health, it is vital that similar analytic[al] methods be used.”

In public health, it is acknowledged that CUAs are not appropriate for some topics and other methods (such as cost benefit analysis (CBA) or cost consequence analysis (CCA)) or outcomes (such as life years gained, cases averted) may be considered.

However, the adoption of different methods and outcomes imposes considerable limitations on baseline comparability across public health interventions as well as across NICE’s different types of guidance.

Aims of NICE assessment of cost effectiveness

Health economics is about using resources efficiently to improve the population’s health. It forms an integral part of the public health guidance development process in determining what can be considered cost effective. The Public Health Interventions

34 Advisory Committee (PHIAC) and the Programme Development Groups (PDGs) are required to make decisions informed by the best available evidence of both

effectiveness and cost effectiveness.

Economic evaluation compares the costs and consequences of alternative courses of action. The cost effectiveness of an intervention or programme is assessed to ensure maximum health gain from the available resources which are finite. If resources are used for interventions that are not cost effective, the population as a whole gains less health benefits (that is, there is a greater ‘opportunity cost’).

However, a balance must be struck between efficient allocation of resources on the one hand and an equitable allocation of those resources on the other.

Public health recommendations are based on the estimated cost of interventions and how that relates to the expected health benefits (that is, recommendations should be cost effective). Recommendations are not made on the basis of the total cost or the resource impact of implementing them. So, if the evidence suggests that an

intervention provides significant health benefits and the cost per person is

acceptable, it is recommended, even if it would be expensive to implement across the whole population.

Although commissioners need to know the resource and cost implications of implementing NICE guidance, this assessment is not within the remit of the

economic analysis. NICE undertakes a separate cost-impact analysis after the public health guidance is published and this forms part of the implementation tool set.

Components of economic analysis

The NICE approach to cost effectiveness typically involves two steps. The first step entails a review of economic studies in the published literature. The second step involves the adaptation or development of an economic model. These two steps are briefly described below.

Economic review

The review of economic studies is systematic but focused. It mirrors the method, including critical appraisal, and scope of the effectiveness reviews. It provides a

35 check on whether effective interventions have already been found to be cost

effective and it helps to determine whether there is a need for additional economic analysis. If a high quality economic study has been published that addresses a structured public health question and is relevant to current practice, then further economic modelling will not be necessary.

Economic model

Some further analysis is usually undertaken as the health economic literature is rarely comprehensive or conclusive enough. Additional economic analyses may involve adapting an existing model or developing a new one. Many of the costs and benefits of public health interventions accrue a long time into the future. To reflect these longer time frames (including a lifetime horizon) extrapolation modelling is often necessary. Where the impact of the intervention beyond the results of the studies is uncertain, the model should explore the impact of different assumptions about future intervention effects. Modelling is also necessary where intermediate outcomes are used rather than health related quality of life and survival.

Given the broad scope of much public health guidance, it is not possible to model the cost effectiveness of every intervention or question. Various criteria are taken into account to decide which interventions should be modelled. The main ones are listed below:

Likelihood of influencing a recommendation Significant health and resource impact

Degree of uncertainty in the cost-effectiveness literature and likelihood the model will clarify matters

Availability of sufficient data to allow useful modelling.

Currently, NICE uses the following ‘reference-case’ assumptions as a basis for the cost-effectiveness analysis:

Table 1 Summary of the public health reference case

36 Element of assessment Reference case

Defining the decision problem Scope developed by NICE

Comparator Interventions routinely used in the public

sector, including those regarded as current best practice

Cost perspective Public sector, including NHS and PSS Outcome perspective All health effects on individuals

Type of economic evaluation CEA (primary), CCA or CBA (secondary) Synthesis of evidence on outcomes Systematic review

Measure of health effects QALYs

Source of HRQL data Patients and/or carers

Valuation of HRQL General public

Discount rate Annual rate 3.5% on costs and health

effects

Equity weighting Equal weight regardless of individual characteristics

Time horizon Most commonly life-time

Departures from the reference case may be made with the agreement of CPHE. The reasons why the reference case was not followed must be given in the report.

Economic evidence and guidance recommendations

The purpose of the economic analysis is to inform the public health guidance recommendations.

If there is strong evidence that an intervention dominates the alternatives (that is it is both more effective and less costly) it should be recommended. If one intervention is more effective but more costly than another then the incremental

cost-effectiveness ratio (ICER) should be considered. Here the cost per QALY gained should be compared with the next most effective alternative. This involves

calculating the difference in mean cost divided by the difference in mean QALYs for

37 one intervention compared with the next most effective alternative.

If one intervention appears to be more effective than another, PHIAC/the PDG will have to decide whether any increase in cost associated with the increase in

effectiveness represents reasonable value for money. In doing so it should refer to the principles outlined in NICE’s report Social value judgements: Principles for the development of NICE guidance (NICE 2008a). It states that:

If the intervention is more effective and less costly than the comparator (that is, dominant) it should be recommended.

Interventions with an ICER below £20,000 per QALY are considered to be cost effective.

ICERs between £20,000−£30,000 may be considered an effective use of resources if certain characteristics are satisfied. Judgements about the acceptability of the intervention as an effective use of resources will specifically take account of the following factors:

The degree of uncertainty around the ICER. Advisory bodies should be more cautious about recommending an intervention when they are less certain about the ICERs presented in the

cost-effectiveness analysis.

The presence of strong reasons suggesting that the change in quality of life hasn’t been adequately captured and may therefore misrepresent the health gain.

When the intervention is an innovation that adds demonstrable and distinct substantial benefits that may not have been adequately captured in the measurement of health gain.

ICERs above £30,000 require an increasingly stronger case with regard to the above factors if they are to be considered an effective use of resources. Decisions about whether to recommend interventions should also take into account the need to prevent discrimination, to promote equality and to consider the trade-off between efficient and equitable allocation of resources.

38