This is a joint post with Denizhan Duran.

As governments across the world expand population access to health care, they are feeling the pressure of rising costs. According to the IMF, emerging economies will spend an additional 1.5 percentage points of GDP on health care over the next 20 years, most of which will come from excess cost growth – defined as health care cost growth related to new medical technologies and income growth, rather than aging.

How can governments and other payers cope with the pressure of increasing costs and demands? A new report issued by the IMS Institute focuses on one strategy: advancing the responsible use of medicines.

After health care provider salaries, total spending on medicines represents the largest category of spending on health, and is growing quickly. Since 2005, total spending has grown by 12% in middle-income countries and 14% in low-income countries. Today, one-fifth of total health spending goes to medicines. Figuring out how to realize efficiencies in medicines spending is therefore crucial for every country, and for the international funders that support them.

In order to examine potential levers of efficiency, IMS uses data from 34 countries, 21 of which are low- and middle-income countries. After extrapolating this data to other countries, the authors identify six strategies that might yield efficiency savings. In particular, non-adherence to medication and untimely medicine use are estimated to generate 70% of avoidable costs from suboptimal use of medicines. If these problems were effectively addressed, the IMS Institute foresees $500 billion a year in potential savings (see figure below from the report).

Many countries are aware of the problem of non-adherence, and are already taking action. Brazil, for example, decreased its dropout rate for TB DOTS treatment from 14% to 9% in 10 years, and increased its HIV treatment adherence rate to 90%; gaining 1.2 million additional life-years since 1996. These results were accomplished with small interventions, such as offering a free meal for patients who come for treatment, or combining fixed doses such that patients would ingest fewer pills, thus improving the probability of adherence. In the US, more than $100 billion per year (5% of health budget) is wasted due to excess hospital admissions due to non-adherence. Unfortunately, and in spite of the importance of adherence for both treatment effectiveness and drug resistance levels in HIV, TB, family planning and other global health priorities, the extent and quality of data on non-adherence in the developing world leaves much to be desired.

The second largest driver of excess cost is untimely medicine use – an effective health system relies on delivering the right medicines, to the right patient, at the right time. Doing this relies on evidence-based policymaking, and a good example of this comes from Thailand. In 2010, Thailand’s Health intervention and Technology Assessment Program (HITAP) evaluated the cost-effectiveness of screening for hepatitis B/hepatitis C that cause liver cancer; the most common form of cancer in the country. The study found that –in lieu of treatment of liver cancer – it was highly cost-effective to screen and treat Hepatitis B and C. Further, with the scale-up of screening and treatment of Hepatitis B/C, liver cancer treatment spending went down by more than 50%, increasing life-expectancy by about eight years for Hepatitis B patients and four years for Hepatitis C patients.

The IMS report has some limitations: data from low-and middle-income countries is not complete and the method used is not fully described.  But it still provides valuable data (which can be purchased) that is useful to illustrate the potential levers for efficiency, and offers a framework for the kind of data analysis that is needed to identify opportunities to improve efficiency. For example, their public and private sector refill data allows for an estimate of adherence not possible to obtain from household surveys.

So how could such work tie into policymaking on global health? The main recommendation of our recent work on priority-setting in health resonates in the IMS Institute’s report: inefficiencies in drug use can be avoided ex ante by improved health technology assessment (HTA) that can guide payer decisions.  The idea is simple: HTA agencies – staffed by health experts at the country level – could weigh cost-effectiveness, affordability and other factors in order to decide which medical interventions should receive higher priority in the allocation of scarce public and donor money. Other work by the IMS Consulting Group presented at the recent International Society for Pharmacoeconomics and Outcomes Research conference in Berlin suggests that even rudimentary HTA systems in emerging economies can leverage lower medicine prices while still assuring rapid access to new technologies.

HTA can thus be beneficial for all stakeholders – patients, policymakers and industry – particularly as the pressure of health care costs and demands increases and donor funds become scarcer. In short, supporting countries and global health funders in developing HTA systems will save more lives for the money.