Value of medicines

What is the issue:

Ensuring the Government and the Australian community gain from the broad health, social and economic value and wider community benefits of new and emerging medicines, vaccines and biotherapeutics.

Why is it important:

A healthy population leads to a strong and healthy economy – no more apparent than Australia’s recent experience with vaccination against COVID-19. A healthy population enhances wellbeing, employment, productivity gains, leading to second order benefits (eg. Government tax revenue and less spending on social services).

Recommendations:

  1. It is critical that government policies encourage investments in the medicines industry, facilitate broader research programs and enable rapid and efficient access to new treatments when they become available.
  2. Government must consider the broader value of medicines to ensure that the framework for the future of medicines and the medicines industry delivers the incentives needed to produce a healthy population for the next 20 years. As an element to this, the Government must implement the recommendations of the House of Representatives Inquiry into access to novel drugs and innovative medical technologies1 and embrace the opportunity that the HTA Review can bring in terms of true reform in reimbursement decision making.
  3. While needing to broaden the current definition of value, the Government must also raise the implicitly accepted threshold for the incremental cost effectiveness ratio (ICER) for vaccines to be more in line with medicines.

Background

The value of medicines derives not only from the health outcomes that they deliver but also from the broader non- health impacts to our society, the community and the economy. This depends on timely medicines access through regulatory and reimbursement processes and a stable and predictable business operating environment to encourage investment.

Medicines generate broader economic value to the Government through health and wellbeing and through second round effects of improving productivity, increasing GDP, generating government revenue through income tax collection and reducing expenditure on welfare benefits.

In Health Technology Assessment (HTA) terms, this value is often expressed as an incremental cost effectiveness ratio (ICER) expressed as Cost/Quality Adjusted life year (QALY). Recent 2021 research has shown that the reimbursement body, the Pharmaceutical Benefits Advisory Committee (PBAC) has valued vaccines at an implicit ICER of 33% compared to the implicit value (ICER) it places on medicines2.

Medicines Australia’s Position

Benefits to Patients:

Recent research (2019) has found that pharmaceutical innovation was responsible for a 75 per cent decline in the premature mortality rate before the age 85, and a 53 per cent reduction before the age of 80. A key takeaway from this research was that almost all (95 per cent) of the 1998 and 2015 decline in premature mortality rates were due to pharmaceutical innovation3.

Further research confirms that early and effective treatment may help to keep patients out of hospital, reduce dependence on welfare benefits, enable participation in the workforce or school4.

The value of innovative medicines is also illustrated by the changes in morbidity/mortality in patients with diseases where there have been significant advances in treatment since 2018 (eg. CAR-T therapies for some types of blood cancers; immunotherapies for various solid tumour cancers, Hepatitis-C treatments and COVID-19 vaccines and treatments).

Key Facts:

Reducing the overall burden of disease and premature death

  • Pharmaceutical innovation is responsible for a 95% decline in premature mortality before the age of 90, and 57% before the age of 805.
  • Almost half (48%) of the increase in mean age at death from cancer between 2008 and 2018 was due to the launch of new cancer drugs
  • US data shows that COVID-19 vaccination reduced deaths by 78% and hospitalisations by about 90%6

Medicines Australia Recommendation:

  • See Recommendation 1 and 2

Issues for the role of vaccines and medicines in Preventative Health:

Medicines and vaccines play a pivotal role in the primary, secondary and tertiary prevention of illness and disease7. For example, the World Health Organization (WHO) defines immunisation as one of the most successful and cost-effective health interventions ever implemented8, making Australia’s National Immunisation Program (NIP) one of Australia’s great health-related achievements.

The National Prevention Health Strategy 2030, coupled with the National Immunisation Strategy 2019-2024, aims to expand and improve the NIP. While this is helpful, until the value given in determining the cost effectiveness of vaccination is increased to better compare with the value given to medicines, we may see a future with a good strategy, but fewer funded vaccines to support that strategy.

Key Fact:

Australians recognise the importance of vaccination by having among the highest vaccinations rates in the world for either childhood immunisation or against COVID-19

Medicines Australia Recommendation:

  • See Recommendation 3
  1. https://www.aph.gov.au/Parliamentary_Business/Committees/House/Health_Aged_Care_and_Sport/Newdrugs/Report
  2. https://www.shawview.com/_files/ugd/8a9719_c61751a436ac49638ceed8b75cbf62af.pdf
  3. Measuring the impact of pharmaceutical innovation in Australia 1998-2018 – Lichtenberg 2019 available at www.medicinesaustralia.com.au
  4. Schofield, D et al, ‘Medicines Deliver Value for Patients and the Community’, Medicines Australia occasional paper series, paper 6, from report by Professor Schofield, ‘Measuring labour productivity and the benefits of interventions …’ 2016.
  5. Measuring the impact of pharmaceutical innovation in Australia 1998-2018 – Lichtenberg 2019 available at www.medicinesaustralia.com.au
  6. https://www.commonwealthfund.org/blog/2022/impact-us-covid-19-vaccination-efforts-march-update
  7. Australian Institute of Health and Welfare 2020. https://www.aihw.gov.au/reports/australias-health/australias-health-2020-in-brief/summary
  8. World Health Organisation, Global Immunisation Vision and Strategy 2006-2015. Available at: http://www.who.int/immunization/givs/en/;AUS 221. Canberra: AIHW.
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