Managing the tradeoffs between minimising

costs and maximising health outcomes

The economics of genomics

Sarina Fisher

Director, Health Economics and Policy

www.TheCIE.com.au

13 November 2014

Health costs have already had a direct hit

on the tax base

Health costs are

consuming a growing

proportion of

resources…

.. and taking up a

growing slice of the

revenue pie,

outcompeting

government funds for

other public services

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Chart 1: Ratio of health expenditure to GDP

Chart 2: Health spending as a % of taxation revenue

Source: AIHW 2014, Health expenditure Australia 2012-13

Future cost of health care: … up up up

Currently >25% of Aust. Government spending for

health, age–related pensions and aged care

All other Government spending is being cut, except

for these

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4% of GDP now

spent on health

alone, set to hit

7%+ by 2049-50

Chart 3: Projected Government spending by category

Source: Treasury projections, Intergenerational Report 2010

Biggest driver of cost growth? .. the things we do

Population and ageing will fuel growth

■ Real health spending on 65+ to rise seven fold

■ Real health spending on 85+ to rise twelve fold

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But it is

increasing

demand for

health

services

that really

takes off

Chart 4: Australian Government spending on health: 2009-10 dollars

Source: Treasury projections, Intergenerational Report 2010

Components of change in health costs

2002-03 to 2032-33 ($bn of 2006-07 dollars)

Disease

Ageing Population Disease

rate

Volume

per case

Treatment

proportion

Price

Cardiovas. 6.39 3.71 -3.18 4.15 0.68 1.49

Respiratory 0.49 -0.03 0.58 12.42 0.00 1.30

Injuries 1.19 2.46 -1.66 4.69 0.00 1.03

Dental -0.14 2.79 -0.11 6.05 0.00 0.44

Mental -0.06 2.20 0.18 4.39 0.00 0.26

Digestive 1.55 2.75 0.36 6.75 0.00 0.19

Neurolog. 8.09 2.98 0.63 4.28 0.00 0.86

Total 37.75 34.38 -2.29 81.30 1.03 8.84

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Almost all of the top 7 diseases driving up costs are

most affected by volume per case

Volume per case is more than double as costly as any

other cost driver

Source: AIHW Disease expenditure projection model

Can genomics help manage growth in volume

per case? .. well yes

Getting more targeted treatments that are most

likely to be effective, reducing the need for ‘more’

■ Finding the right person to benefit from a treatment or

preventative strategy

■ Getting the right treatment and right dosage to maximise gains

and minimise side effects that then need to be managed

Avoiding the treatments that won’t work

Less trial and error prescribing

Less unnecessary exposure to toxicity

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Effective on multiple fronts

Genomics redefines disease at the molecular level.

This information is:

■ predictive, able to identify patients that are predisposed to

certain diseases and their reactions to certain treatments

■ preventative, able to reduce the risk of developing disease,

minimise unwanted side effects, lower toxicity due to ineffective

treatments, and enable preventative strategies to be targeted at

people most at risk, and

■ tailored, stratifying patients according to their genetic makeup

to enable specific diagnosis confirmation, classification or

exclusion to select the right treatment for right person, at the

right stage of their disease.

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Increasingly becoming part of the health

policy landscape

PBS listings increasingly becoming contingent on

health outcomes

New indications are being added as evidence

becomes available

■ Eg. Herceptin listed in 2001 for later stage cancer, extended

in 2006 for early stage, and extended in 2012 for

neoadjuvant therapy for patients with HER-2-positive locally

advanced breast cancer

More tests are being listed on the MBS to

complement access to PBS listed medicines

subject to genetic profiling

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Opportunities for better outcomes

Ineffective treatments can often be avoided.

■ In the case of cancer, treatments are typically in the order of

$100,000 per patient each year

Patients can be rewarded with unprecedented

survival outcomes

Patients can be spared from painful and toxic

treatments that do not deliver therapeutic value

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Genetic based approaches in the news..

