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Pharmaco economics : 

Pharmaco economics

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Introduction Costs classification Benefits Perspectives Concepts in PE Criteria Discounting Methods of evaluation Applications Limitations

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Economic evaluation of the drugs is a rapidly growing area of research. Is important in helping clinicians and managers make choices about new pharmaceutical products and in helping patients obtain access to new medications.

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Health economics- science to assess the cost-benefit of health care interventions. Health economics looks at how best to use limited resources in health care Pharmaco economics – branch of HE, that particularly considers drug therapy Is the study of the costs and benefits of medical therapies and technologies, combines economics, epidemiology, decision analysis and biostatistics in a comprehensive evaluation of treatments.

What is P-Economics? : 

What is P-Economics? Inputs direct & indirect costs Health Care Perspective Outcomes positive & negative

Opportunity cost : 

Opportunity cost Opportunity cost is a central notion in economic analysis. It can be used to explain the consequences of choosing between two alternatives. Opportunity costs reflect the fact that choices have to be made between interventions because of the scarcity of resources.

Average cost : 

Average cost Average cost is calculated by dividing the total costs for the intervention by the total quantity of treatment units provided, such as the number of patients receiving a course of antibiotics.

Marginal cost : 

Marginal cost Marginal cost is the extra cost of producing one unit of output or expanding a programme or service (e.g., increasing the length of stay in hospital by one day).

Costs classification : 

Costs classification Direct costs directly associated with the health care intervention. (i) direct health care costs, such as nurse and doctor salaries, drug costs, the cost of laboratory tests needed for the intervention (ii) direct non health care costs, such as the patient’s cost of transportation to and from treatment centers

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Indirect costs associated with reduced productivity due to illness, disability and death. They are typically calculated from the gross earnings of those in employment. If the analysis is conducted from society’s perspective, indirect costs should be included but, in practice, these costs are often ignored.

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Intangible costs related to psychological factors costs associated with illness or treatment, such as pain and suffering. Although these costs may be mentioned in economic evaluations, they are rarely quantified because of the practical difficulties involved in doing so.

Benefits: : 

Benefits: Natural - Years of life saved Utility - QALY, DALY, HYE Associated economic benefits - Economic benefits of returning to work

Perspective : 

Perspective Point of view from which the study is taken Determines what will be measured, what are the costs and benefits, and how they will be valued Guides and limits application of study results What are the possible perspectives in PE studies?

Provider Perspective : 

Provider Perspective Common perspective Institution (hospital, health center, CMO) Concerned with direct medical costs Economic benefit is that which is realized by provider Provider is concerned with return on investment

Payer Perspective : 

Payer Perspective Insurers or groups that pay for health care Costs are the payout over a defined period of time Benefits are those accrued by payer Goal is to improve profit margin

Societal Perspective : 

Societal Perspective Examines the broader effect of health care Considers productivity potential Benefits may not extend to health care providers and payers, therefore studies conducted from this perspective do not assess economic impact to them

Patient Perspective : 

Patient Perspective Examines out-of-pocket expenses

Outcomes : 

Outcomes Both positive and negative outcomes should be addressed Positive outcomes: drug’s efficacy measure Negative outcomes: ADR and treatment failure

Cost-minimization analysis : 

Cost-minimization analysis compares the costs of different interventions that are assumed to provide equivalent benefits. A good example would be a comparison between a generic drug and its branded equivalent. If the assumption of equal effectiveness is substantiated, the decision hinges on finding the least expensive way of obtaining that health benefit — only the costs are compared and not the benefits. The decision rule is therefore simple because the cheapest intervention will provide the best value for money. However, in practice, there are relatively few CMAs because it is rare for two health care interventions to provide exactly the same benefits.

Cost-Minimization Analysis : 

Cost-Minimization Analysis Used to assess the cost of alternatives Two or more interventions are evaluated Outcome assumed or demonstrated to be equivalent (don’t measure outcomes) Commonly used for generic vs. trade

Cost-effectiveness analysis : 

Cost-effectiveness analysis In cost-effectiveness analysis (CEA), benefits are measured in natural units. For example, these could be heart attacks avoided, deaths avoided or life-years gained (i.e., the number of years by which life is extended as a result of the intervention). Quality of life scores are also used. These can be obtained from health related quality of life (HRQoL) instruments that measure the quality of life of the patient in a number of domains (e.g., physical, emotional and social) and provide scores for each. The main restriction in CEA is that it is one dimensional — only one domain of benefits can be explored at a time..

Cost-Effectiveness Analysis : 

Cost-Effectiveness Analysis Used to evaluate cost and outcome of therapy outcome measure in non-dollar units mmHg blood pressure, mg/dl blood sugar, lives saved Results expressed as cost-effectiveness ratio cost/treatment cost/outcome cost/life saved

Incremental cost-effectiveness ratio (ICER) : 

Incremental cost-effectiveness ratio (ICER)

Example: : 

Example: Therapy A: costs $2500 and saves 10 lives C/E ratio= $250/life saved Therapy B: costs $5000 and saves 15 lives C/E ratio= $333/life saved ICA: $5000-$2500 or $500/life saved 15-10

Cost-utility analysis : 

Cost-utility analysis In cost-utility analysis (CUA), the benefits are measured in healthy years, to which a value has been attached. Unlike CEA, CUA is multidimensional and incorporates considerations of quality of life as well as quantity of life using a common unit. E.g. In Hormone Replacement Therapy, benefits such as reduction in fracture risk, alleviation of menopausal symptoms and risks such as stroke or breast cancer.

