PHARMACOECONOMICS

Presented by:

Tavleen Kaur

M.Pharmacology

1339246

"Not everything that can be counted counts, and not everything that counts can be counted."

- Albert Einstein (1879-1955)

CONTENTSIntroduction

History

Perspectives of Pharmacoeconomics

Health economics

Pharmacoeconomics methodologies

Evaluating economic analysis

Concept of outcome research

Limitation of Pharmacoeconomics

Pharmacoeconomics & drug development

DefinitionPharmacoeconomics is the application of economic

analysis to the use of pharmaceutical products, services and programs, which frequently focuses on the costs (inputs) and consequences (outcomes) of that use.

Pharmacoeconomics is a young science that will improve with application. Its need is undeniable, especially in developing countries.

Pharmacoeconomics Find value In :Fixing the price of a new drug and re-fixing the price

of an existing drug

Finalizing a drug formulary

Creating data for promotional materials of medicines.

Compliance of requirement for drug license.

Including a drug in the medical/insurance reimbursement schemes.

Introduction of new schemes and programs in hospital pharmacy and clinical pharmacy.

Drug development and clinical trials.

Pharmacoeconomics works under :

Decision makers

Analysts

Clinical trail economics

Patient

Patient counsellar

HR

Healtheconomics

Value Added Traditional

Preclinical

Clinical

Marketing

PharmacoeconomicsDevelopment

Preclinical

Clinical

Marketing

Pharmacoeconomics

Development Programmes

HISTORY

• In the 1970s Pharmacoeconomics developed

• In 1978 McGhan , Rowland & Bootman , from the

university of Minnesota, introduced the concepts

of cost-benefit & cost-effectiveness analyses

• Term Pharmacoeconomics was first published in

1986 by Townsend.

PERSPECTIVES of PE

Assessing costs and consequences—the value of a

pharmaceutical product or service—depends

heavily on the perspective of the evaluation.

Patient-Clinical Cure-Quality of life-Out-of-pocket Cost-Satisfaction with treatment processHospital / Physician-Clinical Cure-Profit from treatment

3rd-Party Payer-Clinical Cure-Cost-Customer perception of value

Employer / Society-Clinical Cure-Cost-Productivity

P E R S P E C T I V E

Perspectives

Patient’s Perspective

Patient perspective is paramount because patients

are the ultimate consumers of healthcare services.

Costs from the perspective of patients are

essentially what patients pay for a product or

service—that is, the portion not covered by

insurance.

Provider’s Perspective Costs from the provider's perspective are the actual

expense of providing a product or service, regardless of what the provider charges.

Providers can be hospitals, managed-care organizations (MCOs), or private-practice physicians.

From this perspective, direct costs such as drugs, hospitalization, laboratory tests, supplies, and salaries of healthcare professionals can be identified, measured, and compared.

Payer’s Perspective

Payers include insurance companies, employers, or

the government

From this perspective, costs represent the charges

for healthcare products and services allowed by the

payer.

The primary cost for a payer is of a direct nature.

Payer’s Perspective contd….

However, indirect costs, such as lost workdays

(absenteeism), being at work but not feeling well and

therefore having lower productivity (presenteeism), also

can contribute to the total cost of healthcare to the payer.

When insurance companies and employers are contracting

with MCOs or selecting healthcare benefits for their

employees, then the payer's perspective should be

employed.

Societal Perspective The perspective of society is the broadest of all perspectives

because it is the only one that considers the benefit to society

as a whole.

All direct and indirect costs are included in an economic

evaluation performed from a societal perspective.

Costs from this perspective include patient morbidity and

mortality and the overall costs of giving and receiving medical

care.

HEALTH ECONOMICS• Health economics is the application of the discipline of

economics to the topic of health.

• It include three parameters :-

1. Output of healthcare .

2. Cost of producing better health.

3. Efficiency

PHARMACOECONOMIC METHODS

Economic HumanisticCost consequence Cost benefitCost effectivenessCost minimizationCost utility

Quality of lifePatient preferencesPatient satisfaction

Summary of Pharmacoeconomic Methodologies

Method Description Application Cost Unit

Outcome Unit

COI Estimates the cost of a disease on a defined population

Use to provide baseline to compare prevention/ treatment options against

$$$ NA

CMA Finds the least expensive cost alternative

Use when benefits are the same $$$ Assume to be equivalent

CBA Measures benefit in monetary units and computes a net gain

Can compare programs with different objectives

$$$ $$$

CEA Compares alternatives with therapeutic effects measured in physical units; computes a C/E ratio

Can compare drugs/programs that differ in clinical outcomes and use same unit of benefit

$$$ Natural units

CUA Measures therapeutic consequences in utility units rather than physical units; computes a C/U ratio

Use to compare drugs/programs that are life extending with serious side effects or those producing reductions in morbidity

$$$ QALY’s

CCA Measures multiple costs and outcomes without aggregating the two into a CE or CB ratio.

