Why to study Pharmacoeconomics? Expansion of medical knowledge Increase in the treatment options...
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Transcript of Why to study Pharmacoeconomics? Expansion of medical knowledge Increase in the treatment options...
Why to study Pharmacoeconomics?
• Expansion of medical knowledge
• Increase in the treatment options
• Burden on the health care professionals to provide effective
care efficiently.
• Medical insurance or reimbursement systems
• Regulatory mandate
What Does ‘Cost’ Include?
1. Health Care Cost
a) Variable Cost : Vary according to the patient number e.g. drug acquisition cost, cost of consumables (needles, syringes etc)
b) Fixed Cost : Does not vary with patient number atleast in short term (1 yr) (Overhead)
Eg. Capital Cost of building, equipment & staff salaries
2. Other financial CostsEg. Prescription charges, Travel expense, loss of productivity
3. Intangible Costs : difficult to value financiallyEg. Pain, anxiety, loss of energy, time given by the voluntary carers
Can also be classified as…
• Direct costs- directly associated with the health
care intervention.
- Medical
- Nonmedical
• Indirect costs - associated with reduced productivity due to illness, disability and death.
• Intangible costs- psychological costs associated with illness or treatment, such as pain and suffering
Direct Costs• Medical costs
– Drug acquisition costs– Treatment costs (hospital, physician visits)– Monitoring (labs, physician visits)– Treatment of adverse events
• Non-medical – Home modifications (e.g., wheelchair
ramp)
Indirect / Intangible Costs
• Lost productivity/time off work
• Value of lost productivity (lost income)
• Caregiver time
• Quality of life
• Pain and suffering
Opportunity Costs
• If a resource is used for one purpose, it cannot be used for another
• The benefits or opportunities foregone in the highest-
valued alternative use of resources
• Opportunity costs are the most appropriate means of assigning costs to resources
Health Care Program
Input(Cost)
Output(Consequences)
Whose perspective?
Model of Economic Analysis of Health Care
Cost• Labour• Equipment• Building• Consumable Eg. Drugs
Outcome measure• Monetary or non-monetary
Whose Perspective? Society – Most comprehensive view Providers (Hospital) – direct medical cost which affects
the budget Patient – Direct, indirect and intangible Third Party payer – Costs which pertain to the
reimbursement Pharmaceutical Industry
Measurement of outcomes
• Monetary ($)• Specific clinical outcomes• Quality of life
Types of Economic Evaluations
• Cost-Minimization Analysis (CMA)
• Cost-effectiveness Analysis (CEA)
• Cost-Benefit Analysis (CBA)
• Cost-Utility Analysis (CUA)
• Cost Consequence Analysis (CCA)
Increased complexity & sophistication
Cost-Minimization Analysis (CMA)
• Clinical evidences suggest equality of outcome
• Evaluation of input or cost only
• Useful for comparison of dosage forms of the same
drugs or two generically equivalent drugs
• Not commonly used for drug therapies or health
program
Example
Comparing two IV dosage forms of Clindamycin for prevention of infection in postoperative patients undergoing surgery for
perforated or gangrenous appendicitis.
A Clindamycin 900 mg 8 hrly + Gentamicin 1.5 mg/kg
8 hrly
B Clindamycin 600 mg 6 hrly + Gentamicin 1.5 mg/kg
8 hrly
Outcome: Safety, efficacy & PK of B was comparable with A
Cost : Total cost A > Total cost B (Annals Pharmacother,1989;23:980-3)
Cost-effectiveness Analysis
• Consequences identical for each alternatives• Measured in non-monetary terms• Expressed in natural units
e.g. cost per years of life saved, cases cured, lives saved
• Cost effectiveness ratio = Cost / Outcome• Choice is that of lower CER• Can be used to evaluate programs, therapies or
services.
Disadvantage – Can not compare 2 different alternatives
Not Always Least expensive Alternative
More expensive and additional benefit worth the cost
• Less expensive and at least as effective (non-inferior)
• Extra benefit is not worth the cost
Average cost-effectiveness ratios do not compare the costs and outcomes among health care alternatives, but instead reflect the cost per outcome of one alternative independent of other alternatives.
• Incremental cost-effectiveness
Change in costs and health benefits when one health care intervention is compared to an alternative one.
Eg. Outpatient surgery vs. short-stay surgery
ICER = Difference in the costs/ Difference in the effectiveness
Example
New Old
Cost (Rs per 100 pts treated)
10,000 6400
yrs of lives saved
10 8
CER (Rs per yr of life saved)
1000 800
ICER (Rs per additional life saved)
1800
ICER = Difference in the costs/ Difference in the effectiveness
Cost Benefit Analysis
• To compare alternative therapies where outcome is different. Eg. Prolonging life and quality of life
• Money - Common stable, consistent and plausible denominator
• Outcome = Benefit – Cost
• Most suitable when resources scarce and only one program can be implemented
Cost Benefit Analysis
• E.g. A hospital is considering either offering a diabetes counseling service or adding a MRI scan equipment section to the clinic. Assuming the following Rs. values for each alternative, which program will you choose?
Cost Benefit Analysis
Diabetes MRI scan
program equipment
Costs Rs.20,000 Rs.120,000
Benefits Rs.1,20,000 Rs.360,000
Net Benefits
(B-C) Rs.1,00,000 Rs.240,000
B/C Ratio 5 3
Controversial aspects of Cost-Benefit Analysis
• All outcomes can not be converted into monetary terms Eg. Loss of vision
• Costs and Benefits are distributed heterogeneously in the society.
