The Third Rail—Why Budget Impact Assessments are Not Measures of Value

The National Pharmaceutical Council’s "Guiding Practices for Patient-Centered Value Assessment" address one particular issue that could have significant unintended consequences: budget impact assessments (BIA). To date, only one value assessment framework has tacked on a BIA as part of its process, but it is misleading to mix budget impacts and value together in this way.

The National Pharmaceutical Council recently unveiled “Guiding Practices for Patient-Centered Value Assessment,” which offer comprehensive considerations for the development and application of frameworks for assessing the value of health care. Value assessments are an evolving area, yet growing in use as health care stakeholders look for ways to evaluate the value of care that is being provided to patients. 

NPC’s guiding practices include 28 specific elements, which are broken out into six key aspects of value assessments: the assessment process, methodology, benefits, costs, evidence, and dissemination and utilization. 

During the past few weeks, we’ve taken a closer look at each of these six main areas. Today, we conclude the series with our post on budget impact assessments.

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The National Pharmaceutical Council’s "Guiding Practices for Patient-Centered Value Assessment" address one particular issue that could have significant unintended consequences: budget impact assessments (BIA). To date, only one value assessment framework has tacked on a BIA as part of its process, but it is misleading to mix budget impacts and value together in this way.

That’s because a BIA is only a measure of resource use, not a measure of value. It can inform users about what they are paying, but not about what they are paying for—value. Therefore, BIAs have the potential to affect patients considerably as payers use them to make coverage and reimbursement decisions. The way they are used collectively could have a considerable impact on society, such as discouraging innovation in highly prevalent diseases.

As part of our Guiding Practices, we have outlined several recommendations addressing how BIAs should be used:

  • BIAs should examine all aspects of the health care system, not just medications. To ignore other costs and offsets would result in an incomplete assessment.
  • BIAs should remain separate from value assessments, and their labeling should reflect this significant distinction. Labeling a BIA as a measure of value is inaccurate and misleading. Attempting to combine the two concepts causes confusion and can obscure the individual results from the two assessments.
  • Because a BIA is simply an assessment of budget impact, it should not be judged against artificial affordability caps. It is an estimation of a health care system’s expenditure changes from a new treatment, not an assessment of whether the health care system can afford the new treatment. Given the uncertainty inherent in BIA estimates, and the system-specificity of affordability concerns, it is not the role of a BIA to make artificial determinations of affordability.
  • BIAs should include time frames that are long enough to incorporate all costs and cost offsets as well as the lower costs of medications when they become generic. Many of the cost-offset budgetary impacts of treatment, such as avoided hospitalizations, show up in the longer-term.
  • BIAs should include realistic estimates regarding the uptake rate of a treatment and incorporate input from stakeholders who have expertise or have conducted studies in this area.
  • BIAs should acknowledge the considerable uncertainty in the inputs by incorporating sensitivity analyses, or reporting the ranges around the estimates and results.

Recognizing the differences between what budget impact assessments and value impact assessments measure is an important distinction. If we want to conduct meaningful assessments, then budget and value should be kept separate and distinct.