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The American Journal of Managed Care November 2016
Referrals and the PCMH: How Well Do We Know Our Neighborhood?
Andrew Schreiner, MD; Patrick Mauldin, PhD, Jingwen Zhang, MS; Justin Marsden, BS; and William Moran, MD, MS
Does Medicare Advantage Enrollment Affect Home Healthcare Use?
Daniel A. Waxman, MD, PhD; Lillian Min, MD, MSHS; Claude M. Setodji, PhD; Mark Hanson, PhD; Neil S. Wenger, MD, MPH; and David A. Ganz, MD, PhD
A New Chapter in Health Reform
Michael E. Chernew, PhD, and A. Mark Fendrick, MD
Prescribers' Perceptions of Medication Discontinuation: Survey Instrument Development and Validation
Amy Linsky, MD, MSc; Steven R. Simon, MD, MPH; Kelly Stolzmann, MS; Barbara G. Bokhour, PhD; and Mark Meterko, PhD
Enhancing Patient and Family Engagement Through Meaningful Use Stage 3: Opportunities and Barriers to Implementation
Jaclyn Rappaport, MPP, MBA; Sara Galantowicz, MPH; Andrea Hassol, MSPH; Anisha Illa, BS; Sid Thornton, PhD; Shan He, PhD; Jean Adams, RN, ACIO; and Charlie Sawyer, MD, FACP
Integrated Care Organizations: Medicare Financing for Care at Home
Karen Davis, PhD; Amber Willink, PhD; and Cathy Schoen, MS
Currently Reading
Reconsidering the Economic Value of Multiple Sclerosis Therapies
Tiffany Shih, PhD; Craig Wakeford, MA; Dennis Meletiche, PharmD; Jesse Sussell, PhD; Adrienne Chung, PhD; Yanmei Liu, MS; Jin Joo Shim, MS; and Darius Lakdawalla, PhD
Maternal Mental Health and Infant Mortality for Healthy-Weight Infants
Susan E. White, PhD, RHIA, CHDA, and Robert W. Gladden, MA, BS
The Role of Internal Medicine Subspecialists in Patient Care Management
Jonathan L. Vandergrift, MS; Bradley M. Gray, PhD; James D. Reschovsky, PhD; Eric S. Holmboe, MD; and Rebecca S. Lipner, PhD
Medical Home Transformation and Breast Cancer Screening
Amy W. Baughman, MD, MPH; Phyllis Brawarsky, MPH; Tracy Onega, PhD, MS; Tor D. Tosteson, ScD; Qianfei Wang, MS; Anna N.A. Tosteson, ScD; and Jennifer S. Haas, MD, MSc

Reconsidering the Economic Value of Multiple Sclerosis Therapies

Tiffany Shih, PhD; Craig Wakeford, MA; Dennis Meletiche, PharmD; Jesse Sussell, PhD; Adrienne Chung, PhD; Yanmei Liu, MS; Jin Joo Shim, MS; and Darius Lakdawalla, PhD
Availability of multiple sclerosis (MS) therapies provides substantial value to the currently healthy (who may contract MS in the future), particularly when treatment is fully covered by insurance.

Objectives: To illustrate a more comprehensive view of value associated with medicines treating a highly severe illness and to apply these insights to estimate the costs and benefits of 3 treatments for multiple sclerosis (MS): Avonex, Tysabri, and Tecfidera.

Study Design: Retrospective study spanning 2002 to 2013. We used economic theory to derive the value of therapy to patients with MS and to individuals who face the risk of contracting MS in the future, under the alternative assumptions that therapies were fully insured or paid for out of pocket.

Methods: Models were parameterized through secondary data analysis and targeted literature review. Estimates of individual value were aggregated to the societal level using therapy-specific treatment prevalence rates. Aggregate consumer value was compared with manufacturer revenue.

Results: In the baseline model, Avonex, Tysabri, and Tecfidera generated $46.2 billion of total value to consumers, almost one-third of which accrued to those without MS. The total value to consumers was double manufacturer revenue. Results were qualitatively robust to the use of alternate epidemiological and economic parameters. We found that value to the healthy is positively related to disease severity, and that value to both the sick and the healthy are larger when costs are shared via health insurance.

Conclusions: Theory predicts that treatments for severe disease provide “peace of mind” value to the healthy. Avonex, Tysabri, and Tecfidera have generated significant social value, a large majority of which accrues to consumers. Future economic valuations of medical technology should consider both the potential value to the healthy and the effects of insurance.

