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Pharmacoeconomics

1. Chapter VI Cost-effectiveness analysis 1

2. CEA….. Cost-effectiveness analysis (CEA) measures costs in dollars and outcomes in natural health units , which indicate an improvement in health such as cures, lives saved, or blood pressure reductions. This is the most common type of pharmacoeconomic analysis found in the pharmacy literature. 2

3. CEA….. It provides a framework to compare two or more decision options by examining the ratio of the differences in costs and the differences in health effectiveness between options. The overall goal of CEA is to provide a single measure , ICER , which relates the amount of benefit derived by making an alternative treatment choice to the differential cost of that option. 3

4. CEA….. In CEA, the effectiveness is expressed in terms of non-monetary units that describes the desired objective . lives saved (life years gained) disability days avoided cases treated Limitation: CEA cannot be used to compare interventions with different health outcomes because of its nonmonetary measurement of outcomes . 4

5. CEA….. Recommended Criteria for calling an intervention cost effective: Less costly and at least as effective (as other alternatives). More costly and more effective, with the added benefit worth the added cost Less effective and less costly, with the added benefit of the alternative not worth the added cost. Challenge: Decision as to whether the added benefit worth the added cost Decision Rule: added benefit worth added cost comparatively 5

6. The cost-effectiveness plane Drawn with the differences in cost (or the incremental cost) on the y-axis and the differences in effectiveness (or incremental effectiveness) between the two options on the x-axis . Comparison is between: a new therapy & existing program, acting as the comparator , will be at the origin of both the cost and effectiveness axes depicting the current level of expenditure and benefit. 6

7. New treatment more costly (+) New treatment less costly (-) New treatment more effective (+) New treatment less effective (-) Existing treatment Existing treatment dominates over the new ones (DOMINATED) CEA useful?????? New treatment more effective and more costly (trade-off b/n increases in costs and effectiveness ) CEA useful ?????? New treatment less effective and less costly (trade-off b/n decrease in costs and effectiveness ) New treatment is dominant over the existing one due to its superior outcome at diminished costs. DOMINANT MAKING DECISIONS WITH C-E EFFECTIVENESS PLANE 7

8. Step 1: Framing the Problem Define the study questions Determine the perspective of the study Time Frame and Analytic Horizon 8

9. Step 2: Identify the Baseline and Alternative Interventions A CEA requires a comparison between two or more options. A single option cannot be cost-effective in isolation. However , it is often reasonable to include a “do nothing” option, especially if doing nothing is a legitimate clinical strategy, but also as a baseline comparator to assess the clinical realism of the model and analysis. Baseline Reference point for the analysis Can be placebo, existing treatment or current standard of care Alternative intervention New drug or intervention 9

10. Step 3: Selecting Health Outcome Measures Must be relevant to the study questions Can be categorized into: Intermediate outcome Final outcome Both positive and negative outcomes should be addressed Positive outcomes : drug’s efficacy measure Negative outcomes : ADR and treatment failure 10

11. Step 3: Selecting Health Outcome Measures…… Intermediate Measures Final Measures Morbidity Number of persons screened Number of disease cases Mortality Number of hospital re-admissions Number of deaths Disability Number of assisted living days Number of chronic disabilities 11

12. Step 4: Identify Relevant costs Relevant costs include cost of intervention, cost of disease averted, cost of productivity losses averted, and future unrelated health costs Costs to be included depends on the perspective chosen Controversy on the inclusion of productivity costs and cost of future unrelated health care costs 12

13. Step 5: Decision Model Critical step Can use software, decision tree or done by hand Requires outcome and economic data RCT Peer reviewed published literatures 13

14. Step 6: Analyze and Interpret result Calculate the summary measure-CE ratio The basic components of a C/E ratio are: Numerator : Net cost C Denominator : Health Outcome Cost-effective compared to what? No public health intervention is cost-effective by itself -- it is either more or less cost-effective than another intervention. 14

15. The ratio may take either of the following forms Average C/E ratio (ACER) Marginal C/E ratio (MCER) Incremental C/E ratio (ICER) 15 Step 6: Analyze and Interpret result…….continued

16. Step 6: Analyze and Interpret result…….continued 6.1 Average Cost Effectiveness Ratio (ACER) Ratio of costs to outcomes for a single intervention (strategy A) Use to evaluate the average cost per health outcome for a single program Use to allocate resources between independent programs and programs are ranked based on ACERs. For example, Hepatitis B vaccination vs. HIV testing 16

