PharmacoeconomicApplications in MOH

RAED ALNOWAISER .MIPHE

Scoop of Discussion

Introduction.

Pharmacoeconomic tools.

Examples

Optimum decision making Support.

ECONMOIC IS ??

The study of how individuals & society end up choosing, with or without the use of money, to employ scarce resources that could have alternative uses, to produce various commodities & distribute them for consumption now or in the future, among various people and groups in society.

Paul Samuelson

How to use pharmacoeconomic tools?

Using data to distinguish your practice:

•Data about efficacy (clinical and humanistic)

•Data about cost i.e. resources consumed to achieve efficacy endpoints (investment)

The main objective of using such tools ?

Objectives of pharmacoeconomics must originate within three dimensions when considering results and value of healthcare.

•Acceptable clinical outcomes.

•Acceptable humanistic outcomes.

•Acceptable economic outcomes.

Types of Pharmacoeconomic Analysis

Methodology Cost measurement unit

Outcome unit

Cost minimization $ Various- but equivalent in

comparative groups

Cost benefit $ $

Cost effectiveness $ Natural units (life years, mg/dl blood

sugar, LDL cholesterol)

Cost utility $ Quality adjusted life years

Applying Pharmacoeconomic Principles

The “point of view” considered in economic analyses influences the outcomes and costs considered to be most relevant:◦ Provider

◦ Patient

◦ Payer

◦ Society

Comprehensive Definition of Cost-effectiveness

Therapy is deemed to be a cost-effective strategy when the outcome is worth the cost relative to competing alternatives.In other words, scarce resources are utilized to acquire the best value on the market.

Average Cost-effectiveness

Specifies the cost of an agent required to achieve each unit of effect. No comparison is made to alternative agents.

Cost of drug/ Resulting effect = Cost per unit of effect achieved

Contd..example

Average cost-effectiveness of Agent A

$50.00 /50 units of effect = $1.00 per unit

Average cost-effectiveness of Agent B

$150.00 /90 units of effect = $1.60 per unit

i.e.

$100 per 1% reduction in Hem A1C

$50 per 10 mg reduction in LDL

$5 per symptom-free day gained

Incremental Cost-effectiveness Analysis

Makes comparisons to other therapeutic options, standard of care, or “doing nothing” (placebo)

Fundamental ratio

Cost optionB – Cost optionA

Effect optionB – Effect optionA

= Cost to achieve one unit of effect

contd

$150-$50/ 90 – 50 units = $2.50 per unit of effect achieved

Therefore, because Agent A is an available alternative with a lower average cost per unit of effect achieved, the cost-effectiveness of using Agent B is diminished. The cost of Agent B is not in line with the product it delivers- a poor value.

Incremental Analysis

“The additional costs that one service or program imposes over another, compared with the additional effects, benefits, or utilities it delivers.”

Drummond – Methods for the Economic Evaluation of Health Care Programs

Relationships of Cost to Effect Between Two Competing Alternatives

Cost of alternative A relative to alternative B

Lower Equal Higher

Effectiveness alternative A relative to alternative B

Lo+/-

Trade off-

-

Dominated

Eq + Arbitrary -

Hi+

Dominant+

+/-

Trade-off

Measuring Efficacy Data Variables

What product (effect) can be consistently expected from use of drug or health service?

Usually determined from clinical trials.

Seek direct relationship to morbidity and mortality.

Survival/ death.

Myocardial infarction avoided.

May rely on surrogate probably related to final outcome to enhance feasibility of analysis.

LDL cholesterol changes.

Intimal vessel wall thickness changes.

Randomized controlled clinical trial is gold standard for deriving efficacy data.

Measuring Cost Data Variables

What resources are consumed to produce one unit of the effect?

Direct costs:

• Drug product acquisition costs

• Drug preparation & administration costs

• Drug monitoring costs

• Treatment costs of adverse effects

Indirect costs:

example of institution indirect cost??

Discounting Costs

•In order to draw most valid conclusion about costs generated over time to achieve an effect in the future, it is necessary to consider that there is a time preference associated with money

•Money in hand is worth more than the same amount sometime in the future (we like to be paid as soon as possible, but prefer to pay at the last possible moment)

Therefore future costs must be adjusted to reflect present value.

•A $1000 cost one year from now requires only $930.00 in hand today assuming a 7% return on investment.

Sensitivity Analysis

Conclusions drawn from an economic analysis may change, depending on the uncertainty of cost and effects considered.

S.A., by altering important variables & then recalculating results, tests the validity of conclusions:

Would Agent A still be most cost-effective if the effect of Agent B was greater than measured in clinical trial?

Would Agent A still be most cost-effective if the monitoring costs of Agent B were actually lower?

S.A. becomes increasingly important as assumptions are made to a greater degree.

Cost Utility Analysis

Resource consumed measured in monetary units

Health outcomes/consequences adjusted for quality

Quality adjusted life year (QALY)

QALYs based upon utility (patient preference)

Utility – the value or worth placed on a level of health status, or improvement in health status, as measured by the preferences of individuals or society.

Rating Scale(Feeling Thermometer )

Perfect Health

Death 0

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conclusion

Time and money can only be spent once- choice is inevitable.

Whether done unconsciously or with a consistent process, health care professionals are constantly evaluating patient care choices & acting on them.

Pharmacoeconomics and outcomes research can enhance the quality of your practice by strengthening your evaluation process and increasing the probability that you deliver better value in patient care.