Pharmacoeconomics: Balancing Cost and Care

This presentation delves into the fundamentals of pharmacoeconomics, examining the economic evaluation of pharmaceutical products and services. It covers key concepts such as cost-minimization, cost-effectiveness, cost-utility, and cost-benefit analysis. Attendees will gain insights into decision-making processes for healthcare resource allocation, the impact of pharmacoeconomic studies on policy-making, and real-world applications in various healthcare settings. Emphasis is placed on understanding how to optimize therapeutic outcomes while managing financial constraints.

1. Pharmacoeconomics PRESENTER Dr. R. Janarthanan 1st Year MBBS Dept. of Pharmacology BLDE MODERATOR Dr. Akram A Naikawdi PROFESSOR & HOD Dept. of Pharmacology BLDE

2. INTRODUCTION Term coined by Ray Townsend in 1986 Pharmacoeconomics Definition: "The description and analysis of the costs of drug therapy to healthcare systems and society." Description: Pharmacoeconomics is a branch of economics focusing on the impact of pharmaceutical products and services on health systems and society. Measures and Compares Costs: Identifies, measures, and compares the costs (resources consumed) and outcomes (clinical, economic, humanistic) of pharmaceutical products and services.

3. PRIMARY GOAL Primary Goal Best Healthcare Outcomes: Determine which healthcare alternatives provide the best outcomes in terms of money spent. Resource Allocation: Improve the allocation of resources for pharmaceutical products and services to maximize health benefits.

4. Health Economics: Health Economics is an applied field of study that allows for the systematic and rigorous examination of the problems faced in promoting health for all. Choices with Scarce Resources: Making informed decisions between different healthcare options when resources are limited. Comparative Analysis: Traditionally, medical evaluations focused only on the benefits of treatments. But health economics adds another dimension by also considering the costs. BASIC CONCEPTS AND TERMINOLOGY

5. TYPES OF COSTS: Direct costs : Medical costs Non-Medical costs Indirect costs Intangible costs Opportunity costs Marginal costs COSTS CLASSIFICATION

6. Direct costs are those that are directly associated with the medical treatment and patient care. They can be further categorized into medical and non-medical direct costs. Medical Direct Costs: These are the costs directly related to the healthcare services provided to the patient. Examples: Hospitalization Costs Medical Procedures Medication Costs Doctor’s Fees Non-Medical Direct Costs: These costs are also directly related to the treatment but do not involve direct medical care. Examples: Transportation Home Health Care Medical Equipment DIRECT COSTS

7. Indirect costs refer to the loss of productivity and income due to illness. These costs can be more challenging to measure because they involve broader economic impacts. Examples: Loss of Earnings: When patients or their caregivers have to take time off work due to illness or treatment, leading to a loss of income. Reduced Productivity: Decreased work efficiency and productivity due to health issues, even if the person is still working. Premature Death: Loss of potential future earnings due to early death caused by the illness. INDIRECT COSTS

8. Intangible costs are the non-monetary aspects of the impact of illness. These costs are difficult to quantify but are significant in terms of patient and family well-being. Examples: Pain and Suffering: Physical pain and emotional suffering experienced by patients. Anxiety and Stress: Mental health impacts on patients and their families, including anxiety, stress, and depression. Impact on Quality of Life: Overall reduction in the quality of life due to the illness, which can include limitations in daily activities and loss of enjoyment. IINTANGIBLE COSTS

9. OPPORTUNITY COST OPPORTUNITY COST IS THE VALUE OF THE NEXT BEST ALTERNATIVE THAT YOU GIVE UP WHEN YOU MAKE A CHOICE. IT'S ESSENTIALLY WHAT YOU MISS OUT ON BY CHOOSING ONE OPTION OVER ANOTHER. IN HEALTHCARE, IT REPRESENTS THE BENEFITS THAT COULD HAVE BEEN GAINED IF RESOURCES WERE USED IN A DIFFERENT WAY. IT’S NOT JUST ABOUT MONETARY COSTS BUT ALSO INCLUDES THE BENEFITS OF THE NEXT BEST ALTERNATIVE THAT IS NOT CHOSEN. EXAMPLES: SPENDING ON TREATMENTS: IF A HEALTHCARE SYSTEM SPENDS RS 10LAKHS ON A NEW CANCER TREATMENT, THE OPPORTUNITY COST IS WHAT ELSE THAT RS 10LAKHS COULD HAVE BEEN SPENT ON, SUCH AS VACCINATIONS, OTHER TREATMENTS, OR HEALTHCARE INFRASTRUCTURE. TIME ALLOCATION: FOR A HEALTHCARE PROVIDER, THE OPPORTUNITY COST OF SPENDING AN HOUR WITH ONE PATIENT IS THE VALUE OF WHAT COULD HAVE BEEN ACHIEVED IN THAT HOUR WITH ANOTHER PATIENT OR DOING ADMINISTRATIVE TASKS.