Examines whether the use of a drug produces an outcome that decreases costs and offsets the price cost of the new therapy

$$ Reported separately

Key: CBA = cost-benefit analysis; CEA= cost-effectiveness analysis; CMA= cost-minimization analysis; COI= cost-of-illness evaluation; CUA= cost-utility analysis; CCA= cost consequence analysis

Understanding PE Cube

PE Evaluation

Pharmacoeconomic evaluations provide a basis for resource allocation and utilization. It is increasingly becoming important for health policy decision-making.

A pharmacoeconomic evaluation may be conducted as an economic assessment incorporated into clinical trials. Such trials should compare the new drug/procedure with an older drug or existing intervention.

Four techniques are used for economic evaluation, namely, cost-minimization analysis, cost-effectiveness analysis, cost-utility analysis and cost-benefit analysis. The choice of the evaluation method depends on the nature of outcomes and the context in which the choices need to be made.

Cost Consequence Analysis : CCAMost disaggregated of all the economic analyses &

place the greatest burden on decision-makers.This type of analysis comprises a listing of all relevant costs and outcomes of drug therapy or healthcare intervention including direct medical costs, direct nonmedical costs , indirect costs , clinical costs etc.

Example : CCA involving drugs used in stroke prevention which include drug cost, hospital cost , other costs and include special monitoring , number of strokes observed , number of deaths observed, the rate of clinically meaningful side effect.

Cost Effective Analysis : CEAIt is a technique designed to assist a decision-maker in

identifying a preferred choice among possible alternatives.

Generally it include analytical & mathematical procedures.

CEA analysis has applied to health matters where the programs inputs can be readily measured in dollars but the programs output are stated in terms of health improvement created.

Cost Benefit Analysis : CBA

CBA allows policy & decision makers to make allocative comparisons & decisions across divergent sectors.

It include many technical consideration require a degree of explanation & interpretation to understand how it can be or has been applied.

Benefits side s are either difficult to measure , difficult to convert to dollar or both .

Example : benefits of improved patient QOL , patient satisfaction & working condition for the physician are not only difficult to measure , but are extremely difficult to convert in dollar value.

Cost Minimization Analysis : CMA

This type is used when two or more interventions are evaluated & demonstrated or assumed to be equivalent in terms of a given outcome or consequence, cost associated with each intervention may be evaluated & compared.

Cost Utility Analysis : CUA

It is a form of cost effectiveness analysis in which the health outcomes are measured in terms of quality adjusted life years (QALYs) gained.

It is used successfully to aid in decisions regarding health care programs (surgery vs. chemotherapy) , instrument that are reliable & sensitive enough to detect changes with drug treatments (anti-hypertension agents vs. another) are still needed.

Outcomes Research

Pharmaco-economics

Pharmaceutical Care

Relationship Between Outcomes, Pharmacoeconomics and Pharmaceutical Care

Contd… Definitions Pharmacoeconomics:

The description and analysis of the costs and consequences of pharmaceutical products and services and their impact on individuals, health care systems and society.

Pharmaceutical Care:The responsible provision of drug therapy for the purposes of achieving definite outcomes.

Outcomes Research: Broadly defined as studies that attempt to identify, measure and evaluate the end result of health care services in general.

CLINICAL

ECONOMIC

HUMANISTIC

OUTCOMESRESEARCH

Outcomes Relationship

Clinical

• Efficacy• Safety • Impact of therapy on “natural history” of the disease

Economic

• Cost Analysis • Cost-of-Illness • Cost-Minimization• Cost-Benefit• Cost-Effectiveness • Cost-Utility

Humanistic

• Health Related Quality of Life• Patient Satisfaction• Caregiver Impact• Patient Preferences• Functional Status

Health Services Research

•Policy Research •Access •Structure of Care

The assessment of technology (drugs, devices, etc)

Outcomes Research

Applications Of Pharmacoeconomics

Phase II Phase III Marketing Phase

RegulatoryPhase

Pharmacoeconomic Studies

Research and Development

Strategy

Pricing and Reimbursement

Strategy

Communication to Physicians and Patients

Pharmacoeconomics and Drug Development

What is the relationships between

Pharmacoeconomics evaluation & Clinical trials ?

Pharmacoeconomics studies may be planned &

conducted at the Clinical development & phase IV

stages of post marketing research .