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The most widely used measure of benefit in CUA is the Quality adjusted life year (QALY) Disability adjusted life years (DALYs) and Healthy year equivalents (HYEs).

Quality adjusted life years : 

Quality adjusted life years Combines quantity and quality of life. It is calculated by estimating the total number of life-years gained from treatment and weighting each year with a quality of life score to reflect the quality of life in that year. For example, a patient living for 10 years but with a quality of life of say, 0.7 on a scale of 0 to 1 (with 0 as death and 1 as perfect health), would live for seven (0.7 x 10) QALYs.

Disability adjusted life years : 

Disability adjusted life years Similar to QALYs, Developed by the World Bank and the World Health Organization to quantify the global burden of disease. Like a QALY, it incorporates both quantity and quality of life in a common measure. The main difference is that it measures losses of healthy life rather than life-years gained..

Healthy year equivalents : 

Healthy year equivalents measure of quantity and quality of life. HYEs consider a sequence of health states and their duration and then ask respondents how many healthy years of life this scenario is equivalent to. For example: if you live with a disabling hip fracture for three years, how many years of healthy life would this be equivalent to?

Cost-Benefit Analysis : 

Cost-Benefit Analysis Used to identify, measure, and compare costs of providing a program or treatment strategy, and the benefits realized from the program or treatment therapy (ex. Vaccination program) Can have multiple outcomes/programs Identify all the costs & benefits from program or intervention and convert them into dollars (in that year)

Cost-Benefit Analysis : 

Cost-Benefit Analysis Net Benefits=Total Benefits - Total Costs Results are often expressed as a Benefit-to-Cost Ratio Total Benefits/Total Cost - >1, benefits exceed costs - =1, benefits equal cost - <1, benefits are less than costs

Cost of illness evaluation : 

Cost of illness evaluation Important in evaluation of new therapies Evaluates humanistic impact of disease and the resources used in treating a condition prior to discovery of a new intervention Aids in effective establishment of a baseline for comparison

Relationship between PE and Clinical Trials : 

Relationship between PE and Clinical Trials PE evaluation may be the secondary objective of a trial designed primarily to study safety and efficacy PE study may be the principal purpose of the clinical trial PE study may be done retrospectively using the data obtained in previous trial

Discounting : 

Discounting Time gap between health resource investment and gain of the benefit Adjusts future costs to present costs Value of a dollar today is worth more than a dollar in the future If values are not discounted, the cost will remain stable and may lead to false conclusion about value of the benefit

Issues With Discounting : 

Issues With Discounting No consensus on how to discount or how much to discount A discount rate (r) of 3-8% per year has been suggested Equation used: PV= 1/(1+r)n

Available Sources of Data for Pharmaco economic Analysis : 

Available Sources of Data for Pharmaco economic Analysis Stock / Purchasing Records Adverse Drug Reaction Program Data Non-Essential / Non-Formulary Monitoring

Applications : 

Applications Provides the frame work to aid decision making process in health care Forms the basis for national health policy In development of treatment protocols In consideration of rational drug therapy In management of risks in development, production and marketing of pharmaceutical products

Limitations : 

Limitations The whole process may be open to bias, In the choice of comparator drug, The assumptions made, or In the selective reporting of results.

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A key problem is our ability to implement the results of a study. Short term outlook which limits the application of economic evaluations showing long term savings for the health service in return for increased spending now. Many budgets operate in isolation, A new intervention may simply not be affordable no matter how cost effective it might be.

Udvarhelyi’s 6 Principles for Critique of PE Evaluations : 

Udvarhelyi’s 6 Principles for Critique of PE Evaluations 1. Explicit statement of the perspective for the analysis should be provided 2. Explicit statement of benefits of the program/technology should be provided 3. Types of costs used or considered should be specified

Udvarhelyi’s Principles (continued) : 

Udvarhelyi’s Principles (continued) 4. If costs/benefits accrue over different times, discounting should be used 5. Sensitivity analysis should be performed to test assumptions 6. Summary of efficiency should be expressed as a C/B or C/E ratio and incremental costs stated

Decision analysis model e.g. : 

Decision analysis model e.g. Ondansetron vs. metaclopramide for CINV Data collected from meta-analysis of clinical trials Clinical outcomes- no. of emesis episode within 24 hrs and no. of extra pyramidal r/ns. In cost analysis Ondansetron- $95.50 Metaclopramide- $50.95

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Emesis rate O- 2.03 M- 2.69 In cost utility analysis, the incremental cost of O - $168.391 per QALY when compared to M. Conclusion : O offers a small clinical benefit at a very high cost.

Prospective analysis e.g. : 

Prospective analysis e.g. R- tPA vs. streptokinase in AMI. Data from GUSTO trial – 41,021 subjects for 1 year Life expectancy after one year was projected using Duke Cardiovascular Disease Database. Costs for these resources were developed from a hospital cost accounting system and from medicare reimbursement rates

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At the end of one year, Tpa had higher costs and a higher survival rate than SK. Discounting at 5%, tPA had a marginal cost of $32,678 per QALY gained as compared to SK. Conclusion: Cost effectiveness of tPA falls within the range of other medical therapies currently accepted in the medical community.

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