Discount Rate Determination for Economic Evaluations in HTA in the Philippines

Abstract

Abstract To inform the development of a reference case for economic evaluation, we explored various approaches to determine a base case discount rate and rate options for discounting benefits and costs. We conducted literature review and expert consultations to list approaches to determine base case discount rates, noting the advantages and disadvantages of each approach. The same methods were used to identify whether different discount rates would be applied to costs and benefits. We computed a social rate of time preference using the Ramsey formula: rc = ρ+μg, where ρ = pure rate of time preference μ= elasticity of the marginal utility of consumption and g= growth rate in per capita income. We assumed ρ = 1%, μ = 1.4% consistent with international practice, but used actual g of the Philippines of 4.5%. We compared this with the official social discount rate and with rate most commonly used internationally. These options were presented to the Philippine Health Technology Assessment Council for decisionmaking. Based on reviewed literature, 10 out of 22 countries used a 3.0% to 3.5% discount rate while 18 countries from the same pool applied equal discount rates for both costs and outcomes. The official social discount rate (SDR) prescribed by the Philippine National Economic Development Authority is 10% for all social investments. Upon input of the values, rc was calculated at 7%, which is above the international norm but below the official rate. Four discount rate options were identified: 3%, 3.5%, 7% and 10%. Evidence suggested using a discount rate higher than 3% to 3.5% for low-to-middle income countries. A more conservative rate based on the Ramsey formula of 7% base case discount rate was selected in performing economic evaluations. Sensitivity analysis was set between 3% and 10% to allow benchmarking with international practice and with the official SDR, respectively. Given Philippines' early HTA implementation phase, it was agreed to subject these rates to regular review. Key messages Setting a discount rate in economic evaluations is a crucial process for HTA institutionalization. Discount rate determination heavily relies on decision context a country considers most relevant.