Shining Steel or Bastard Science?

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Shining Steel or Bastard Science?
Economics and Health Care Decisions
Karl Claxton
Department of Economics and Related Studies and
the Centre for Health Economics University of York
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Social choice in health

• Which health technologies, at what price and how
  much evidence?
• Who will live a little longer
• Who will die a little sooner

wickedness or folly or more likely both,
ethically illiterate as well as socially
divisive, responsible for the perversion of
science as well as of morality and are contrary
to basic morality and contrary to human rights.
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Economics and social choice

• Definition of social welfare
• Society viewed as a collection of individuals
• Only individual preferences count
• Criteria for improvement
• Improve social welfare if gainers could
  compensate losers
• Means of measurement
• Market prices represent social values
  (compensation required)
• Non marketed goods can be valued as if a market
  exists
• Make claims of what is efficient
• Strength and legitimacy of the prescription rest
  on the strength and the legitimacy of the
  assumptions

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Some implications

• Heath care programmes should be judged in the
  same way as any other proposed change. The only
  question is do they represent a potential Pareto
  improvement not do they improve health outcomes.
  It is possible that a programme may increase the
  health of some but reduce the health of others.
  If those that gain health outcome can compensate
  those that lose health (measured by individual
  willingness to pay) then the programme may be a
  potential Pareto improvement even if the health
  outcomes overall are lower.
• Mark Pauly.

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But?

• And he looked up and saw the rich putting their
  gifts into the treasury and He saw a poor widow
  putting in two small copper coins mites. And he
  said, Truly I say to you, this poor widow put
  in more than all of them for they all out of
  their surplus put into the offering but she out
  of her poverty put in all that she had to live
  on. Luke 21, v1-4, NAS.

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Mark or Luke?
Perfectly disgusting.A state can be Pareto
optimal with some people in extreme misery and
others rolling in luxury, so long as the
miserable cannot be made better off without
cutting into the luxury of the rich. Pareto can,
like Ceasars spirit, come hot from hell Sen
Those that object to the market object to
freedom itself Friedman
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If not the invisible fist?

• Specify explicit social welfare function
• What and who counts?
• What weights should be used?
• How can any social welfare function claim
  legitimacy
• Who should decide?
• What process should be used?
• Maybe Freidmans got a point after all?
• Paternalism at best
• Lack of accountability and danger of dictatorship

Liberty or leviathan?
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Legitimate institutions and process

• Accountable higher authority (principal)
• Task of balancing competing claims, liberty and
  social justice
• Devolves responsibility and resources to meet
  specific objectives
• Devolved authority (agent)
• Asked to meet explicit (necessarily narrow)
  objectives
• Given the resources to do the job
• Agent doesnt meet all the objectives of the
  principal
• Impossibility of expressing an explicit social
  welfare function
• Observe the implications of some latent but
  legitimate welfare function
• Modest claims based on implied social values
• Legitimacy of any claim rest on the legitimacy of
  institutional arrangements

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Which technologies, at what price?
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Price and value?
Price
Value of the technology P.Q
P
All value goes to the private sector No net
health benefits to the NHS
Q
Quantity
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Will the NHS ever benefit?
Generic entry at year 15 p lt p
Total value
Private share
NHS share
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Have your cake but never eat it!?
Accept pgtp during patent because pltp when
generics enter
Private share
Total value
NHS share
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How should we share value?

• Should the private sector get all the value?
• We dont care who gets it
• No subsidies or publicly funded research and
  development
• But it is legitimate to care
• NHS should get some of the value
• Some incentives for early uptake
• How to share?
• Explicit rules that mirror other markets
• A free choice of price but with associated
  guidance
• Preserve monopoly rights during patent period
• Avoid games (commitment, hold up and
  politicisation)

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Price and guidance?
Price
P1
P2
P3
S1
S2
S3
Q1
Q
Q2
Quantity
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Are other deals possible?

• PltP for Q exists which is mutually beneficial
• But how would negotiations turn out?
• Public sector accountable and transparent
• Public, political and interest scrutiny
• What is the credible threat?
• Clear predictable signals and explicit rules

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Why is evidence valuable?
How much evidence?
Whats the best we can do now?
Could we do better?
Maximum value of more evidence is 2 QALYs per
patient
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Adopt the new technology?
Reject the technology
Adopt new technology
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Value of additional evidence
Reject the technology
Adopt new technology
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Coverage (guidance) with evidence?

• Questions to ask
• Is additional evidence needed?
• What type of evidence is needed?
• Can this evidence be provided once approved?
• What type of research is possible?
• Registry no control group
• How and who should pay?
• Sponsor
• Promises to provide the evidence?
• Public sector
• Other more valuable priorities (without a
  sponsor)
• Should account for research costs (price
  discount)
• Price so additional research not needed

20
Coverage without evidence?

• Coverage with evidence not possible
• Sponsor unwilling or unlikely to provide it
• Type of research needed is not possible
• Early approval?
• Net benefits of early access
• Evidence base is least mature
• Impact on future research
• Incentives for manufacturers
• Ethics of experimental research
• Compare costs and benefits to all patients?
• Net benefit of access to the technology
• Value of the evidence forgone

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Benefits of early access
Adopt the technology
Reject the technology
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Value of evidence forgone
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Reduce the price
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Role of cost-effectiveness analysis?

• Cost-effectiveness analysis (and NICE) has
  nothing what so ever to do with cost
  containment!!
• Expresses legitimate collective demand for health
  technologies
• Does not prescribe social welfare
• Individual compensation
• Simple sum of consumer and producer surplus
• Reflects values implied by legitimate social
  process
• Accountability, debate and progressive change

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The role of economists?
Those that object to the market object to
freedom itself Friedman
If economists could manage to get themselves
thought of as humble, competent people, on a
level with dentists, that would be splendid!
Keynes
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Son, be a dentist (Orin, little shop of horrors)

• Observe implied social values
• Capture more than can be imagined in all our
  philosophy
• Critically reflect back the implications
• Bourgeois apologists?
• Explicit social and scientific value judgments
• Accountability, democratic debate and progressive
  social change
• Social legitimacy rests with the institutions and
  processes
• Are they legitimate not are they perfect
• Contribute to progressive change
• Not legitimate and progressive change is not
  possible?
• Youve no business being a dentist
• By any means necessary