Pharmacoeconomics

pharmacoeconomics, cost of drugs , how to analyse the cost and the outcome

1. PHARMACOECONOMICS Dr Anu Chandran Department of pharmacology Trivandrum medical college

2. CONTENTS History Definition Outcome Cost Pharmacoeconomics methodologies Steps for evaluating economic analysis Limitation of Pharmacoeconomics

3. HISTORY In the 1970s Pharmacoeconomics developed In 1978 McGhan , Rowland & Bootman , from the university of Minnesota, introduced the concepts of cost-benefit & cost-effectiveness analyses Pharmaceutical industry - late 1980s Journal of Pharmacoeconomics - 1992

4. Term first coined in 1986 by Townsend “ the description and analysis of the costs of drug therapy to health systems and society ” Rl Townsend ( 1986 )

5. Economics Greek – Rules of household ‘Science of the distribution of wealth and resources’. “ Study of how society decides what gets produced, how and for whom ”.

6. Definition: Description a nd analysis of the costs and consequences of pharmaceutical products and services and their impact on individuals, health care systems and society .

7. Pharmacoeconomics allows us to compare the economic resources consumed (inputs) to produce the health and economic consequences of products or services (outcomes ). INPUTS OUTCOMES Economic Health and Economic Resources

8. What is PharmacoEconomics ? Inputs Costs Health Care Outcomes

9. Costs Cost is NOT the same as price. All the resources that are used to produce and deliver a particular drug therapy. Physicians and pharmacists do not have complete information about the costs of drugs. Have no idea how much drugs cost . COSTS ECONOMICAL

10. classification Direct costs : health care funder : costs to deliver services to patient; both medical and non-medical Indirect costs : cost of treatment to patient or society( loss of productivity) Intangible costs : quality of life

11. Other costs Opportunity cost : Benefit forgone when selecting on therapy alternative over next best alternative Rupee given to someone is denied to somebody Marginal cost: Costs where the resource use actually changes substantially

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

13. ECHO model C linical outcomes E conomic outcomes H umanistic outcomes

14. CONSEQUENCES Outcomes Clinical Humanistic Economic Cure, comfort and survival Physical, emotional, social function, role performance Expense, saving, cost avoidance Prasanna R. Deshpande, Pharm D, Manipal,India

15. Measurement of benefits (outcomes ) Natural clinical units Years of life gained Number of strokes prevented etc. Utility units Quality adjusted life years (QALYs )

16. Parameters for PE evaluation Efficacy - Established by RCT Cost - Decided by company

17. Five types of Pharmacoeconomic Analyses Cost-minimization (CMA) Cost of Illness (COI ) Cost-benefit (CBA) Cost-effectiveness (CEA) Cost-utility (CUA)

18. Cost minimization analysis(CMA) Used when 2 different drug therapy are considered to produce same results Compares ‘cost’ Consider which drug costs less Used to compare Different brands Brand vs. Generic products Different antibiotic therapy Different routes of administration

19. Cost benefit analysis(CBA) Both cost and outcomes taken in monetary ( $ ) terms Ignores the intangible benefits Benefit and cost are expressed in terms of money Outcome expressed as: Ratio of benefit to cost Net benefit = benefit – cost

20. Cost of Illness “An illness consumes resources and, thus, it has a cost. The cost of an illness is the sum of three broad components : medical resources used to treat the illness, the nonmedical resources associated with it, and lost productivity due to illness or disability” (Larson, 1996)

21. Cost-Effectiveness Analysis Used to evaluate cost and outcome of therapy A therapy is a cost-effective strategy when the outcome is worth the cost relative to competing alternatives .

22. 2 Current productions 1 Increased Efficacy Increased Cost Decreased Efficacy Decreased Cost Not good 3 Increased Efficacy Decreased Cost Preferred 4 Decreased Efficacy Increased Cost Useless

23. C ost and outcomes are analyzed ….. Costs are expressed in monetary terms. Consequences are measure in their natural units, such as: - Cases cured - Lives saved - Hospitalization prevented

24. Cost-Effectiveness Ratio = Cost of treatment ($) Therapeutic effect* (Natural units) Limitation – must choose a single measure !