Am J Manag Care. 2016;22(11):e368-e374
Take-Away Points

Although many studies have assessed the social value of medical care to the sick, the value to the healthy who may use treatment if they become sick has been largely ignored. We used empirical estimations to parameterize an economic model that describes the value of 3 multiple sclerosis treatments to those who are healthy but face the risk of contracting MS in the future, as well as to the sick. 
  • When patients bear the full cost of treatment, the value of the 3 treatments to the sick totals $11.1 billion, while the value to the healthy is $8.9 billion. 
  • The value of therapy increases with the severity of the disease being treated. 
  • Insurance coverage has a complementary effect on the value of therapy: the total populationwide value of the 3 treatments increases to $46.2 billion when actuarially fair insurance is assumed.
The rising cost of healthcare in recent decades has been accompanied by an increasing interest in quantifying the value of medicine.1,2 The cost of healthcare—unlike the costs of other goods—is often borne primarily by healthy consumers who are not currently using it. For example, premiums for private health insurance and taxes for public health insurance schemes are paid by the entire population, not just the patients who happen to be sick at a point in time. This raises a key question: What is the value of healthcare to the sick and to the healthy consumers who are paying for it?

The value of medical care to the sick is readily apparent, whereas the value to the healthy manifests in at least 2 ways. First, healthy individuals value medical technology because it will be available to them if they become sick in the future. The higher the likelihood of becoming sick with a particular disease, the more a healthy person values treatments for that disease. Second, new technology can provide peace of mind in the present, even to those who may never end up using it. The worse the disease, the more a healthy person values this peace of mind.3-5

To illustrate the “peace of mind” value, consider the analogy of a fire extinguisher in one’s home: it provides value should the house catch fire by reducing the damage the fire would cause, and this value increases with the size of the potential loss. Awareness of this potential benefit provides immediate and continuous peace of mind from the protection against fire damage. This value is realized even if a fire never breaks out. Moreover, this peace of mind value increases with the size of the potential loss. A renter with few possessions may worry little about the risk of fire and thus derive few benefits from a fire extinguisher. In contrast, the owner of a home filled with priceless heirlooms might worry more and thus place higher value on the fire extinguisher. The “peace of mind” value is likely to be quantitatively meaningful, because evidence suggests that most consumers dislike risk and value reducing it.6-10

Medical technology provides peace of mind similar to that in the fire extinguisher example. To illustrate, consider a healthy individual today and another in 1990 who are concerned about the prospect of a human immunodeficiency virus (HIV) infection. Both would experience anxiety, but the first individual would be anxious about the risk of complications and the inconvenience of a lifetime of medical treatment; the second individual would be anxious about death. The very real difference between these 2 levels of anxiety contributes to the value that healthy individuals have obtained from modern HIV and AIDS therapies. In other disease areas, the value of a new therapy to a healthy individual can be similarly characterized by decreased anxiety or fear of a diagnosis due to the therapy’s ability to reduce the harm from a disease. This example illustrates that the peace of mind afforded by new medical technologies will be especially valuable for treatments that mitigate the consequences of the most severe diseases.4,5

Multiple sclerosis (MS) provides a useful case study of a severe disease, as it is the leading cause of nontraumatic neurologic disability among young adults.11,12 In MS, the body’s immune system attacks the central nervous system, creating brain lesions. During relapses, symptoms dramatically worsen and the disease can transition into a stage of progressive disability. MS patients suffer from fatigue and pain, as well as mobility and sensory problems.13-15 Peak onset occurs between the ages of 20 and 40, often affecting healthy individuals in their prime years of productivity. Thus, MS onset imposes high medical costs and has severe consequences for quality of life and productivity, such as lost income.13-15

MS therapies also highlight the wider debate over the value of new medical technology. Some question the value of innovative drugs that help manage—but do not cure—debilitating and progressive diseases. Skepticism about the value of such drugs has been fueled by cost-effectiveness studies and a recent United Kingdom risk-sharing scheme.16,17

Our study uses an economic model developed by Lakdawalla, Malani, and Reif (2015)4 to estimate the value of MS therapies to both healthy and sick individuals. We focus on 3 currently available MS therapies, incorporating their specific dates of introduction, magnitudes of health benefit, and prices: Avonex (interferon beta-1a intramuscular, introduced 1996), Tysabri (natalizumab, introduced 2004), and Tecfidera (dimethyl fumarate, introduced 2013).


From an economic perspective, the value of a good is measured as the amount of other consumption that an individual is willing to sacrifice in exchange for it. These trade-offs are conventionally estimated in the framework of a “utility” model that explicitly estimates the value that consumers assign to different goods. A plethora of studies measure the value consumers assign to health relative to other goods,18-23 and these measurements provide the empirical basis for utility models that estimate the trade-off between health improvements and other consumption. We followed this approach and estimated the value of the MS therapies of interest by constructing an economic model of the trade-off between consumption and health. Following the economic literature, we assumed that the quantity of consumption is determined by the income that remains after medical costs.

