Did the price of pharmaceuticals really rise by 5.6% in Q1 2018?

The Australian Bureau of Statistics (ABS) Consumer Price Index (CPI) Mar 2018 summary notes a +5.6% increase in the price of pharmaceutical products as contributing to the overall +0.4% rise reported for the quarter. The CPI is the official measure of inflation in the Australia economy and is the non-seasonally adjusted ‘All groups CPI’ weighted average of prices paid for goods and services in eight capital cities.

The CPI is made up of 11 expenditure groups weighted by household spending patterns to produce aggregate measures of price change. Traditionally, these weights have been sourced from the ABS Household Expenditure Survey and updated every 6 years. Housing and Food and non-alcoholic beverages groups are the two most significant components of household expenditure.

Pharmaceutical products are included in the Health group together with costs associated with medical and hospital services, and private health insurance premiums. The detailed ABS report for the March 2018 quarter reveals that the rises observed in pharmaceuticals, +5.6% (and medical and hospital services, +1.5%) are due to the decrease in the proportion of patients who qualify for safety net thresholds under the Pharmaceutical Benefits Scheme (PBS) and Medicare Benefits Scheme (MBS), respectively. This is due to the annual January 1 reset of threshold amounts for the PBS and MBS, as well as co-payment indexation for PBS.

This phenomenon shows why seasonally adjusted CPI figures are also presented. The included graph clearly shows a positive increase in spend on pharmaceuticals in the first quarter of each year. Note: the Mar 2017 CPI rise in pharmaceuticals was +4.9%. Seasonal adjustments are made to control for this type of systematic, calendar related event.

After seasonal adjustment, the Health group household expenditure in Q1, 2018 grew by +0.8% with the main contributor being medical and hospital services. The weighting of the Health group within the CPI has been increasing over time. In the most recent readjustment the group weight rose to 5.43%, although certain population subgroups, namely self-funded retirees and age pensioners are spending over 10% of household expenditure on health.

The weighting rise was driven by medical and hospital services, following increases in private health insurance premiums over the relevant period. This rise was noted to have been partially offset by a fall in the expenditure share of pharmaceutical products. Clearly, the price of pharmaceuticals in Australia has not been rising, but actually decreasing over time.

Domo Arigato Dr. Roboto [originally published in PulseLine]

The word ‘robot’ was introduced into the English language by writer Karel Capek in his 1920’s play ‘R.U.R.’ (Rossum’s Universal Robots). ‘Robota’ means forced labour in his native Czech. Although entities with robot-like features have been depicted in tales since prehistoric times and modern pop culture is littered with them!

The first use of robots in medicine, however, came much later. Robotic surgery originated alongside minimally invasive surgical techniques in an effort to improve sight of the surgical field, as well as extend dexterity beyond that of a surgeon’s hands in the confined spaces of the body. Surgical robots helped provide the fine-motor control and magnified three-dimensional imaging and depth perception generally lost in keyhole surgery.

In 1985, a surgical robot was developed for neurosurgical biopsies, and this was quickly followed by specifically designed equipment to assist in prostate removal and total hip replacements. The da Vinci® robot evolved out of work with telemedicine, and enabled a surgeon to work remote from the patient while directing robotic arms via controls and a display. It was FDA approved for laparoscopic procedures in 2000.

While robotic surgery offers considerable technical advantages over traditional laparoscopy, the improvement in patient outcomes measured in trials ranges from significant to marginal at best. When looking at clinical studies, the appropriate comparison is laparoscopic versus robotic-assisted, not open technique, which generally has a higher complication rate. Disadvantages of robotic surgery, in addition to the up-front capital and maintenance costs, include increased set-up and operating times, and the requirement for additional training. Cost is the key factor in any debate regarding the place of robotic surgery in modern practice.

Handmer and colleagues conducted a randomised study to demonstrate this point. They showed that despite the wide-spread ‘hype’ and adoption of robotic-assisted laparoscopic radical prostatectomy (RALP), Australian Fellowship-trained laparoscopic radical prostatectomy (LRP) surgeons achieve comparable functional outcomes to their robotic-assisted peers. Their advice to patients is to select a surgeon based on experience and trust rather than the ‘tech’ they use.

Private health facilities were early adopters of robotic technology in Australia with a da Vinci system installed at Victoria’s Epworth Hospital in 2003 to perform robotic-assisted radical prostatectomies. In 2008, the Royal Brisbane and Women’s Hospital (RBWH) became the first public hospital in Australia to have a da Vinci Surgical Robot purchased by government funding ($AU 3.5 million, at the time) and thus making the technology available to public patients. Hall and colleagues conducted a cost analysis at the RBWH comparing open radical prostatectomy (RRP) and robotic-assisted radical prostatectomy (RALP) and found, due to the activity-based funding formulas in place, the average expense of a RALP admission was approximately $AU 12K while a RRP cost the hospital $AU 2K on average. As indicated above however, that the readmission rate and associated costs for the open group were significantly higher than that of the robotic group. Although not included in his analysis, Hall surmised that these readmissions would impact waiting lists and so ultimately cost the hospital.