17. Step 6: Analyze and Interpret result…….continued 6.2 Marginal Cost Effectiveness Ratio Marginal cost effectiveness = what’s the extra cost to get the extra effectiveness? Ratio of additional costs to outcomes obtained from one additional unit of an intervention. Examines effects of scale (within a single program/service) Does cost per health outcome increase or decrease as program changes size? 17 Cost Strategy A’ - Cost Strategy A Outcome Strategy A’ - Outcome Strategy A

18. Step 6: Analyze and Interpret result…….continued 6.3 Incremental Cost Effectiveness Ratio Ratio of additional costs to outcomes obtained when one intervention is compared to the next most effective intervention. When comparing 2 therapies, ICA assesses what the added cost per net effect for alternative therapy would be ICEA is the difference in total costs of 2 therapies divided by difference in effectiveness of the 2 therapies 18 Cost Strategy B - Cost Strategy A Outcome Strategy B - Outcome Strategy A

19. 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 ICEA: $5000-$2500 or $500/life saved 15-10 19

20. When to Use between mutually exclusive (competing) interventions 20

21. Step 6: Analyze and Interpret result-cont Exclusion of Dominated Alternatives If intervention is both less effective and more costly than the next most effective alternative- Strongly Dominated and be eliminated. An intervention can also be dominated when its ICER is higher than that of the next most effective intervention- Extended or Weak Dominance 21

22. Performing an ICEA Rank the alternative treatment options by health benefit (beginning with the one with the lowest benefit). Eliminate treatment alternatives that are strictly dominated. Calculate the ICER between each treatment option and the next most expensive option. Eliminate treatment options that display extended dominance. Determine which treatment options have an ICER that is below the cut-off ICER. 22

23. Step 7: Sensitivity Analysis Conduct sensitivity analysis on the variables that have uncertain values How sensitive are the results to different values of key variables Evaluate the “what if ” scenarios, For example, a. Assume different cost of drug or outcome b. Assume different probability of a outcome 23

24. Step 8: Presenting CEA results Presentation of a CEA should include the following (Haddix et al 2003) The study perspective, time frame and analytic horizon The study question The assumptions used to build the model A description of the intervention Evidence of the effectiveness of the intervention Identification of all relevant costs Inclusion or exclusion of productivity costs Discount rate Results of incremental analysis Results of sensitivity analysis Discussions 24

25. Example 1: Calculate the ICER Mutually Exclusive Interventions Total Outcomes (Life Years) Total Costs ICER Treatment A 11 110000 Treatment B 9 90000 25

26. Example 1: Calculate the ICER- Cont Mutually Exclusive Interventions Total Outcomes (Life Years) Total Costs ICER Treatment B 9 $ 90,000 Treatment A 11 $110,000 26 Step 1: Arrange in order of increasing effectiveness

27. Example 1: Calculate the ICER- Cont Mutually Exclusive Interventions Total Outcomes (Life Years) Change in Effectiveness Total Costs Change in Cost ICER Treatment B 9 $90,000 Treatment A 11 2 $110,000 $20,000 27 Step 2: Check and Exclude dominated Alternatives

28. Example 1: Calculate the ICER- Cont 28 Step 3: Calculate the ICER Mutually Exclusive Interventions Total Outcomes (Life Years) Change in Effectiveness Total Costs Change in Cost ICER Treatment B 9 $90,000 Treatment A 11 2 $110,000 $20,000 10000

29. Example 2: Results of a C-E Study Averted Cases Cost Program A 100 $ 50.000 Program B 150 $ 130.000 Program C 110 $ 170.000 29

30. Step 1: Order by Increasing Effectiveness Averted Cases Cost Program A 100 $ 50,000 Program C 110 $ 170,000 Program B 150 $ 130,000 30 Example 2: Calculate the ICER………

31. Step 2: Check for Dominance Averted Cases Increm. Effec. Cost Increm. Cost Increm. C-E Ratio Program A 100 $ 50,000 Program C 110 10 $ 170,000 $120,000 Program B 150 40 $ 130,000 (-$40,000) 31 Example 2: Calculate the ICER………

32. Step 2: Check for Dominance Averted Cases Increm . Effec . Cost Increm . Cost Increm. C-E Ratio Program A 100 $ 50,000 Program C 110 10 $ 170,000 $120,000 12,000 Program B 150 40 $ 130,000 (-$40,000) -1,000 32 Example 2: Calculate the ICER………

