PHARMACOECONOMICS INTRODUCTION

INTRODUCTION A challenge for healthcare professionals is to provide quality

patient care, while assuring an efficient use of resources. Challenged to provide high-quality patient care in the least

expensive way, clinicians developed strategies aimed at containing costs. However, most of these strategies focussed solely on determining the least expensive alternative rather than the alternative that represents the best value for the money.

The ‘cheapest’ alternative (w.r.t drugs) is not always the best value for patients, departments, institutions, and healthcare systems.

Pharmacoeconomics is the discipline which places a value on drug therapy.

The roots of pharmacoeconomics developed in the 1970s, following the evolution of pharmacy as a clinical discipline and the incorporation of the pharmaceutical sciences into the pharmacy curriculum.

DEFINITIONSHealth Economics: The field of study that evaluates the behaviourof individuals, firms and markets in health care, and that usuallyfocuses on the cost (inputs) and consequences (outcomes) ofhealth care interventions (such as use of drugs, devices,procedures, services and programmes).

Pharmacoeconomics: The field of study that evaluates thebehaviour of individuals, firms and markets relevant to the use ofpharmaceutical products, services and programs, and whichfrequently focuses on the costs (inputs) and consequences(outcomes) of that use.[The International Society for Pharmacoeconomics and Outcomes Research (ISPOR)]

In clinical settings, importance is always given to :• Therapeutic effectiveness of an agent (drug) for

patients.• Impact of the therapeutic agent’s cost.• QoL (Quality of Life) changes in the patient after using

the therapeutic agent.

Decision-making regarding the drug price controls and overall health care costs requires the understanding and balancing of clincial and economic knowledge and tools.

Pharmacoeconomics (PE) is one such tool that aids in the decision-making using the combination of cost (economic) and consequences (clinical or economic or humanistic endpoints).

COSTS Total Cost (TC) = cost of producing a particular quantity of output

Fixed Cost (FC) = costs which do not vary with the quantity of

the output in the short run

Variable Cost (VC) = cost which varies with the level of output

Average Cost (AC) = average cost per unit of output

Marginal Cost (MC) = extra cost of producing 1 extra unit of output

(Output refers to the product)

CONSEQUENCES OF COSTS The consequences (or outcomes) of a disease and its

treatment are an equally important component of pharmacoeconomic analyses.

Consequences (or outcomes) of medical care can be categorized into three types: economic, clinical, and humanistic.

Economic outcomes: are the direct, indirect, and intangible costs compared with the consequences of treatment alternatives.

Clinical outcomes: are the medical events that occur as a result of disease or treatment (e.g., safety and efficacy end points).

Humanistic outcomes: are the consequences of disease or treatment on patient’s functional status or QoL along several dimensions (e.g., physical function, social function, general health and well-being, and life satisfaction).

Assessing the economic, clinical, and humanistic outcomes (ECHO) associated with a treatment alternative provides a complete model for decision making.

Positive versus Negative Consequences Consequences (outcomes) can be further categorized

as positive or negative. A Positive outcome is a desired effect of a drug

(efficacy or effectiveness measure), [e.g., epidemic cases cured, reductions in HbA1c, life-years gained, or improved health-related quality of life (HRQOL)].

A Negative outcome is an undesired or adverse effect of a drug, (e.g., treatment failure, an adverse drug reaction (ADR), a drug toxicity, or even death).

Pharmacoeconomic evaluations should include assessments of both types of outcomes. Evaluating only positive outcomes can be misleading because of the potential detriment and expense associated with negative outcomes. Thus, the balancing of positive and negative consequences is important in any pharmacoeconomic evaluation.

Intermediate and Final Consequences Consequences also can be discussed in terms of

intermediate and final outcomes. Intermediate outcomes can serve as a proxy for

more relevant final outcomes. Eg.: 1) Achieving a decrease in LDL cholesterol levels with a lipid-lowering agent is an intermediate consequence that can serve as a proxy for a more final outcome such as a decrease in myocardial infarction rate.

2) Reductions in hemoglobin A1c (HbA1c) is a generally accepted intermediate proxy for managing type 2 diabetes.

Intermediate consequences are used commonly in clinical and pharmacoeconomic analyses as proxies predictive of final outcomes because their use reduces the cost and time required to conduct a trial.

Final outcomes refer to the ultimate end point desired by healthcare programme.

Pharmacoeconomic analysis also compares outcomes (clinical, economic or humanistic) and inputs (resource consumption) of p’ceutical products, programs and/or services to the next best alternatives (e.g., allopathic vs traditional medicines).

P’coeconomics requires inputs from areas such as economics, epidemiology, medicine, pharmacy and social sciences.

Aim: To identify, measure, value and establish a link b/n both resource

consumption and outcomes so that relative worth of selected p’ceutical

products, programs and/or services can be established.

5 Analyses of P’coeconomicsCost-Minimisation Analysis (CMA) Cost-Benefit Analysis (CBA)Cost-Effectiveness Analysis (CEA) Cost-Utility Analysis (CUA) Cost-Consequences Analysis (CCA)

4 Es of Health Program EvaluationEfficacy: Can it work? Does it do more good than harm under ideal conditions?Effectiveness: Does it work? What can be achieved under realistic conditions?Equity: Is it reaching those who need it (access)? Who gains and

who loses (distribution)?Efficiency: Is it worth doing?

Misconceptions about PEI. PE means Cost-containment While PE analysis can result in cost-containment, that is not it’s

only goal. Full PE analysis considers ECHO, and not just cost containment.

II. PE means Cost-Effectiveness CEA is just one tool of a full-fledged PE analysis.

III. PE means Drug Utilisation Evaluation DUE focuses on appropriateness of drug use and may employ

qualitative and/or quantitative approaches, resources utilised and other economic variables.

IV. PE means Outcomes Research These two terms are sometimes used interchangeably within

the pharmacy field. But, outcomes research is a broad discipline that evaluates the impact of healthcare interventions. The outcomes could be clinical, economic or humanistic.

P’coeconomics is one of the tools used in evaluating the impact of a drug interventions on health outcomes and in guiding decision-making.

V. Cost saving means Cost-Benefit Analysis Both these terms are also used interchangeably. CBA

incorporates all benefits by incorporating individual preferences using the ‘willingness to pay’ method.

NEED FOR P’COECONOMICS Offers assistance under resource constraints, tight budgets and competing programs. Can aid in decision-making in evaluating the affordability of

and access to the right medication to the right patient at the right time.

Helps in comparing two (or more) drugs of the same therapeutic class or drugs with similar MOA.

Establishes whether the claims by a manufacturer regarding their drug are justified or not.

Can help the hospital committee to finalize…• Whether a drug should be included in the formulary• Which drug would provide net positive benefits to the patient.• Which would be the best drug for a pharmaceutical

manufacturer to develop and the right price to market it.• What the expected QoL improvement is with a certain drug

when trading off it’s side effects.

ECONOMIC EVALUATIONSAll p’coeconomic evaluations are based on answers to 2 basic

qns. :• Are there two or more alternatives?• Do the interventions examine costs and health effects?

Partial Economic Evaluation : If only one treatment or drug or program is examined. It is

simply a descriptive analysis of that treatment / drug / program.

OR If a pharmaceutical program (drugs or intervention) consists

of two or more alternatives but, the evaluation limits itself to either costs or effects only.

Full Economic Evaluation : PE evaluation of two or more alternatives, and attempts to

link both costs and effects.

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