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Genomics now embedded in drug pipeline

Across all diseases, 12%-50% of new drugs in the

pipeline are targeted medicines

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Chart 4: Oncology treatment modalities in top pharmaceutical markets, 2003–2013

Source: PhRMA, 2014, ‘Cancer medicines: value in context’, PhRMA, Spring 2014, phrma.org

Genetics research the key winner in medical

research funding in Australia

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0

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Neurogenetics

Medical Genetics

Genotyping

Genomics

Genetic Screening/Testing

Genetic Expression

Genetic Epidemiology

Genetic Engineering

Genetic Development

Genetic Counselling

Epigenetics

Cancer Genetics

Other

$ m

illio

n

NHMRC funding for human genetics and genomics issues by type of research

HGP: making it cost effective and feasible

10 years on from

the HGP

Now almost 3,000

genes with known

disease causing

mutations

Over 100 drugs

available with

pharmacogenetic

information on

label

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Health expenditure as a per cent of taxation revenue

HGP

(1989)

Last sequence

(2000s)

10 years on

(2010s)

Cost to generate a

human genome

sequence

US$1bn $US10-50m $US$3-5k

Time required 6-8 yrs 3-4 months 1-2 days

Number

sequenced

0 1 ‘000s

Genes with known

disease causing

mutations

53 1474 2972

Genes with known

molecular basis

61 2264 4847

Pharmagenomic

drugs

4 46 104

Challenges aplenty

Making the case to Government

■ Always asked to pay more (PBS, MBS, etc), hard to see the

substitution of services

The case to clinicians

■ Need to experience a personal patient experience

■ Education and awareness possibly needed on the

availability of new tests relevant to treatment choice

■ Breaking habits is always hard, and oncologists/surgeons

will always believe they ‘personalise’ treatment

■ In some areas (eg/ breast cancer) genomic based

approaches supports everyday clinical practice, while

genetic testing rates for new cancer cases for colorectal and

lung cancer range from 35% to 45% of new cases. www.TheCIE.com.au14

Challenges aplenty (continued)

Testing capabilities

■ Economies of scale are real and present and drive

investment decisions at the laboratory level

■ Skills and resources for interpretation often cited as a

challenge

■ Different tests pick up different mutations: not like there is

one simple solution

It all takes time

■ HER2 testing has long been the standard to care yet 7 years

after it was mandated was it listed on the MBS for a rebate

■ MSAC is costly and timeconsuming

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But can be well worth it

Economic gains can be substantial

Australian Centre for Health Research recently

estimated the value of genetic testing in Australia at

between $2.1 billion and $5.5 billion over 5 years.

Avoiding ‘trial and error prescribing’ adds another

$360 million to- $720 million in benefits

Source: Australian Centre for Health Research 2011,

Healthcare in Australia: Prescriptions for

Improvement

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It’s not just us:

Overseas drug reimbursement models are

demanding health outcomes evidence that

increasingly only genomic approaches will be able to

deliver

Germany: the Pharmaceutical Market Restructuring

Act links pharmaceutical pricing to therapeutic

benefit scores

United States: Obamacare (USA Affordable Care Act)

makes the change from rewarding volume and

intensity to rewarding quality and value

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The US ACA 2010 will drive changes in

diagnostics and drug development

The ACA establishes guaranteed issue, meaning that

insurers offering insuring in either the group or individual

market must provide coverage for all individuals who

request it

The law prohibits issues of health insurance from

discriminating against patients with genetic diseases by

refusing coverage because of pre-existing conditions

ACA offers additional protections for patients with

genetic diseases by establishing that certain health

insurers may only vary premiums based on a few

specified factors (age, geography), prohibiting the

adjustment of premiums because of medical conditionswww.TheCIE.com.au18

Necessity of accuracy and less uncertainty

Governments clearly want to prioritise access to

health care, and are looking for ways to embedded

an outcomes focus

Changes in the US via the ACA, is set to drive

changes in global pharma and drug

discovery/development which will only reinforce what

is happening in the Australian policy and funding

environment now

Now and into the future, genomic based approaches

will determine the value of treatment to patients, and

be the gatekeeper of access to Government funded

tests and treatmentwww.TheCIE.com.au19

Sarina Fisher

Director, Health Economics and Policy

+61 2 9250 0800

+61 418 245 560

sfisher@thecie.com.au

www.TheCIE.com.au