 As we describe above, value may accrue not only to those suffering from an illness, but also to those who are currently healthy but still susceptible to future illness. We refer to these constructs as “value to the sick” and “value to the healthy.” Both of these depend, in turn, on how the costs of therapy are incurred. Unlike standard goods, a portion of healthcare is often paid for by nonusers, via insurance. Insurance may increase the value of therapy for both the sick (by replacing direct costs with less costly insurance premiums) and the healthy (by reducing financial risk). Our study thus estimates the value of MS therapy from 4 perspectives: value to the sick and value to the healthy, first under the assumption that costs are fully borne by consumers (without insurance) and then assuming actuarially fair insurance, in which therapy costs are distributed across the entire risk pool (with insurance).2,8 These perspectives are summarized in Figure 1.

Prior efforts to estimate the value of new medical technologies have typically emphasized only 1 of these 4 perspectives: the value to the sick, without consideration of insurance.

The eAppendix (available at formally describes the economic model developed by Lakdawalla, Malani, and Reif (2015),4 which we used to measure value from each of these perspectives (utility model–based willingness-to-pay estimation). The value to the sick depends on: 1) health benefits of the therapy for those who are diagnosed with MS, as measured by incremental quality-adjusted life-years (QALYs); 2) the health costs of MS, as measured by QALYs for individuals with and without MS; 3) the costs of therapy; 4) other medical costs with and without therapy; and 5) differences in consumer income, which determine the value of money to a consumer. We measured these both for MS patients receiving best supportive care (BSC) and for MS patients utilizing 1 of the 3 qualified drugs.

The value to the healthy depends on all 5 factors above, along with: 6) the incidence of MS, which measures the risk that healthy people will acquire the disease in any given year; and 7) the degree of consumer risk-aversion, which measures the value of risk-reduction to healthy consumers. In reality, some individuals are not materially at risk for MS, meaning that the population could consist of 3 groups: those with MS, healthy individuals at risk for MS, and healthy individuals not at risk for MS. This third group may never derive benefit from the actual use of the therapies. However, as the causes of MS are still not well understood,24-26 healthy individuals cannot easily ascertain whether they fall into the second or third groups. Thus, for the purposes of our analysis, we pooled these groups together.

We used parameters in these 7 areas to construct separate economic utility models for each of the 4 perspectives described in Figure 1. Our models assume that the health state and drug utilization choice are constant for an individual within each year. These models are then used to estimate the annual value to consumers of using 1 of our 3 drugs of interest relative to BSC. The incremental value of the 3 drugs is given by the difference in value between using the drug and using BSC.

Finally, we aggregated the different estimates of incremental per-patient value to the societal level using disease prevalence and drug utilization rates. We added up the individual annual values of treatment over the period 2002 to 2013 (the years for which data on the therapies are available) to obtain the aggregate value of the 3 therapies. These aggregate values have been compared with manufacturer revenue to determine the share of value that returns to consumers. Complete details on economic model specification, parameterization, and sensitivity analyses are provided in the eAppendix.


Economic Model and Parameters

The Table summarizes the parameters obtained from our literature review and data analysis, which were used to calculate the social value of therapies. As detailed in the eAppendix, our analysis suggests that MS patients earn 37.1% less income than their non-MS counterparts; Avonex users earn 41.4% more income than their MS patient counterparts who are not using disease-modifying therapies (DMTs). Because of data limitations, we were unable to estimate income effects for Tysabri and Tecfidera directly. Instead, we assumed that the effects for those therapies were equal to that of Avonex. This conservative assumption likely understates the income effect of those therapies, because both of those products reduce relapse rates and disability progression more than Avonex does.

An MS diagnosis was also associated with a significant increase in non-DMT medical costs (87.0%), while the use of Avonex and Tysabri reduced annual medical costs by 11.2% and 16.4%, respectively. There were too few cases of Tecfidera usage in the claims data to identify an effect on medical costs (Tecfidera had a sample size of 137 compared with 9272 and 1223 for Avonex and Tysabri, respectively). As a result, we elected to use the Avonex cost offset parameter (–11.2%) for Tecfidera. This is a conservative approach, as Tecfidera was shown to reduce disability progression and relapse frequency more compared with interferons (including Avonex).27 As a result of using this conservative estimate, our models likely underestimate the social value of Tecfidera. In the eAppendix, we describe a sensitivity analysis in which this value is set equal to the midpoint of the Avonex and Tysabri estimates (–13.8%).

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