2. OVERVIEW
Introduction
Goals
Cost and its type
Perspective of pharmacoeconomic evaluation
Methods of pharmacoeconomics
Types of pharmacoeconomics studies
Application
Limitation
Conclusion.
3. WHAT IS
PHARMACOECONOMICS?
Pharmacoeconomics is described as “The branch of
health economics aims to quantify in economic terms
the cost and benefit of drugs used therapeutically”
“ Rang and Dale’s pharmacology”
4. HISTORICAL IMPORTANCE
in 1986, Ray Townsend’s(Pharmacist from Upjohn company)
used “Pharmacoeconomics” for the first time.
At that time study was done to evaluate the cost-
effectiveness of ZIDOVUDINE for treatment AIDS patients,
which turned up to be $10,000/year(shock for public)
Caused public outraged against pharmaceutical industry.
5. INDIA
International Society for Pharmacoeconomics and Outcomes
Research (ISPOR) was established in MAY, 2006.
It has framed Pharmacoeconomic Guidelines for India.
6. WHY DO WE NEED HEALTH
ECONOMICS?
Efficacy Safety
Additional resources Time frame
Perspective
7. GOALS
To determine which healthcare alternative provides the best
healthcare outcome in terms of money spent.
To improve the allocation of resources for pharmaceutical
products and services.
9. COST AND ITS TYPES
COST- it involves all the resources that are used to produce and deliver a
particular drug therapy/services.
Types of Cost-
1. Direct cost-
A. Medical cost
B. Non-Medical cost
2. Indirect cost
3. Intangible cost
4. Opportunity cost
5. Marginal cost.
11. DIRECT NON-MEDICAL COST
costs incurred by the patients in receiving medical
care.
E.g.- transportation to and from the hospital.
12. INDIRECT COST
Costs from society’s perspective
E.g.- Absenteeism, loss of productivity etc.
TANGIBLE COST
The pain, worry, or other distress that a patient or their family
might suffer.
13. OPPORTUNITY COST
The amount/benefit lost when selecting one therapy
alternative over the next best alternative.
E.g. labour, capital, building, etc.
MARGINAL COST
Marginal costs are the additional costs that arise as a
consequence of the introduction of a new treatment to a
standard therapeutic intervention.
14. OUTCOME(BENEFIT)
The Benefits we expect from an intervention is measured in-
Natural units- E.g.- years of life saved, strokes prevented,
peptic ulcers healed, etc.
Utility units- utility is an economist’s word for satisfaction, or
sense of well being.
18. PAYER PERSPECTIVE
Society Security/Government, third party payers.
Eg- Private insurance companies and employers
Included Costs:
-Direct cost
-Indirect cost
relevant to employers
lost workdays
lost productivity at work.
19. SOCIETAL PERSPECTIVE
The broadest of all perspective that evaluates all costs and
consequences.
Considers benefit to society as a whole
Included Costs-
-Direct Costs= overall cost of providing care.
-Indirect Costs=loss of productivity.
21. COST-MINIMIZATION ANALYSIS(CMA)
It evaluates the cost of two or more drug therapies which are
equivalent in terms of therapeutic outcome.
Simple method
Least costly alternative is chosen
Examples
Generic vs Branded drugs(Me too drugs)
Different antibiotics of same class.
22. COST MINIMIZATION EXAMPLE
INTERVENTION ACQUISITION
COST(Rs)
OUTCOME(effectiveness
in terms of natural units)
Malaria treatment
A
250 90% select
Malaria treatment
B
350 90% reject
23. COST-EFFECTIVENESS ANALYSIS(CEA)
CEA is defined as a series of analytical and mathematical
procedures that aid in the selection of a course of action from
various alternative approaches.
Outcome = monetary terms(natural units).
E.g. years of life saved or disease cured or healed.
24. CEA CONT…
It is expressed in two different form of ratios-
1. Average cost-effectiveness ratio (ACER)- it represent the total
cost of a treatment divided by its clinical outcome to yield a
ratio representing the rupees cost per specific clinical
outcome gained, which are independent of comparators.
ACER- total health care cost(rs)/clinical outcome.
25. CEA CONT….
2) Incremental Cost Effective Ratio(ICER)- It can be used to
determine the additional cost and effectiveness gained when
one treatment alternative is compared with the next best
treatment alternative.
