Squaring the circle between costly innovation and limited healthcare budgets

9th June 2015

Medical innovation that is delivering hope for patients is causing anxiety for payers. Restructuring health systems with the patients at the centre is the route to delivering better care and saving costs, says Mark Pearson of OECD

Breakthrough products being delivered from pharma and biotech pipelines are transforming treatment and outcomes across a swathe of indications.

To cite a few recent advances: the first approval of an immune checkpoint inhibitor for treating metastatic cancers; the first gene therapy approved in a regulated market for a rare inherited disorder; a clutch of new drugs that get to the root of Hepatitis C infection; an antibody for reducing LDL-cholesterol in people who do not respond to statins; a targeted treatment for a subset of cystic fibrosis patients.

This – far from exhaustive – list is testimony to the innovative force of the industry. These drugs are making a reassuring difference to patients who before had limited treatment options. But at the same time, EU health authorities are becoming nervous and unsure how they will stretch their budgets to accommodate these new therapies.

It is, says Mark Pearson, Deputy Director, Employment Labour and Social Affairs, OECD, a seemingly impossible balancing act. “In the past we talked about single diseases, now with the rise of targeted therapies this is broken down to multiple diseases, and smaller pools of patients are treated.”

As a result, economies of scale are evaporating. “We are going to see expensive products, both because they will be for fewer people and because there will be less competition,” Mr Pearson says.

Other factors are playing into this mix. Social change, the Internet, and the rise of the informed patient, means people are losing faith in experts. As a result, “Physicians can’t ration in the same way – people will insist on getting access to treatments,” says Mr Pearson.

The whole is calling the existing system for developing and reimbursing drugs into question. “How can we be sure of getting the sort of innovation we want at the price we want?” Mr Pearson asks. “We can’t just blame the pharma companies when all they are doing is responding to the way that the incentives are set up currently.”

Yet it is undoubtedly the case that breakthrough medicines have the potential to reduce costs. Recent dramatic improvements in treating Hepatitis C infection – the current sub-optimal treatment of which is a huge overhead for Europe’s health systems – being but one case in point.

Removing the silos

The sad fact is that our health systems are not structured to realise the win:win of simultaneously improving health and reducing overheads. “There may be better quality care, but the silos are so deeply entrenched it is not possible to identify the savings in costs,” Mr Pearson says.

It will require a test of nerves to change this. And policy makers will have to accept the returns may not materialise for some time. The starting point must be to put the patient at the centre, Mr Pearson believes. “For a start, it is naïve to think the model of the patient as passive recipient can be sustained. People expect to be at the centre, to have the means to make their own judgments and to be involved in decision-making.”

Patient-centered health systems will by default focus on what matters to patients, to assess their performance by outcomes rather than by activity. “The logic will demand health systems measure themselves by outcomes, not merely record they treated someone,” says Mr Pearson.

Investigate disparities

This will call for a new metrics, with Mr Pearson suggesting a good place to start would be in investigating why the health systems of different member states show such large variation in costs and outcomes, not only taken as a whole, but also from one intervention to another.

The joint OECD-European Commission report ‘Health at a Glance: Europe 2014’ once again pointed to the disparities. Although life expectancy in EU member states has increased by more than five years on average since 1990, the gap between those with the lowest life expectances – Latvia, Lithuania, Bulgaria and Romania – and France Spain and Italy with the highest, remains at around eight years. Unpicking the reasons for this would present a roadmap to increasing sustainability.

In addition, work in progress to develop methods for capturing patient reported outcomes also promises to make an important contribution.

As Mr Pearson notes, “We are really bad at showing value in health care. Yet we manage this in other areas of our lives. The key question for the future has to be, ‘Does the person value the service?’