What Is This Thing Called Value?
Rob Abbott, CEO & Executive Director, ISPOR
Economists love to talk about value. The entire field of welfare economics is premised on the belief that the behavior of individuals (and firms) regarding the allocation of scarce resources can be accurately modeled to divine the overall well-being of a society. In health economics, techniques such as cost-effectiveness analysis (CEA) are used to assess the value of a new drug or therapeutic intervention. And of course, the quality-adjusted life-year (QALY) is a key arrow in the health economist’s metaphorical quiver to measure the effectiveness of healthcare interventions, even if it is oft-maligned.
The only problem, or caution, here is that value in the real world is often much more nuanced and difficult to measure than we would like to admit. Peter Drucker, one of the great management theorists of the 20th century, frequently said that the needs, wants, and aspirations of customers were so complicated that they could only be answered by customers themselves. As an example, he famously described a homeless shelter, where the received wisdom about value was defined as nutritious meals and clean beds. In fact, as interviews with the shelter’s homeless customers revealed, while the food and beds were appreciated, they did little or nothing to satisfy deep aspirations not to be homeless. The customers said, “We need a place of safety from which to rebuild our lives.” The shelter threw out their assumptions and rules and began to work with individuals to find out what a rebuilt life means to them and how they can be helped to realize their goal. The point here is to be careful about the underlying assumptions that inform our work, and to get as close to the customer (or patient) as you can to better understand what they value in their therapeutic journey.
"The point here is to be careful about the underlying assumptions that inform our work, and to get as close to the customer (or patient) as you can to better understand what they value in their therapeutic journey."
With the above context, I’m excited to introduce this issue of Value & Outcomes Spotlight that focuses on value assessment, and the QALY in particular. Value assessment is an evolving field that strives to assist policy makers in making decisions about which health services—drug, device, surgery, and so on—should be reimbursed and at what level. This is especially important as healthcare systems move away from traditional fee-for-service to value-based arrangements. To make it even more complicated, there is no singular approach to assessment and value definition that consistently meets the needs of all stakeholders. Payers, for example, think about value differently than patients. The former are particularly interested in managing or containing overall expenditures and demonstrating value for money, whereas the latter are interested in accessing treatments that will improve their lives both quantitatively and qualitatively. As noted earlier, the QALY is not without its critics. The Affordable Care Act in the United States even prohibits the Patient-Centered Outcomes Research Institute from using cost-per-QALY benchmarks. The use of QALYs by policy makers, in the United States and elsewhere, to inform coverage and reimbursement decisions is controversial. Still, there are limits to what any society can sustainably spend on healthcare, and it is useful, perhaps even vital, to gain as much insight as possible on both the quantity and quality of life that different treatment options offer patients.
So, how to move forward?
As the papers in this issue of Value & Outcomes Spotlight make clear, a standard measure of health outcomes that enables comparisons across different disease areas and populations is a good thing. So too, with the valuation of health states in utility measurement. The QALY is a de facto standard in this regard, but it is not perfect. We therefore need to take a clear-eyed view of it (and other assessment approaches) as underlying assumptions about social value, for instance, can result in an inequitable weighting of outcomes. Further, the quality of the data used in calculating a QALY must be high to ensure that the resulting value statements are reliable. The range of costs that are typically considered in a QALY can also be a limiting factor.
"There are limits to what any society can sustainably spend on healthcare, and it is useful, perhaps even vital, to gain as much insight as possible on both the quantity and quality of life that different treatment options offer patients."
It is perhaps most appropriate to take a step back from the QALY in and of itself and consider the broader issue of value assessment and the guiding principles that should inform any approach to try to define value. As my colleague, Peter Neumann, has pointed out, value assessment in healthcare has typically focused on pharmaceuticals rather than services and procedures, even though the latter comprise roughly 70% of health spending in the United States (versus 15% for drugs). This suggests that at a meta level, there is abundant room to apply value assessment in different areas and, in so doing, achieve broad system efficiency and affordability. As to some of the principles that might inform a refreshed approach to assessment, whether directed at drugs or services, it cannot be stressed enough the importance of gathering stakeholder (patient, payer, and other) input throughout the assessment process. This is foundational to any exercise that seeks an accurate definition of value. Building on this, the assessment should include all aspects of the healthcare ecosystem, not simply the drug or therapy. Similarly, a broad approach should be taken to evaluating benefits and costs, and these should be considered over a long-term horizon. Finally, any value assessment should use all available evidence to inform the value decision.
"It is perhaps most appropriate to take a step back from the QALY and consider the broader issue of value assessment and the guiding principles that should inform any approach to try and define value."
ISPOR’s new 2030 strategy includes a specific goal to “lead the definition, measurement and use of value for health and healthcare decision making”. Supporting this goal are strategic objectives directed at refining the definition of value to explicitly reflect the emerging concept of whole health; to identify, create, and advance approaches to improve the measurement and use of value; and to drive the integration of affordability, accessibility, and equity in value-based decision making. As such, the papers collected in this issue of Value & Outcomes Spotlight are especially meaningful to me as we seek to grow our knowledge of the shape of current thought on value assessment. As ISPOR CEO, I feel both a great responsibility and an opportunity to step onto this intellectual frontier and signal to our members and other stakeholders that we are actively shaping the conversation about value—something that lies at the heart of all economic decisions.
