Pharmacoeconomics by harsh

basics of pharmacoeconomics

1. PHARMACOECONOMICS Dr. Harsh Yadav,Dr.Gopal jhalani Resident Doctor, Department of Pharmacology, SMS Medical College , Jaipur 28 th November 2013

2. ECONOMICS- Science of distribution of wealth and resources in a balanced way so that everyone is benefited with available resources and finances .

3. Pharmacoeconomics is the process of identifying , measuring, and comparing the costs, risks, and benefits of programs, services, or therapies & determining which alternative produces the best health outcome for the resource invested. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 3

4. Pharmacoeconomics identifies, measures, and compares the costs and consequences of pharmaceutical products and services . It involves economic evaluation of drug development, drug production, and drug marketing i.e., all the steps that take place from the time the drug is manufactured to when it reaches the patien ts . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 4

5. Doctors prescribe patients consume third purchasing parties (government insurance companies) pay the bill with money that they have obtained from increasingly reluctant healthy members of the public". [ 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 5

6. In terms of production, the India pharma industry ranks 3 rd on a global scale whereas in terms of turnover worth, it ranks 14 th Medication prices are among the lowest prices in the world . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 6

7. The Indian pharmaceutical industry is a hub where medications can be produced at a low price and still be of international quality . It witnessed a robust growth from the production turnover of about 1.14 billion dollars in 1990 to over 22.73 billion dollars in 2009-10, comprising about Rs , 14 billion dollars of domestic market and 9 billion dollars of exports . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 7

8. Although India is a producer of abundance of quality drug at low cost only one third of its population has access to essential medicines 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 8

9. P.E. STUDY USEFUL IN Fixing the price of a new drug and re-fixing the price of an existing drug Finalizing a drug formulary Compliance of requirement for drug license. Including a drug in the medical/insurance reimbursement schemes. Introduction of new schemes and programs in hospital pharmacy and clinical pharmacy. Drug development and clinical trials 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 9

10. How to do PE Study 1. Perspective 2. Costs 3. Consequences 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 10

11. Perspective Patient Perspective Provider Perspective Payer Perspective Societal Perspective 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 11

12. Cost : The value of the resources consumed by a program or drug therapy of interest Direct medical costs Direct nonmedical costs Indirect costs Intangible costs Opportunity costs 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 12

13. Direct medical costs Medications Supplies Laboratory tests Healthcare professionals' time Hospitalization Direct nonmedical costs Transportation Food Family care Home aides 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 13 Cost

14. C osts Indirect costs Lost wages (morbidity) Income forgone because of premature death (mortality) Intangible costs Pain Suffering Inconvenience Grief Opportunity costs Lost opportunity Revenue forgone 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 14

15. Consequences : is defined as the effects, outputs, or outcomes of the program or drug therapy of interest. Economic outcomes( direct, indirect, and intangible costs compared with the consequences of medical treatment alternatives) Clinical outcomes (e.g., safety and efficacy end points ). Humanistic outcomes- quality of life along several dimensions (e.g., physical function, social function, general health and well-being, and life satisfaction) 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 15

16. Positive versus Negative Consequences P ositive outcome is a desired effect of a drug (efficacy or effectiveness measure) A negative outcome is an undesired or adverse effect of a drug, possibly manifested as a treatment failure, an adverse drug reaction (ADR), a drug toxicity, or even death . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 16

17. Economic Evaluation Methods Cost-of-Illness Evaluation Cost-Minimization Analysis Cost-Benefit Analysis Cost-Effectiveness Analysis Cost-Utility Analysis 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 17

18. Cost-of-Illness Evaluation identifies and estimates the overall cost of a particular disease for a defined population. This evaluation method is often referred to as burden of illness and involves measuring the direct and indirect costs attributable to a specific disease 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 18

19. Cost-Minimization Analysis determination of the least costly alternative when comparing two or more treatment alternatives. With CMA, the alternatives must have demonstrated equivalency in safety and efficacy (i.e., the two alternatives must be equivalent therapeutically ) The least expensive agent, considering all these costs, should be preferred. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 19

20. Cost-Benefit Analysis Both the costs and the benefits are measured and converted into equivalent dollars in the year in which they will occur. These costs and benefits are expressed as a ratio (a benefit-to-cost ratio ) If the B:C ratio is greater than 1, the program or treatment is of value . If the B:C ratio is less than 1, the program or treatment is not economically beneficial. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 20

21. Cost-Effectiveness Analysis CEA involves comparing programs or treatment alternatives with different safety and efficacy profiles a way of summarizing the health benefits and resources used by competing healthcare programs so that policymakers can choose among them . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 21

22. Cost : measured in dollars Outcomes: measured in terms of a specific therapeutic outcome. e.g ., lives saved , cases cured, life expectancy, drop in BP 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 22

23. A verage Cost-Effectiveness R atio (ACER) ACER = HEALTH CARE COST(IN RS .) CLINICAL OUTCOME(NOT IN RS .) Using this ratio, the clinician would choose the alternative with the least cost per outcome gained 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 23

24. Incremental Cost- Effectiveness Ratio (ICER) ICER = COST A (IN RS .) COST B (IN RS) EFFECT A (%) EFFECT B (%) This formula yields the additional cost required to obtain the additional effect gained by switching from drug A to drug B. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 24

25. Experts differ over which ratio, ACER or ICER, is the most appropriate and useful . ACER reflects the cost per benefit of a new strategy independent of other alternatives. ICER reveals the cost per unit of benefit of switching from one treatment strategy (that already may be in place) to another. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 25

26. Cost-Effectiveness Plane 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 26 cost cost effect effect NE quadrant: more costly, more effective NW quadrant: more costly, less effective SW quadrant: less costly, less effective SE quadrant: less costly, more effective PERFORM CEA PERFORM CEA DOMINATED DOMINATES Adapted from: Smith KJ et al. In: Arnold, RJG, editor. Pharmacoeconomics from theory to practice. Boca Raton: CRC Press; 2010. p. 95-108.