E.g Kidney Transplantation
Patients with limited life expectancy
Patients with potential for productive life
Economical but not humanitarian
Discounting Future Cost and Benefits
• Positive value of time preference
People prefer to defer costs to the future and to acquire benefits sooner rather than later.
• Discounting reflects the present value of a cost or health benefit that will occur at some future date.
• The effect of discounting is to give future costs and health benefits less weight in an economic analysis.
• Both costs and benefits should be discounted
• Most appropriate discount rate debatable
Discounting Future Cost and Benefits
Example Benefits in terms of QOL
Rx of Hypertension Vs Rx of CHF Short term decrease in QOL Short term increase in QOL Long term increase in QOL
Appears more attractive Discounted
“Not useful for programs with preventive intention”
Cost Utility Analysis
• Utility is desirability for a particular state of health
• Basic purpose is to improve Quality of life in patients
• Accounts for physical, social and psychological well being.
Patient satisfaction• Quality – Adjusted Life Year (QALY)• Disability – Adjusted Life Year (DALY)
Qualityof Life
Physical Function
Social & RoleFunction
Psychological Function
General well-being
Multiple dimensions of HrQoL
AFFECT
FUNCTION
How to measure QOL?
• Difficult – lacks precision and clarity; too broad
• Health related quality of life (HRQOL)
a) Generic instruments – for all diseases and patient groups
Eg. Sickness impact profile
Nottingham health profile
SF-36
b) Specific instruments – Eg. Hospital anxiety depression scale
Arthritis impact measurement scale• Desirable properties – Reliability, validity, sensitivity
Sensitive to value judgment
Quality – Adjusted Life Years (QALys)
QALYs = number of years lived x utility*
• Patient 1:•Utlity – 0.9•Number of years = 10•QALYs = 0.9 x 10 = 9 QALY
•Patient 2:•Utlity – 0.6•Number of years = 15•QALYs = 0.9 x 10 = 9 QALY
*Utility can be ranged from 0 (worst health state) to 1 (best health state / healthy)
Quantity of LifeQuality weight that represents
HRQOL
Disability – Adjusted Life Year (DALY)
• DALY captures the impact of morbidity and mortality in a common unit of measurement
• DALY was developed primarily to compare relative burdens among different diseases and among different population
• DALY measures disease impact rather than measuring impact of the interventions to improve health.
QALY and DALY
• QALY = number of years lived x utility = 0.7 X 60 = 42 years
• DALY = numbers of years lived X disability + number of years lost (perfect health)
= 0.3 X 60 + 20 = 38 years
QALY
DALY
Disability Utility Health
Weighting state
0 1 Perfect
1 0 Death
0.3 0.7 CHF
6080
Cost Consequence Analysis (CCA)
• Definition: An analysis in which resources and outcomes are calculated but not aggregated into cost-outcome ratios
• Characteristics – Resources are measured in monetary units – Outcomes are measured in multiple ways– Results are presented in a tabular format
• Objective: To assist decision makers for choosing the most relevant resource-outcome ratio
CCA
• Advantages– Transparency– Flexibility– Conceptually the simplest– Avoids controversies– Most comprehensive
• Limitations:– Labor/resource intensive
Summary of PE Methodologies
• “It is cost minimization when I stand at the bar and choose the cheapest beer available
• When I compare the price per liter to see which one satisfies my thirst for the least money this is a cost-effectiveness analysis
• When I also take into account the flavor and alcoholic strength to decide which beer I prefer overall, I am performing a cost-utility study
• When I decide whether to buy a beer at all, to buy something else entirely, or save my money, and take into account the effect of the drink on my productivity the next day, that is a cost-benefit analysis”
Thornton JG. Br J Hosp Med 1997; 58(11): 547-550
Types of Economic Analyses Analytic Method
Input (Cost) Consequences Primary Concern
Cost - benefit (CBA)
Monetary Monetary Maximal increment in benefit for limited
resources Cost-
effectiveness (CEA)
Monetary Clinical: life-year gained, % patients
reaching goal
Least costly way to achieve objective;
compare alternatives within 1 therapeutic
category Cost-utility
(CUA) Monetary Quality-adjusted
life-year (QALY) gained
Societal allocation; compare alternatives across therapeutic
categories Cost-
minimization (CMA)
Monetary Equal benefit ASSUMED
Efficiency (e.g., generic, therapeutic
substitution) Cost-of-illness Monetary Total cost
identification
Applications of Pharmacoeconomics
Industry
• Decision making during drug development
Early stages - Go/ not to go decisions
Later stages - Rational prescribing and utilization
• Pricing a new medicine/ repricing an existing medicine
• Convincing the regulatory authorities for marketing
approval
Applications of Pharmacoeconomics
Health Policy Makers
• Implied value and incremental cost effective analysis are crucial while making health policy decisions.
• Economic analyses are used while programming
budget. The more cost effective alternatives are replaced for the less cost effective ones.
OR in India
• POST–GRADUATE DIPLOMA IN HEALTH ECONOMICS, HEALTH CARE FINANCING AND HEALTH POLICY
Indian Institute of Public Health (IIPH), Delhi
• TRAINING COURSE ON BASIC HEALTH ECONOMICS AND
FINANCING, National Institute of Health & Family Welfare
ISPOR in India
• International Training Course on Promoting Rational Drug Use in the Community
• International Training Course on ARV Drugs Supply Chain management in resource poor settings
• September/October ISPOR–India Annual meeting
Pharmacoeconomics Research Information Cost Effectiveness
VALUE
• Is a pharmaceutical product worth its price?
• In which patients does it produce the optimal benefit (both cost and quality) ?