“Trial by fire” passed – the efficiency frontier

In 2007 the Statutory Health Insurance (SHI) Act to Promote Competition (GKV-WSG) provided the legal basis for the recommendation of so-called ceiling prices for drugs. For IQWiG, this was the starting signal of an intense working phase for the development of health economic evaluations.

Development of methods

The task was to develop a scientific method tailored towards the German system that enabled to set the benefit of drugs in direct relation to their costs. With the support of international experts and on the basis of known approaches, IQWiG developed its efficiency frontier method and discussed this method intensely with the scientific community. In October 2009 the method was developed far enough for IQWiG to present Version 1.0 of its health economic methods paper.


First health economic evaluation

The Federal Joint Committee (G-BA) then awarded the first commission. Four drugs for the treatment of depression were to be tested. In October 2013 IQWiG presented its first health economic final report. It contained the requested recommendations on reimbursement prices. By means of the efficiency frontier method, IQWiG successfully performed the calculations and arrived at 3 key results: 

  1. The relation between the benefit of the 4 antidepressants for patients and the price reimbursed by the health insurance funds varied between the 4 drugs examined (from more favourable to less favourable).
  2. For all 4 drugs, the current reimbursement price was higher than the “appropriate” price.
  3. The efficiency frontier method, the approach chosen by IQWiG, works; health economic evaluations are feasible.

Efficiency frontier

With this method, all relevant interventions for the same therapeutic indication are compared with each other, and the values for their benefit and their treatment costs are entered into a coordinate System.

Patient preferences

In order to better determine the weighting of different outcomes from the patient perspective, IQWiG tested the conjoint analysis (CA) and the analytic hierarchy process (AHP). It was shown that both methods can contribute to determining the most important outcomes for patients.

Pilot study: Analytic hierarchy process in the indication “major depression”

Pilot study: Conjoint analysis in the indication “hepatitis C”

Current situation

The results of this first health economic evaluation are no longer directly relevant for decision making. This is because, since the first commission was awarded, the legal situation has changed. Since the introduction of AMNOG, a health economic evaluation is planned for the situation where, after a regular early benefit assessment, price negotiations fail and an arbitral verdict does not lead to the setting of a price either. Then the pharmaceutical company or the Umbrella Organization of Statutory Health Insurance (“GKV-Spitzenverband”) can apply for a health economic evaluation.

Future role of health economic evaluation

With its first health economic evaluation, IQWiG has clarified that this type of evaluation is feasible in Germany. From a health policy point of view, it remains to be seen which role this type of evaluation will in future play within the German health care system. 

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Glossary entries