How Affordable Is A New Cancer Treatment?
In the climate of increasing number of people developing cancer and cancer treatments having premium prices, many companies are releasing break through drugs at high prices. In some markets national health plans may cover the cost of pharmaceuticals but in many global markets the patient needs to either totally or partially self-finance. There is also a growing awareness that health insurances and government programmes cannot always continue to pay for the most expensive cancer therapies due to capping of finances available and hence even in markets with well-established government and insurance paying programmes there may be a need to self-finance.
So the question arises of how could a person finance such a treatment?
A cancer is typically classed as a catastrophic illness, defined as a severe illness requiring prolonged hospitalization or recovery and treatment and in the case of cancers, often life threatening. Treatments are usually required immediately whether surgery and chemotherapy or both- all of which are high cost and can lead to financial hardship if a patient needs to self-finance. (Indeed, the unusual economic environment of the delivery of catastrophic illness care encourages the use of innovative therapies). If a patient needs to self-finance treatment, these high treatment prices cannot be financed by the usual average household expenditure allocated to health. For example, in Australia and Singapore, a household earning between USD50,000 and USD100,000 spends between US$2500 and US$3000 on health. Depending on the treatment price point it may be possible to finance treatments by re-allocating discretionary expenditure, discretionary expenditure being defined as expenditure on communications, travel and leisure but often for such high cost treatments and for life threatening conditions it may be necessary to dip into savings. The focus of this article is to explore how a person with a cancer can finance a high treatment cost with a particular focus on savings.
Let us consider the scenario of “How many people newly diagnosed with breast cancer could afford a treatment of US$30,000 in Singapore and Australia financed from 20% of their retained savings plus part of their usual expenditure on healthcare and discretionary?”
To answer this question, first we forecasted the number of new cases of breast cancer diagnosed each year (incidence) from the forecasted population and incidence rate by age and gender over time. This population was linked to their household income and so it is possible to assess how many could finance treatment from different parts of their expenditure and savings. All this is done automatically in our Epidemiology Model. The proportion able to afford is outlined in the following table and illustrates a more than 3-fold difference.
By forecasting the breast cancer incidence and then assessing how many people can finance this price point under this scenario using our epidemiology model reveals the following:
Table 1: % able to afford treatment
It is interesting to note the average household salary in the 2 markets are not too dissimilar, but the proportion able to finance the treatment from 20% retained savings is significantly different -being more than triple in Singapore (44%) than Australia (13%) in 2015.
Table 2: Comparison of Income Australia and Singapore
Taking a closer look at the average household income profile it is noted that the disposable income (income after tax) is significantly higher (28%) in Singapore than Australia, the household expenditure is less and so the annual savings is 6 times higher.
Understanding the difference in disposable income, expenditure and savings gives more understanding of how a patient could finance this treatment and affordability levels.
Household income only is not a good proxy of affordability:
Often a quick assessment of high priced treatment affordability is done by considering the household income or a multiple of the household income. As Australia and Singapore have comparable average household incomes this analysis would produce a similar result in terms of patient affordability. If more detail was taken into consideration e.g. disposable income (income after tax) then the 2 markets would begin to demonstrate a difference in proportion able to afford. But by understanding the expenditure and savings gives a more detailed analysis of how they could finance the treatment.
Another point worth emphasizing is that despite the Total Health Expenditure (THE) per capita being nearly double in Australia than Singapore, the % able to afford this high priced self-financed treatment is more than triple in Singapore than Australia emphasizing again the importance of understanding how the patient will finance the treatment.
Table 3: Comparison of Health Expenditure Australia and Singapore
Comparing affordability proportion with other Asian markets
Let’s now compare Australia and Singapore with other affluent markets in the region: Japan and South Korea.
Table 4: % able to afford treatment
By carrying out the same affordability scenario it can be seen that the proportion able to afford is lowest in Australia, and higher in both South Korea and Japan. This should be noted in the context that the average household income is significantly lower in both South Korea and Japan. The affordable market % is significantly higher in all countries although to a lesser extent.
This is because Asians tend to save more. Korea and Japan have a lower average household income yet still a higher proportion can afford treatment
Table 5: Comparison of Japan and South Korea
Australian’s do not have as high savings and hence less able to finance such a high priced treatment. It should be noted that all countries compared in this article do have a universal health programme and access to catastrophic health insurance.
So the ability to afford a high priced treatment out of savings is significantly greater in Singapore, followed by Japan, Korea and then Australia.
On considering the affordable market size for a high priced self-financed treatment it is important to assess the affordable market from savings and discretionary expenditure rather than using the proxies of household income or Total Health Expenditure (THE) per capita.
The proportion able to afford tends to be higher in Asian markets where savings rate is higher than in Australia where the average income and THE per capita may be higher. Doing a detailed analysis using household savings, and expenditure provides the more detailed analysis and limits error.