33. Step 2: Check for Dominance Averted Cases Increm . Effec . Cost Increm . Cost Increm. C-E Ratio Program A 100 $ 50,000 Program C 110 10 $ 170,000 $120,000 12,000 Program B 150 40 $ 130,000 (-$40,000) -1000 33 Example 2: Calculate the ICER………

34. Step 3: Eliminate Dominated Programs Averted Cases Increm . Effec . Cost Increm . Cost Increm. C-E Ratio Program A 100 $ 50,000 Program C 110 10 $ 170,000 $120,000 12000 Program B 150 40 $ 130,000 (-$40,000) -1000 34 Example 2: Calculate the ICER………

35. Step 4: Re- Calculate ICER without dominated programs Averted Cases Increm. Effec. Cost Increm . Cost Increm. C-E Ratio Program A 100 $ 50,000 Program B 150 50 $ 130,000 $80,000 35 Example 2: Calculate the ICER………

36. Step 4: Re- Calculate ICER without dominated programs Averted Cases Increm. Effec. Cost Increm . Cost Increm. C-E Ratio Program A 100 $ 50,000 Program B 150 50 $ 130,000 $80,000 $ 1600 36 Example 2: Calculate the ICER………

37. Step 5: Choose program with Incremental C-E Ratio <= perceived value If perceived value of an averted case >= $ 500 and < $ 1,600, choose Program A; If perceived value of an averted case >= $1,600, choose Program B. 37 Example 2: Calculate the ICER………

38. Exercise Mutually Exclusive Intervention Total Outcomes (Life years) Total Costs Program A 30 $ 200,000 Program B 10 $ 50,000 Program C 15 $ 130,000 Program D 11 $170,000 38

39. Exercise Mutually Exclusive Intervention Total Outcomes (Life years) Total Costs Program B 10 $ 50,000 Program D 11 $170,000 Program C 15 $ 130,000 Program A 30 $ 200,000 39 Step 1: Arrange in increasing order of effectiveness

40. Exercise Mutually Exclusive Intervention Total Outcomes (Life years) Change in Outcome Total Costs Change in cost Program B 10 $ 50,000 Program D 11 1 $170,000 $120,000 Program C 15 4 $ 130,000 (-$40,000) Program A 30 15 $ 200,000 $ 70,000 40 Step 2: Calculate change in outcome and cost

41. Exercise Mutually Exclusive Intervention Total Outcomes (Life years) Change in Outcome Total Costs Change in cost ICER Program B 10 $ 50,000 Program D 11 1 $170,000 $120,000 120,000 Program C 15 4 $ 130,000 (-$40,000) (-10,000)) Program A 30 15 $ 200,000 $ 70,000 4,667 41 Step 3: Calculate the ICER

42. Exercise Mutually Exclusive Intervention Total Outcomes (Life years) Change in Outcome Total Costs Change in cost ICER Program B 10 $ 50,000 Program D 11 1 $170,000 $120,000 120,000 Program C 15 4 $ 130,000 (-$40,000) (-10,000)) Program A 30 15 $ 200,000 $ 70,000 4,667 42 Step 4: Remove dominated program

43. Exercise Mutually Exclusive Intervention Total Outcomes (Life years) Change in Outcome Total Costs Change in cost ICER Program B 10 $ 50,000 Program C 15 5 $ 130,000 $ 80,000 16,000 Program A 30 15 $ 200,000 $ 70,000 4,667 43 Step 5; Calculate the ICER by removing strongly dominated program

44. Exercise Mutually Exclusive Intervention Total Outcomes (Life years) Change in Outcome Total Costs Change in cost ICER Program B 10 $ 50,000 Program C 15 5 $ 130,000 $ 80,000 16,000 Program A 30 15 $ 200,000 $ 70,000 4,667 44 Step: Remove Program C as there is weak dominance

45. Exercise Mutually Exclusive Intervention Total Outcomes (Life years) Change in Outcome Total Costs Change in cost ICER Program B 10 $ 50,000 Program A 30 20 $ 200,000 $ 150,000 $ 7,500 45 Step: Recalculate the ICER

46. An advantage of using a CEA is that health units are common outcomes that are routinely measured in clinical trials, so they are familiar to practitioners. These outcomes do not need to be converted to monetary values. A disadvantage to CEA is that the alternatives used in the comparison must have outcomes that are measured in the same clinical units. 46