10. Marginal cost refers to the additional cost incurred to produce one more unit of a product or service. In healthcare, this often means the cost associated with providing one additional treatment or service to a patient. It's different from average cost, which is the total cost divided by the number of units produced or services provided. Examples: Hospital Stay: If a patient stays one extra night in the hospital, the marginal cost might include only the variable costs such as meals and nursing care, rather than fixed costs like the building and equipment. Medication: For a medication, the marginal cost might be the cost of producing and distributing one additional pill, excluding the initial research and development costs already incurred. MARGINAL COST

11. Natural Units: Benefits measured in terms such as years of life saved, strokes prevented, or diseases healed. Utility Units: Measures of satisfaction or well-being, often evaluated through quality of life assessments. Utility units can be derived from direct measurements or expert opinions. BENEFITS MEASUREMENT

12. The methodology for analyzing costs and benefits gives rise to the following commonly encountered types of economic evaluation. Cost-Minimization Analysis (CMA) Equivalent Outcomes: Used when interventions are demonstrated or assumed to be equivalent in outcomes. Example: Comparing costs of two generically equivalent drugs with proven equal outcomes but different costs. METHODOLOGIES

13. . Cost-Effectiveness Analysis (CEA/ICER) Health Benefit in Natural Units: Evaluates therapies by measuring health benefits in natural units (e.g., years of life saved) and costs in monetary terms. Comparison: Helps identify the most cost-effective therapy among alternatives with similar outcomes but different success rates. Cost-Utility Analysis (CUA) Quality and Quantity of Life: Measures the impact of interventions on both the quantity and quality of life. Expression: Results often expressed as cost per quality-adjusted life-year (QALY) gained, incorporating patient perspectives. METHODOLOGIES (CONTD....)

14. Cost-Benefit Analysis (CBA) Monetary Terms: Compares the costs and outcomes of therapies, with outcomes expressed in monetary terms. Comparison Across Areas: Allows for comparisons across different medical interventions by translating benefits into monetary values. Cost-of-Illness Evaluation (CIE) Humanistic Impact: Evaluates the humanistic impact and resource use of a disease before new interventions. Baseline: Establishes a baseline for comparison with new therapies. METHODOLOGIES (CONTD....)

15. COST ILLNESS EVALUATION

16. Cost-Consequence Analysis Comprehensive Listing: Lists all relevant costs and outcomes without aggregating them into single measures like QALYs or cost-effectiveness ratios. Readily Understandable: Provides a detailed presentation of intervention value, allowing decision-makers to weigh costs and benefits independently. METHODOLOGIES (CONTD....)

17. Type of Analysis Description Example Key Comparison Cost-Minimization Analysis (CMA) Compares costs of interventions with equivalent outcomes. Drug A vs. Drug B Drug A: $50/month Drug B: $60/month Both drugs are equally effective. Drug A is cheaper. Cost-Effectiveness Analysis (CEA) Compares costs and natural unit benefits (e.g., years of life saved). Treatment X vs Treatment Y for heart disease Treatment X: $10,000, extends life by 5 years. Treatment Y: $15,000, extends life by 6 years. Cost per year of life saved: Treatment X: $2,000/year Treatment Y: $2,500/year Cost-Utility Analysis (CUA) Measures impact on quality and quantity of life (QALYs). New cancer drug (Drug C) vs. standard treatment Drug C: $50,000, provides 2 QALYs. Standard treatment: $20,000, provides 1 QALY. Cost per QALY: Drug C: $25,000/QALY Standard: $20,000/QALY

18. Type of Analysis Description Example Key Comparison Cost-Benefit Analysis (CBA) Compares costs and benefits in monetary terms. Vaccination program Cost: $1 million Expected savings: $5 million in healthcare and productivity losses. Net benefit: $4 million Cost-of-Illness Evaluation Assesses overall economic impact of a disease before new interventions. Impact of diabetes Direct costs: medical treatments, hospitalizations Indirect costs: loss of productivity, long-term disability Total annual cost of diabetes: $300 billion Cost-Consequence Analysis (CCA) Lists all relevant costs and outcomes without aggregating into single measures. Asthma treatments (Treatment A vs. Treatment B) Treatment A: $1,000/year, reduces hospital visits by 50%, improves QoL by 20%, minimal side effects. Treatment B: $1,200/year, reduces hospital visits by 60%, improves QoL by 25%, moderate side effects. Comprehensive presentation of costs and benefits for each treatment.

19. Prospective Studies: Experimental studies, often part of clinical trials, but costly and time-consuming. Retrospective Studies: Data analyses of previously conducted trials or cohort studies, ideal for pharmacoeconomic evaluations. Model Studies: Use decision trees, Markov analysis, and other frameworks to display data from various sources when direct studies are unavailable. TYPES OF PHARMACOECONOMIC STUDIES

20. Therapeutic Decision-Making: Assists healthcare professionals in choosing effective and efficient drug therapies. Formulary Decision-Making: Helps in selecting the most cost-effective drugs for inclusion in formularies. Program Justification: Justifies investment and reimbursement for clinical services or programs. Drug Policy and Pricing: Influences drug policy decisions, treatment guidelines, purchasing negotiations, and pricing. APPLICATION OF ECONOMIC ANALYSES

21. Pharmacoeconomics as a Tool: Aids in ensuring cost-effectiveness in healthcare by comparing costs and benefits. Importance: Understanding pharmacoeconomic methods is crucial for demonstrating the value of new medicines and making informed healthcare decisions. CONCLUSION

22. Maiti R. Postgraduate Topics in Pharmacology. 3rd ed. Paras Medical Publisher; 2019. Tonin , Fernanda S et al. “Principles of pharmacoeconomic analysis: the case of pharmacist-led interventions.” Pharmacy practice vol. 19,1 (2021): 2302. doi:10.18549/PharmPract.2021.1.2302 References

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