25. Cost-utility Integrates both costs and consequences within the utility analysis framework. A variation of CEA differences between CUA & CEA CUA requires the measurement of final outcomes in terms of changes in life expectancy adjusted for patient preferences Intermediate outcomes are not appropriate to use in cost-utility analysis outcomes expressed in QALY gained.

26. QALY - is a measure of disease burden , including both the quality and the quantity of life lived 1.0 QALY = Disease free yr. 0.5 QALY = Yr. spent with specific disease 0 = death Prasanna R. Deshpande, Pharm D, Manipal,India

27. Cost – monetary units Outcome - Patient preferences or “Utility based” unit QALY (quality adjusted life years) The most difficult analysis Used when QOL is the important outcome

28. Steps for conducting a PE Analysis Define the problem Identify the perspective and alternative interventions to be compared I dentify and measure outcomes of each alternative Identify, measure and value costs of all alternatives use discounting and sensitivity analysis when appropriate

29. 1 . Define the problem and state the objective Identify the disease state and what aspect you want to deal with. i.e. What is the most cost effective method for controlling glucose in the treatment of type II diabetes?

30. 2 . Identify the perspective … that is, who will be utilizing the information to make what decisions. This will guide you in choosing the relevant costs and benefits .

31. Simple model of economic analysis of health care Input (cost) Health Care programme Output (consequences) Whose perspective ?

32. Patient Perspect ive Examples of costs that directly affect the patient include: Out-of-Pocket costs lost income transportation Relevant Consequences are: Therapeutic effectiveness Adverse events Quality of Life (QOL)

33. Health Practition er Costs to physicians may include: Hospitalization Pharmacy Personnel Supplies Consequences of interest are: Therapeutic effectiveness Adverse events

34. Hospitals Costs include: Hospital stay costs Treatment of adverse events & complications Consequences of interest: Therapeutic effectiveness Adverse events

35. Payer perspctive Costs of for covered services which may include: Hospitalization Pharmacy Nursing home care Consequences of interest None

36. Societal All possible costs including lost productivity All possible consequences including QoL , & life years .

37. 3. Identify Alternative Interventions What are the relevant choices? Often a head-to-head comparison of the most used (traditional) treatment with the new one. It’s important to compare with the most likely substitute for a realistic result. The comparator doesn’t have to be a drug therapy.

38. Cost and Effectiveness Comparison Grid Effectiveness A>B A=B A<B A>B Analyze Choose B Choose B Cost A=B Choose A Indifferent Choose B A<B Choose A Choose A Analyze

39. 4 . Identify and measure outcomes cure rate (percent cured of illness) improved quality of life decreased incidence of morbidity years of extended life relief or reduction in symptoms no effect Adverse events (drug interactions and side-effects) mortality

40. Measuring Costs Costs are measured over a relevant time period such as a month or year. The length of time used depends on the typical span of the illness.

41. Discounting If the analysis spans more than a year, then the MONEY values must be adjusted to a common point in time . Present Value = Future value (1+r) n where r = discount rate (typically ranges from .03 to .06) and n = the number of years in the future .

42. Pharmacoeconomics works under : Decision makers Analysts Clinical trail economics Patient Patient counsellar HR Health economics

43. HEALTH ECONOMICS Health economics is the application of the discipline of economics to the topic of health. It include three parameters :- Output of healthcare . Cost of producing better health. Efficiency

44. Limitations Liable for bias Reduces the ability of the docto r to prescribe best drugs Difficulties are faced during the implementation of the results Methodologies at present are controversia l and are at development

45. PE in Today’s S cenario Drug development is very expensive process Duration of development – 10 to 15 yrs Patent life – 20 yrs. Patent life starts with preclinical phase. All new drugs are very expensive when they come in market .

46. Conclusion Tool for formulary designing and decision making process Help in shaping the economic evaluations & allocate resources properly Effective utilization of restricted resources . Provide clear picture about the likely costs and benefits of other alternatives

47. " Not everything that can be counted counts, and not everything that counts can be counted." - Albert Einstein (1879-1955) THANK YOU