ICER- Cost of A(rs)- Cost of B (rs)/ effect of A(%) – effect of
B(%)
Thus, CEA can provide valuable data to support drug policy,
formulary management, and individual patient treatment
decisions.
26. EXAMPLE OF CEA
COST DRUG A(Heparin) DRUG B(LMW Heparin)
Acquisition cost 300 400
Administration cost 50 0
Monitoring cost 50 0
Adverse effect treatment
cost
100 0
subtotal 500 400
OUTCOME
Extra years of life 2.22 1.6
Cost-effectiveness ratio 500/2.22= Rs 225 400/1.6= Rs 250
Per extra year of life
27. COST UTILITY ANALYSIS(CUA)
CUA is an economic tool in which the intervention
consequence in measured in terms of quantity and quality of
life.
Outcome = intervention cost/QALY gained.
Example-
Helps in making decisions regarding healthcare programs(e.g
cost per QALY of surgery vs cost per QALY of chemotherapy
in cancer patients ).
28. CUA CONT…
COST(Rs) DRUG A(Heparin) DRUG B(LMW HEPARIN)
Acquisition cost 300 400
Administration 50 0
Monitoring 50 0
Adverse effect 100 0
subtotal 500 400
UTILITIES
Extra years of life 2.22 1.6
Quality of life index 0.33 0.41
QALY 0.73 0.66
Cost-to-utility ratio 500/0.73= Rs 685 per extra
quality of life year.
400/0.66= Rs 606 Per extra
quality of life year.
29. COST BENEFIT ANALYSIS(CBA)
A cost-benefit analysis compares the costs and outcomes of
alternative therapies.
Tool used for decision-making process in allocation of funds
to healthcare programs.
Outcome = monetary terms.
Eg- a surgical procedure compared with a pharmaceutical
intervention.
30. EXAMPLE OF CBA
COST DRUG A DRUG B
Acquisition cost 300 400
Administration cost 50 0
Monitoring cost 50 0
Adverse effects 100 0
subtotal 500 400
BENEFITS(Rs)
Days at work(Rs) 1000 1000
Extra month of life(Rs) 2000 3000
Subtotal(Rs) 3000 4000
Benefit to cost ratio 3000/500=6:1 4000/400= 10:1
Net benefit(Rs) 3000-500= Rs2500 4000-400= Rs3600
31. COST-OF-ILLNESS EVALUATION(CIE)
Concerned with new therapies.
A comparison is made with between the new therapy and an
old therapy on the basis of-
1. Humanistic impact of the disease
2. Resources used in treating the disease (prior to the discovery
of the new therapy).
Important consideration is given to the design and intent of
the study.
32. COST-CONSEQUENCE ANALYSIS
A cost-consequence analysis has been defined as one in
which costs and effects are calculated individually.
E.g.- comprises of listing of all relevant costs and outcomes of
drug therapy including- direct medical costs, direct non-
medical costs, indirect costs, clinical outcomes, utility impacts
and quality-of-life impacts.
33. COST-CONSEQUENCE ANALYSIS CONT..
Advantages- more understandable and more likely to be
applied by healthcare decision-maker.
Drawback- decision is made at individual decision-maker’s
level that might not be made in patient’s or society’s best
interest.
34. TYPES OF
PHARMACOECONOMICS STUDIES
Three main types-
1. Prospective studies are experimental studies that can be an
additional part of a RCT/cohort study.
2. Retrospective studies are data analyses of clinical trials/
cohort studies that were conducted previously.
3. Model studies are performed as a method of displaying data
obtained from a variety of resources if previously studied data
are unavailable.
35. APPLICATIONS
1. Clinical decision making
2. Formulary decision making
3. Drug Policy decisions, treatment guidelines
4. Purchasing negotiation
5. Pricing in the Pharmaceutical Industry.
36. LIMITATIONS
1. Establishing guidelines or standards of practice.
2. Creating a cadre of trained producers and consumers of
pharmacoeconomic work.
3. Continuing education on the relevant features of this
discipline for practitioners, government officials, private
sectors executives.
4. Stable funding to support applied pharmacoeconomic
research.
37. CONCLUSION
Pharmacoeconomics serves as fourth hurdle in licensing
process(efficacy, safety, quality of manufacture.
And on the other hand , the requirement to undertake
pharmacoeconomic studies at least gives manufacturers the
opportunity to demonstrate the cost- effectiveness of their
products.
Therefore Pharmacoeconomics could be considered as both a
friend and a foe.
