A concise overview of pharmacoeconomics, health economics, various costs, various pharmacoeconomic study designs and its application in the field of medicine and drug development
2. OUTLINE
• Introduction
• Need of Pharmacoeconomics
• Goals
• Costs and types
• Perspectives of Pharmacoeconomics
• Types of Pharmacoeconomic studies
• Applications
• Conclusion
3.
4. INTRODUCTION
• Term coined by Townsend in 1986
• Branch of health economics
Making choices between options, when there is
scarcity of resources
Fundamentally comparative, weighing the costs and
benefits of 2 options- Most efficient
6. • Pharmacoeconomics research identifies, measures
& compares the costs( i.e. resources consumed ) &
consequences (i.e. clinical, economic , humanistic)
of pharmaceutical products & services
• PE analysis
• Efficient allocation of limited resources among
competing alternative medications and services
• Biggest bang for your buck, using a quantitative
measure
• To make the best use of limited resources
7. WHY STUDY
PHARMACOECONOMICS ??
• Helps to decide which drug to develop
• To estimate and understand the full impact of new
therapy
• To make an informed decision regarding appropriate
use of drug which have been developed
• To make the best use of limited resources
8. GOALS:
To determine which healthcare alternatives
provide the best healthcare outcome in terms
of money spent
To improve the allocation of resources for
pharmaceutical products and services
10. COSTS
Cost vs. Price ??
Cost involves all the resources that are used to
produce and deliver a particular drug therapy
Types of Costs
• Direct costs
Medical vs Nonmedical
• Indirect costs
• Intangible costs
• Opportunity costs
11. • Direct Medical Costs: Costs of medical service
These include:
• Fixed costs or costs that do not vary immediately
with the number of patients treated. E.g. capital
costs of hospital building or equipment etc.
• Variable costs or costs that vary immediately with
number of patients treated. E.g. costs of drugs,
syringes, needles etc.
• Direct non-medical costs:
• Costs incurred by the patient in receiving medical
care. E.g. transportation to and from hospital.
12. • Indirect cost: e.g. income lost because of
absenteeism, loss of productivity
• Intangible costs
• Costs of pain, worry and other suffering which a
patient or his family might suffer
• Opportunity costs:
• The amount lost by not using economic resources
in its best alternative use (labour, capital,
building, management etc.)
• Resources invested in one area will be at expense
of loss of another opportunity
13. PERSPECTIVES OF PHARMACOECONOMICS
• Patient perspective
• Provider perspective
• Payer perspective
• Societal perspective
After selection of
perspective next step cost
related measurements
1. Direct medical costs
2. Direct non medical costs
3. Indirect nonmedical costs
4. Intangible costs
5. Opportunity costs
14. PATIENT PERSPECTIVE
All the relevant cost and consequences experienced
by the patient
Included costs:
Direct
Indirect
Intangible
16. PAYER PERSPECTIVE
Social Security/Government, third party payers
eg. private insurance companies and employers
Included costs:
-Direct costs
-Indirect costs
relevant to employers
lost workdays
lost productivity at work
17. SOCIETAL PERSPECTIVE
The broadest of all perspectives that
comprehensively evaluates all costs and
consequences
Considers the benefits to society as a whole
Included costs:
- Direct; overall cost of providing care
- Indirect; loss of productivity
19. OUTCOME PARAMETERS
Clinical- As a result of disease or treatment
-survival / mortality
-morbidity
Economic- Direct, indirect and intangible costs
Humanistic
-Patient preferences / Utilities
-Quality of life
20. TYPES OF STUDY
• Cost Minimization Analysis
• Cost Effectiveness Analysis
• Cost Benefit Analysis
• Cost Utility Analysis
21. COST MINIMIZATION ANALYSIS (CMA)
Compares the costs of two or more alternatives that
have a demonstrated equivalence in therapeutic outcome
Relatively straight forward and simple method
Least cost alternative is chosen
• Examples:
Brand vs. Generic products
Different antibiotic therapies
Different route of administration of the same drug
22. COST-MINIMIZATION ANALYSIS (CMA):
IN DRUG THERAPY
Cost of therapies (₹)
COSTS Drug A Drug B
Acquisition cost 250 350
OUTCOMES
Antibiotic effectiveness 90% 90%
23. COST-MINIMIZATION ANALYSIS (CMA): IN
DRUG THERAPY
Cost of therapies (₹)
COSTS Drug A Drug B
Acquisition cost 250 350
Administration 75 0
Monitoring 75 25
Adverse effects 100 25
Subtotal 500 400
OUTCOMES
Antibiotic effectiveness 90% 90%
24. COST-EFFECTIVENESS ANALYSIS
(CEA)
Form of economic evaluation whose goal is to identify,
