Pharmacoeconomics: Methods, Cost Analysis, and Importance in Modern Healthcare

This presentation provides a comprehensive overview of pharmacoeconomics — a crucial branch of health economics that evaluates the cost-effectiveness, cost-utility, cost-benefit, and cost-minimization of pharmaceutical products and healthcare services. The slides explain the foundational concepts, terminologies, and methods used in pharmacoeconomic evaluation including QALY, CMA, CEA, CUA, and CBA. It also emphasizes the importance of pharmacoeconomics in healthcare decision-making, policy development, pricing strategies, and optimizing resource allocation. This is an essential study resource for pharmacy students and healthcare professionals looking to understand the economic impact of therapeutic decisions.

1. PHARMACOECONOMICS

2. Introduction To Pharmacoeconomics Pharmacoeconomics is the branch of economics that uses cost-benefit, cost-effectiveness, cost minimization, cost of illness, and cost utility analyses for comparing pharmaceutical products and treatment strategies . It's a part of health economics focusing on the economic estimation of drugs . Cost can be measured in following ways: cost/unit, cost/treatment, cost/person, cost/person/year, etc. Pharmacoeconomics coined by Townsend in 1988.

3. Pharmacoeconomics Economic Cost benefit Cost effectiveness Cost minimization Cost utility Humanistic Quality of life Patient preferences Patient satisfaction

4. Objectives Outline the issues and theory. To show its application to make decisions about drug therapy. To show application in decreasing the financial burden on consumers for effective management of the healthcare system. To make limited resources more effective for the expansion of healthcare benefits at lower costs.

5. Need of Pharmacoeconomics To find out the optimal therapy at the lowest cost. In the industry, to develop specific research and development alternatives. In the public, to design health insurance benefits. In the government, to determine program benefits and prices.

6. Methods of Pharmacoeconomics Evaluation Cost-Minimization Analysis (CMA) It involves measuring only the costs of health services, e.g., prescribing generic medicine instead of a brand leader. Cost-Effectiveness Analysis (CEA) It refers to the whole of economic evaluation but specifically a particular type of evaluation in which the health benefit can be defined and measured in natural units, e.g., years of life saved, etc .

7. Methods of Pharmacoeconomics Evaluation Cost-Utility Analysis (CUA) It's similar to cost-effectiveness, but the outcome is a unit of utility, e.g., Quality Adjusted Life Years (QALY) in coronary artery bypass versus cost for erythropoietin in renal diseases. Cost-Benefit Analysis (CBA) The benefit is measured as the associated economic benefit of an intervention, e.g., monitoring the value of returning a worker to employment earlier

8. Basic Terminologies Pharmacoeconomic – It’s the branch of health economics that deals with the evaluation of the costs and consequences of therapeutic decision-making. Cost of Drugs – It’s the total resources spent in making the drug or drug preparation. Price – It’s the amount a customer pays for a product or service. QOL (Quality of Life) – An individual’s perception of their position in life in the context of the culture and value system in which they live and in relation to their goals, expectations, standards, and concerns. Time Trade Off (TTO) – It’s a tool to help determine the QOL of a patient. QALY – Quality Adjusted Life Years. Discounting – It’s a method for time adjustment for costs where future costs are brought to the present.

9. Direct Cost These are the resources consumed in the prevention, detection, or treatment of a disease or illness. It involves the transfer of money . A ) Direct Medical Cost: Represents costs that are incurred during the provision of care. Ex. Cost of drugs, lab tests, salaries of healthcare professionals. B ) Direct Non-Medical Costs: Arising due to illness but do not involve purchasing medical services. Ex. Cost of transportation, cost of special clothing, etc.

10. Indirect Cost It’s the external cost or indirect cost. These are costs of reduced productivity. It is the one borne by the patient and family. Ex . Wages and salaries lost due to mortality and morbidity.

11. Intangible Costs These are costs incurred, which represent non-financial outcomes of disease and medical care, which cannot be expressed in monetary value. It's related to the patient's pain, worry, and suffering, as well as the patient's family. Ex . Quality of life for patients with cancer, arthritis. It's difficult to measure and is presently included in indirect costs.

12. Utility Unity & Quality of Life Utility Unity: It evaluates the changes in a patient's approved result from moving from one state to another for the use of drug therapy. Quality of Life: It involves physical and psycho-social dimensions of life. Physical dimensions include the presence or absence of ache and immobility, while psycho-social dimensions include the level of anxiety, depression, and reduced ability of the patient to deal with issues.

13. Importance of Pharmacoeconomics Pharmacoeconomic analysis helps to achieve maximum benefit at limited cost. Clinicians want their patients to receive the best care and outcomes available. The payers want to manage rising costs . Pharmacoeconomics combines the objectives of both clinicians and payers by estimating the value of patient outcomes for the expenditure spent on medications and other healthcare services. In today's healthcare settings, pharmacoeconomic methods can be applied for effective formulary management, individual patient treatment, medication policy determinations, and resource allocation.