PE and Drug Development Phase I

Cost of illness , Clinical benefits (in achieved order to have a marketable product)

Phase II

Cost of illness, QOL, Resources utilization, Instrument costs.

Phase III

How much money is spent in new drug development ?

Patient related costs(as large number of patient are involved in this trail)

PE and Drug Development Phase IV

Post marketing Pharmacoeconomics studies are extremely important in that they allow evaluation of the costs & consequences of drug therapy without the altered interventions that occur in strictly controlled clinical trials.

Pharmacoeconomics evaluation may be secondary objective of a trail designed primarily to safety & efficacy.

Pharmacoeconomics evaluation may be the principle purpose of a clinical trail .

A Pharmacoeconomics evaluation may be done retrospectively using clinical data obtained in previous.

Putting Theory into PracticeMission - To provide pharmacoeconomics and

outcomes research, education, and consulting services to assess the value of pharmaceutical products and services in today’s healthcare systems.

Applied Pharmacoeconomics

1. Drug Therapy EvaluationPharmacoeconomics principles and methods have been applied to

assist clinicians and practitioners in making more informed and complete decisions regarding drug therapy.

Selecting the most cost effective drug for an organizational formulary is important.

It is equally important to determine the most appropriate way to use and prescribe these agents.

It is also useful for making a decision about an individual patient ‘s therapy.

Evaluating the impact a drug has on patient’s health related quality of life can be useful when deciding between two agents for customizing a patient’s pharmacotherapy.

2. Clinical Pharmacy Service EvaluationPharmacoeconomic principles and methods has been

used for justifying the value of various health care services ,especially pharmacy services.

When a specific service is competing for hospital resources, pharmacoeconomics can provide the data necessary to justify that service maximizes the resources allocated by health care system administrators.

It is also useful in determining the value of existing service, estimating the potential worth of implementing a new service.

Limitations of PharmacoeconomicsPricing decisions for pharmaceuticals usually follow a

two-step process. A final economic evaluation needs to be based on a prior clinical-pharmacological evaluation of a new drug in light of therapeutic alternatives.

However, major limitations for this evaluation process may be encountered. Most notably a lack of

(1) evidence-based data,

(2) clinical endpoint data,

(3) direct comparator studies or

(4) an impaired "assay sensitivity" may cause uncertainty about the appropriate value of a new drug. Moreover situations with

(5) incremental, small benefit,

(6) lack of precedents in case of innovations or

(7) obvious "efficacy-effectiveness gaps" may pose challenges in the pricing decision process for pharmaceuticals.

PE in Today’s ScenarioDrug development is very expensive process

Duration of development – 10 to 15 yrs

Patent life – 20 yrs.

Patent life starts with preclinical phase.

All new drugs are very expensive when they come in market.

International Society of Pharmacoeconomics & Outcomes Research The mission of ISPOR is to increase the efficiency,

effectiveness, and fairness of health care to improve health.

ISPOR is recognized globally as the authority for outcomes research and its use in health care decisions towards improved health.

The ISPOR scope and sphere of influence includes outcomes researchers, health technology developers and assessors, regulators, health economists, health care policy makers, payers, providers, patients, populations, and society as a whole.

ISPOR Members

ISPOR outreach to over 11,300 members. ISPOR worldwide members come from different work environments –

50% from research organization and academic institutions, 12% from government organizations, health technology assessment agencies, hospitals and clinical practice, and 38% from pharmaceutical, biotechnology and medical device industries. Visit Website - http://www.ispor.org.

Activities of ISPOR : India chapter

• Preparation of Pharmacoeconomics guidelines for India

• Symposia & Workshop on Pharmacoeconomics

• Symposia on Clinical Outcome Studies

• Symposia on Health Care and Policy-issues

• Second International Conference on Pharmacoeconomics & Outcomes Research

Health Care BudgetIn both developed and developing countries there is increased

cost of health care > 10 %

Expensive techniques for diagnosis and treatment of disease. So health care sector is becoming very expensive.

Health care includes:

1. cost of drug

2. infrastructure

3. salary of physician , pharmacist, nurses, administration in hospitals.

4. payers like insurance.

Objectives of health care budget :

Decrease health care cost.

Increase evidence based medicine.

Health care provider’s role:

1. Quality of care

2. Patient satisfaction

3. Cost effectiveness

ConclusionIn our developing economy, India, the words

“pharmacoeconomics” and “outcomes research” are new to health care practitioners, but we are determined to familiarize ourselves with these concepts and put them into practice.

In most developing countries, the patients continue to suffer due to an ignorance about information, and practice and resources being overburdened. There is a universal need to optimize both, which is possible by adopting the practice of pharmacoeconomics, outcomes research, and Health Technology Assessment.

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