examine, and compare the relevant costs and consequences of
competing drug regimens and interventions
Costs are expressed in monetary terms
Consequences are measure in their natural units, such as:
- Cases cured
- Lives saved
- Hospitalization prevented
Decision maker in identifying a preferred choice among
possible alternatives
25. Result expressed as: cost per unit of success
CER = cost / Effectiveness
Choice is that of lower ratio
26. CEA IN DRUG THERAPY
Cost of therapies (₹)
COSTS Drug A Drug B
Acquisition cost 300 400
Administration 50 0
Monitoring 50 0
Adverse effects 100 0
Subtotal 500 400
27. CEA IN DRUG THERAPY
Cost of therapies (₹)
COSTS Drug A Drug B
Acquisition cost 300 400
Administration 50 0
Monitoring 50 0
Adverse effects 100 0
Subtotal 500 400
OUTPUTS
Extra years of life 2.22 1.6
Cost-effectiveness ratio 500/2.2 = ₹ 225 400/1.6 = ₹ 250
Per extra year of life
28. COST-BENEFIT ANALYSIS (CBA)
All costs (inputs) and benefits (consequences) of
alternatives expressed in monetary terms
Results are often expressed as:
• Ratio of benefit to cost
• Net cost or benefit = benefit – cost
CBA allows uniform comparison of programs or
interventions with entirely different outcomes
Useful when resources are limited and only one
program can be implemented
29. COST-BENEFIT ANALYSIS (CBA)
Cost of therapies (₹)
COSTS Drug A Drug B
Acquisition cost 300 400
Administration 50 0
Monitoring 50 0
Adverse effects 100 0
Subtotal 500 400
BENEFITS(₹)
Days at work (₹) 1000 1000
Extra months of life (₹) 2000 3000
Subtotal (₹) 3000 4000
Benefit to cost ratio 3000/500=6:1 4000/400=10:1
Net benefit (₹) 3000-500 =2500 4000-400 =3600
30. COST-UTILITY ANALYSIS (CUA)
Method to compare treatment alternatives or
programs where costs are measured in monetary
terms and outcomes is expressed in terms of patient
preferences or quality of life
CUR = Cost / QALY
Least cost preferred
• Example:
• Evaluating arthritis treatment
• Chemotherapy that increases survival but
decreases patient well-being
31. COST-UTILITY ANALYSIS
Cost of therapies (₹)
COSTS Drug A Drug B
Acquisition cost
Administration
Monitoring
Adverse effects
Subtotal
UTILITIES
Extra years of life (yrs)
Quality of life index
QALYs
Cost-to-utility ratio
300
50
50
100
500
2.22
0.33
0.73
500/0.73=₹ 685 Per
extra quality of life
year
400
0
0
0
400
1.6
0.41
0.66
400/0.66= ₹ 606
Per extra quality of
life year
32. PHARMACOECONOMIC METHODS
Cost minimization analysis (CMA)
-assumes equal outcomes
Cost effectiveness analysis (CEA)
-measures outcome in natural or physical units
Cost Benefit analysis (CBA)
-measures both benefit and cost in monetary terms
Cost Utility analysis (CUA)
- measures outcomes in QALY
33. APPLICATIONS
Assist in decision making and allocating scarce resources
Assessing the value of a new agent
Formulary decision making
Drug policy decisions, treatment guidelines & Justify the
addition of new clinical service
Pricing in pharmaceutical industry
Decision on reimbursement
Third-party; payers use such information to decide
whether to pay for a particular treatment, or to determine
what price they are willing to pay
34. CONCLUSION
Time and money can
only be spent once-
choice is inevitable
Pharmacoeconomics can
enhance the quality of
practice by
strengthening
evaluation process and
increasing the
probability that deliver
better value in patient
care
Eg- new drug and previous best therapy
Traditional medical evaluation focused only on the benefits
to determine the most efficient way to use our resources
Rising costs of health care
Limited resources
Is the drug/intervention providing benefit at a reasonable cost?
Intangible – immposible to measure in monetary terms but sometimes captured in QOL
a point of view
Individual interpretation
Utility is a economist word for satisfaction or sense of well being
An attempt to assess the quality of state of health and not just the quantity
2 generically equivalent drugs- Outcome proven to be equal but acquisition and administration cost may be significantly different
Decision making process in allocation of funds to healthcare programme
Compares the cost involved in implementing a programme with the value of outcome
Surgical procedure vs medical intervention, endpoints can be different
Assist physician, hospitals, insurers, patients and hcps to chose best & efficacious therapy in least cost- optimizing the outcome to the patients and decrease the costs to the society
Formulary- which drug to be included in the formulary by choosing most effective treatment in lowest price
Pharmaceutical companies use it to evaluate pricing of a drug and also to make decisions to pursue or not to pursue particular development program