To justify its cost, robotic surgery is more suitable for patient groups where there is clear evidence of greater benefit, such as obese patients and those with cancer of the lower rectum, where space is extremely limited. Total knee replacement surgeries, where alignment and positioning of the prosthetic is critical to long-term performance and quality of life. The most obvious use for and benefits of robotic surgery in a country as large as Australia is as a technological add-on for telemedicine in remote and rural areas. For public patients in NSW, the wait has been a long one with robotic assisted procedures only becoming available in 2017 with the opening of the Surgical & Robotics Training Institute at Sydney’s Royal Prince Alfred Hospital. For many patients, robots will continue to be in the realm of science fiction into the foreseeable future.

PulseLine is a digital-first publication dedicated to providing news, commentary and insights on the Australian health landscape.


Getting The Best Value For Your Buck [originally published in PulseLine]

If you work in the Life Sciences then you have probably seen the term ‘value-based healthcare’ increasingly used.

Oxford-based, Professor Muir Gray of the Nuffield Department of Primary Care Health Services, describes the genesis of this movement in the United Kingdom as occurring in the aftermath of the 2008 Global Financial Crisis. The fiscal constraints on healthcare spending over previous decades that had spawned evidence-based decision making, such as the Cochrane collaboration, health technology assessment and quality improvement, were no longer adequate. The pressure on the system forced a new approach to maximising the value generated from the available, and often diminishing, resources.

An example of this approach in action is the recent National Institute for Health and Care Excellence (NICE) Guidance that recommends stopping the annual cystoscopy used to monitor bladder cancer patients for disease recurrence. The rationale being that patients will return if/when they experience symptoms, and there is no evidence on a population level that annual monitoring saves lives. Many other interventions that could be reduced without adversely impacting population health have been identified as part of a Choosing Wisely campaign. This same initiative was launched locally in 2016 as Choosing Wisely Australia and is being led by Australia’s medical colleges, societies and associations.  

Value-based healthcare can be formally defined as a healthcare delivery model in which providers, including hospitals and physicians, are paid based on patient health outcomes. Less formally, the intent is to ‘achieve the best outcomes, do it with minimal cost and do not sacrifice quality’. The policy has now reached our national agenda with the recently published Australian Healthcare and Hospitals Association Blueprint for a post-2020 National Health Agreement titled ‘Strategies for outcomes-focused and value-based healthcare’. They advocate a whole of Government approach to primary prevention; the availability and utilisation of real-time, linked data; and most contentiously, the establishment of an independent national health authority distinct from the Commonwealth, and state and territory health departments, reporting directly to COAG, to support integration of health services at a regional level, and all within a 2-year time-frame!

In 2015, Anthony Scott, a NHMRC Principal Research Fellow based at the University of Melbourne, considered options for introducing value-based healthcare concepts into Medicare. Achieving value for money is difficult as the market for healthcare is unique: patients do not know the value of the care they receive; Governments become involved to address market failures and ensure equity of access; and resources are frequently misallocated. Scott considers best practice Medicare rebates for specialists; pay-for-performance for GPs and hospitals; re-assessing which items are included in the Medicare Benefits Scheme (MBS) and value-based payments for public and private hospitals. He concludes that re-aligning financial incentives targeted at health care providers is likely to be more effective than adjusting patient co-payments (perhaps a nod to the $7 debacle), and although changes to improve quality are possible, they will have little impact on slowing overall expenditure growth.

One primary care initiative currently being rolled out around Australia are Health Care Homes. These provide co-ordinated care for people with chronic conditions with the value-based payments different from a fee-for-service or capitated approach in which providers are paid based on the amount of healthcare services they deliver. Bundled payments are provided monthly depending upon the level of complexity of each patient’s condition (categorised by tiers).

The Medical Technology Association of Australia (MTAA) have organised a full-day Value-based Healthcare Summit to be held in Sydney on April 24. Value-based healthcare will be discussed in the Australian context from a variety of perspectives including the capture of real-world data to assess value; measuring Patient-Reported Outcome Measures (PROMs); the International Consortium for Health Outcomes Measurement (ICHOM) standards; and value-based healthcare in the public & private sector.

PulseLine is a digital-first publication dedicated to providing news, commentary and insights on the Australian health landscape.