Pharmacoeconomics ppt.

pharmacoeconomics

1. PHARMACOECONOMICS DR VIJITA SHAH 1 st year resident, Department of Pharmacology, GMCS 1

2. Objectives Introduction What is pharmacoeconomics ? Needs of pharmacoeconomics ? Challenges Why study pharmacoeconomics ? Goals Costs and types Perspectives Methodology Limitations Application Conclusion 2

3. Introduction Term coined by Townsend in 1986 Branch of health economics Making choices between options , when there is scarcity of resources Fundamentally comparative, weighing the costs and benefits of two options – most efficient 3

4. What is Pharmacoeconomics ? “Research that identifies, measures and compares the costs (resources consumed) and the economic, clinical and humanistic outcomes of diseases, drug therapies and programs directed to these diseases” Or “The field of study that evaluates the behavior of individuals, firms and markets relevant to the use of pharmaceutical products, services and programs, which frequently focuses on the costs (inputs) and consequences (outcomes) of that use” 4

5. Continued… The description and analysis of costs of drug therapy to health care system & society Pharmacoeconomics research identifies, measures and compares the costs & consequences It is the branch of economics that uses cost- benefit, cost effectiveness, cost- minimization, cost- of- illness and cost- utility analysis to compare pharmaceutical products and treatment strategies. 5

6. What is Pharmacoeconomics ? Impact on health status (1)Survival Drug therapy (2)QoL Impact on healthcare costs (1)Hospitalisations (2)Other drugs (3)Procedures, etc. Impact on health status (1)Survival Alternative drug (2)QoL therapy Impact on healthcare costs(1)Hospitalisations (2)Other drugs (3)Procedures, etc. 6 Target patient group

7. Need of Pharmacoeconomics ? To decrease health expenditure whilst optimizing healthcare results To spend less on cost of healthcare products and services To decrease the concern for patients, healthcare professionals and public 7

8. Challenges Creating cadre of trained producers and consumers of pharmacoeconomic work Continuing education on the relevant features of this discipline for practitioners, government officials, private sector executives Stable funding to support applied pharmacoeconomic research 8

9. Pharmacoeconomic analysis Input Pharmaceutical Output product or services Cost Analysis Clinical or Outcome study ( a partial pharmacoeconomic study) (not an economic study) Pharmacoeconomic Analysis COSTS Treatment Outcome 9

10. Why study pharmacoeconomics ? Helps to decide which drug to develop To estimate and understand the full impact of new therapy To make an informed decision regarding appropriate use of drug which have been developed 10

11. Goals To determine which healthcare alternatives provide the best healthcare outcome in terms of money spent To improve the allocation of recourses for pharmaceutical products and services 11

12. Costs Costs vs Price.?? Cost involves all the resources that are used to produce and deliver a particular drug therapy 12

13. Types of costs Direct medical cost Direct nonmedical cost Indirect cost Intangible cost Opportunistic Incremental 13

14. Perspective Patient Provider Payer Societal 14

15. Patient perspective All the relevant cost and consequences experienced by patient Includes costs – Direct Indirect Intangible 15

16. Provider perspective Concerned with the expenses of providing products or services Includes cost – Direct cost only 16

17. Payer perspective Societal security / Government, third party payers e.g. Private insurance companies and employers Includes cost – 1) Direct 2) Indirect a) relevant to employers b) lost workdays c) lost productivity at work 17

18. Societal perspective The broadest of all perspective that comprehensively evaluates all costs and consequences Considers the benefits to society as a whole Includes cost – Direct : overall cost of providing care Indirect : loss of productivity 18

19. ECHO Model Economic outcome Clinical outcome Humanistic outcome 19

20. Outcome parameters Clinical – As a result of disease or treatment - Survival / mortality - Morbidity Economic – Direct , Indirect , Intangible costs Humanistic – Patient preferences / Utilities - Quality of life 20

21. Pharmacoeconomics 21 Economic Cost benefit Cost effectiveness Cost minimization Cost utility Humanistic Quality of life Patient preferences Patient satisfaction

22. Methodology Cost benefit analysis Cost effectiveness analysis Cost minimization analysis Cost Utility analysis Other study methods 22

23. Cost benefit analysis (CBA) Allows for the detection , estimation and comparison of the benefits and costs of a program or treatment alternative is termed as Cost Benefit Analysis. A healthcare decision maker would choose the program or treatment alternative with highest net benefit or the greatest benefit-to-cost (B:C) ratio. Cost- benefit analysis is a way to compare the costs and benefits of an intervention, where both are expressed in monetary units. Benefit cost ration (BCR) = PV (benefits) PV (costs) 23

24. If the B:C ratio is greater than 1 , then the program or treatment is of value. The benefits provided by the programme or treatment alternative, outweigh the cost of providing it. If the B:C ratio equals 1, then the benefits equals the cost. The benefits given by the programme or treatment alternative are equivalent to cost of providing it. If the B:C ratio is less than 1 , the programme or treatment is not economically beneficial. The cost of providing the programme or treatment alternative outweighs the benefits realized by it. 24

25. The Data of CBA, of an intervention program that used atorvastatin in hypertensive patient with sedentary lifestyle were : A) Total cumulative benefits was 100 billion dollars calculated from - Direct medical costs reduced - Valuation of quality of life gained due to reduction of fatal heart attacks and stroke B) Cost of programme in monetary terms was 5 billion dollars So based on above formula : BCR= 100 billion dollars/5 billion dollars =20 (>>>1). 25

26. This methodology should be used for comparing the treatment alternatives in which the costs and benefits do not occur simultaneously. However, it is controversial to express health benefits in monetary value. 26