27. QALY and HRQOL HRQOL(HEALTH RELATED QUALITY OF LIFE)- A persons perception of how health impacts his physical, social and psychological functioning of well being Measurement of HRQOL is achieved by use of patient completed questionnaires 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 27

28. Terminology Utility Numerical estimate of quality of life (QOL) associated with a disease state or treatment Perfect health = 1, Dead = 0 Anything else…somewhere in between Measured using questionnaires 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 28

29. Terminology Quality-Adjusted Life-Year (QALY) Life expectancy adjusted based on utility QALY = time in health state × utility of state If patient remains in the state for the remainder of their life, we can use life expectancy for time 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 29

30. QALY Example Consider 2 hypothetical chemo drugs Standard of care vs. new therapy Both prolong life Both cause side effects which reduce QOL 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 30

31. QALY Example Standard of care treatment: Prolongs life by an average of 1 year Estimated utility of 0.65 due to side effects New treatment: Prolongs life by an average of 1.5 years Estimated utility of 0.5 due to side effects 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 31

32. Standard of Care QALYs QALY = Life expectancy × utility = 1 year × 0.65 utility = 0.65 QALYs The standard of care is expected to add 0.65 quality-adjusted life-years to our patient’s life. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 32

33. New Treatment QALYs QALY = Life expectancy × utility = 1.5 years × 0.5 utility = 0.75 QALYs The new treatment is expected to add 0.75 quality-adjusted life-years to our patient’s life. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 33

34. Cost-Utility Analysis Pharmacoeconomists sometimes want to include a measure of patient preference or quality of life when comparing competing treatment alternatives . Cost-utility analysis (CUA) is a method for comparing treatment alternatives that integrates patient preferences and HRQOL. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 34

35. Cost is measured in dollars, and therapeutic outcome is measured in patient-weighted utilities rather than in physical units. Results of CUA are also expressed in a ratio, a cost-utility ratio (C:U ratio). Most often this ratio is translated as the cost per QALY gained or some other health-state utility measurement. The preferred treatment alternative is that with the lowest cost per QALY (or other health-status utility ). 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 35

36. CUA is the most appropriate method to use when comparing programs and treatment alternatives that are life extending with serious side effects (e.g., cancer chemotherapy) those which produce reductions in morbidity rather than mortality (e.g., medical treatment of arthritis) and when HRQOL is the most important health outcome being examined . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 36

37. Proper application of pharmacoeconomics will empower the pharmacy practitioners and administrators to make better and more informed decisions regarding products and services they provide. Pharmacotherapy decisions traditionally depended solely on clinical outcomes like safety and efficacy, but pharmacoeconomics teaches us that there are three basic outcomes to be considered clinical, economic, and humanistic in drug therapy. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 37

38. Australia was the first country to form evidence based guidelines about medication reimbursement on the basis of cost-effectiveness research. Since 1993 Food and Drug Administration (FDA) in United States and Central Drug Standard Control Organization (CDSCO) in India do not require an economic analysis for Drug approval . A new drug has to be approved for a program based on pharmacoeconomic analysis . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 38

39. The development of pharamcoeconomics is at an infancy stage in India at the moment, despite the rapid growth of clinical research . I n India Chapter of SPOR-INDIA ( Society of Pharmacoeconomics and Outcomes Research India )has been formed, but it needs to develop the platform for pharmacoeconomics . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 39

40. We hope in India clinical pharmacists including doctors with knowledge of P.E. be more beneficial than conventional doctors as they can implement the principles of economics in daily basis practice in community and hospital pharmacy . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 40

41. Questions? 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 41

42. References Assesspharmacy:principles of pharmacoeconomics chapter 1 The role of pharmacoeconomics in current Indian healthcare system( Akram Ahmad1, Isha Patel2, Sundararajan Parimilakrishnan1, Guru Prasad Mohanta1, HaeChung Chung3, Jongwha Chang3)journal of research in pharmacy practice, review article, volume 2 ,issue 1 Ahuja J, Gupta M, Gupta AK, Kohli K. Pharmacoeconomics . Natl Med J India 2004;17:80-3 Drummond MF, Sculpher MJ, Torrance GW. Critical Assessment of Economic Evaluation. Methods for the Economic Evaluation of Health Care Programmes . 3 rd ed. Oxford: Oxford University Press; 2005 Bennett PN, Brown MJ. Topics in drug therapy. Clinical Pharmacology. 9 th ed. Edinburgh: Churchill Livingstone; 2003. p. 24 . 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 42

43. Cost-Effective ≠ Cost-Saving!!! 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 43

44. Cost-Saving vs. Cost-Effective Cost-saving An intervention that has a lower total cost than an alternative intervention Cost-effective An intervention that is sufficiently effective relative to its total cost when compared with an alternative intervention 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 44

45. Calculating ICER ICER = difference in cost difference in effectiveness Or… ICER = C2 – C1 $’s E2 – E1 QALYs 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 45

46. USE OF P.E. IN INDIA 1. To find the optimal therapy at the lowest price. 2 . Numerous drug alternatives and empowered consumers also fuel the need for economic evaluations of pharmaceutical products . 3. The use of economic evaluations of alternative healthcare outcomes. 4/25/2016 Yadav H, SMS Med Coll, JAIPUR 46