Developing a Value Framework: The Need to Reflect the Opportunity Costs of Funding Decisions

TY - JOUR

T1 - Developing a Value Framework

T2 - The Need to Reflect the Opportunity Costs of Funding Decisions

AU - Sculpher, Mark

AU - Claxton, Karl

AU - Pearson, Steven D

N1 - © 2017, International Society for Pharmacoeconomics and Outcomes Research (ISPOR). This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy.

PY - 2017/2

Y1 - 2017/2

N2 - A growing number of health care systems internationally use formal economic evaluation methods to support health care funding decisions. Recently, a range of organizations have been advocating forms of analysis that have been termed "value frameworks." There has also been a push for analytical methods to reflect a fuller range of benefits of interventions through multicriteria decision analysis. A key principle that is invariably neglected in current and proposed frameworks is the need to reflect evidence on the opportunity costs that health systems face when making funding decisions. The mechanisms by which opportunity costs are realized vary depending on the system's financial arrangements, but they always mean that a decision to fund a specific intervention for a particular patient group has the potential to impose costs on others in terms of forgone benefits. These opportunity costs are rarely explicitly reflected in analysis to support decisions, but recent developments to quantify benefits forgone make more appropriate analyses feasible. Opportunity costs also need to be reflected in decisions if a broader range of attributes of benefit is considered, and opportunity costs are a key consideration in determining the appropriate level of total expenditure in a system. The principles by which opportunity costs can be reflected in analysis are illustrated in this article by using the example of the proposed methods for value-based pricing in the United Kingdom.

AB - A growing number of health care systems internationally use formal economic evaluation methods to support health care funding decisions. Recently, a range of organizations have been advocating forms of analysis that have been termed "value frameworks." There has also been a push for analytical methods to reflect a fuller range of benefits of interventions through multicriteria decision analysis. A key principle that is invariably neglected in current and proposed frameworks is the need to reflect evidence on the opportunity costs that health systems face when making funding decisions. The mechanisms by which opportunity costs are realized vary depending on the system's financial arrangements, but they always mean that a decision to fund a specific intervention for a particular patient group has the potential to impose costs on others in terms of forgone benefits. These opportunity costs are rarely explicitly reflected in analysis to support decisions, but recent developments to quantify benefits forgone make more appropriate analyses feasible. Opportunity costs also need to be reflected in decisions if a broader range of attributes of benefit is considered, and opportunity costs are a key consideration in determining the appropriate level of total expenditure in a system. The principles by which opportunity costs can be reflected in analysis are illustrated in this article by using the example of the proposed methods for value-based pricing in the United Kingdom.

KW - value frameworks

KW - opportunity costs

KW - QALYS

KW - value-based pricing

U2 - 10.1016/j.jval.2016.11.021

DO - 10.1016/j.jval.2016.11.021

M3 - Article

C2 - 28237201

SN - 1098-3015

VL - 20

SP - 234

EP - 239

JO - Value in Health

JF - Value in Health

IS - 2

ER -