27. Cost effectiveness analysis (CEA) Summarization of the health benefits and resources used by competing healthcare programmes or treatment alternative is termed as Cost Effectiveness Analysis (CEA). “ Cost is measured in dollars and outcomes are measured in terms of obtaining a specific therapeutic outcome. ” These outcomes are often expressed in physical units or natural units but notably a non dollar units. The results of CEA are expressed as a ratio either as an average cost effectiveness ratio (ACER) or as an incremental cost effectiveness ratio (ICER). 27

28. For proper balancing cost with patient outcome, for determining which treatment alternatives represent the best health outcome per dollar spent, and deciding when it is appropriate to measure outcome in terms of obtaining a specific therapeutic objective, this CEA methodology is used. Also it provides valuable data to support drug policy, formulary ,management and individual patient treatment decisions. 28

29. Average cost effectiveness ratio (ACER) An ACER represents the total cost of a programme or treatment alternative divided by its clinical outcome to yield a ratio representing the dollar cost per unit of clinical outcome gained. ACER = Health care costs ( in dollars)__ Clinical outcome ( not in dollars) 29

30. “Is this increased benefit represent the value of the increased cost” ? 30

31. Incremental cost effectiveness ratio (ICER) ICER can be used to determine the additional cost and effectiveness gained when one treatment alternative is compared with the next best treatment alternative. ICER = _ Cost of treatment A – Cost of treatment B____ Effect of treatment A – Effect of treatment B 31

32. Cost minimization analysis (CMA) Determination of the “ least costly alternative when comparing two or more treatment alternatives is termed as Cost minimization analysis (CMA) With CMA, the treatment alternatives must have demonstrated equivalency in terms of safety and efficacy. When comparison of two or more therapeutically equivalent agents or alternate dosing regimen of the same agent is done then CMA method is preferred. 32

33. Example If drugs A and B are antiulcer agents and have been documented as equivalent in efficacy and incidence of ADRs, then the costs of using these drugs could be compared using CMA. These costs should extend beyond a comparison of drug acquisition costs and include costs of drug preparation, administration and storage. 33

34. Cost utility analysis (CUA) Cost utility analysis (CUA) is a method for comparing treatment alternatives that integrates patient preferences and health related quality of life (HRQOL). HRQOL measure is an utility, having value between 1.0 and 0.0 CUA compares cost, quality and quantity of patient years. Often the utility measurement used is a quality adjusted life year (QALY) gained. 34

35. CUA is the most appropriate method to use when comparing programs and treatment alternatives that are life extending with serious side effects, those which produce reductions in morbidity rather than mortality, and when HRQOL is the most important health outcome being examined. CUA is employed less frequently than other economic evaluation methods because of a lack of consensus on measuring utilities, difficulty comparing QALYs across patients and populations, and difficulty quantifying patient preferences. 35

36. QALY A full year of health in a disease free patient would equal 1.0 QALY A year spent with a specific disease might be valued significantly lower, perhaps as 0.5 QALY, depending on the disease Quality adjusted life years are then derived by multiplying the time in a health state by the appropriate utility score. 36

37. Cost of Illness Evaluation By evaluating the humanistic impact of disease and the resources used in treating a condition prior to discovery of a new intervention, the pharmacoeconomist can effectively establish a baseline for comparison. It is important to carefully consider the design and intent of the study. There is value in having baseline information, but absolute conclusions regarding the value of an intervention versus an alternative can be made only after direct comparison 37

38. Cost Consequences analysis A cost consequences analysis has been defined as one in which costs and effects are calculated but not aggregated into quality adjusted life years or cost effectiveness ratios. Cost consequence analysis provides most comprehensive presentation of information describing the value of an intervention and has the advantage of being more rapidly understandable and more likely to be applied by healthcare decision makers. Potential weakness of cost consequence analysis is that all of the data are not always of comparable quality. 38

39. Types of pharmacoeconomic studies Prospective studies Retrospective studies Model studies 39

40. Model study 40 Pharmacoeconomic model Decision trees Influence diagrams Markov analysis Discrete event simulation Systems dynamics

41. Limitations Sometimes choice of drugs is given according to availability Drugs are prescribed under promotional pressurizing activities of marketing executives of pharmaceutical firms For chronic diseases, bio-availability consideration can have an upper hand over pharmacoeconomics 41

42. Applications Therapeutic decision making Formulary decision making To justify investment in a clinical service or program To justify reimbursement of a clinical service or program Purchasing negotiation Drug policy decisions, treatment guidelines Decision on reimbursement 42

43. Continued.. Pricing in the pharmaceutical industry Applied pharmacoeconomics is defined as putting pharmacoeconomic principle, methods and theories into practice to quantify the value of pharmacy products and pharmaceutical care services used in real world environments Important tool required for framing the list of essential medicine Important role in determining the reimbursement of a claim, which involves third party payers or government/ private health sectors. 43

44. Pharmacoeconomic studies Phase I Phase II Regulatory Phase Marketing Phase 44 Research & Development strategy Pricing & Reimbursement strategy Communication to Physician & Patients

45. Conclusion Identifying, measuring and comparing the costs and consequences of drug therapy for healthcare systems and society. Due to the increased cost burden and high pricing of drug, it has become very essential in pharmaceutical industry, government and in the private sector for comparing various cost consequences. Enhance the quality of practice by strengthening evaluation process and increasing the probability that deliver better value in patient care. As a consequence of limited financial resources, health economics , the pharmacoeconomic analysis is becoming a frequently used criterion for decision making in modern health care policy. 45

46. Thank you 46