pharmacoeconomics pdf

Introduction to PharmacoeconomicsIntroduction to Pharmacoeconomics

Renée J. Goldberg Arnold PharmDPresident & CEO

Arnold Consultancy & Technology LLC

Renée J. Goldberg Arnold PharmDISPOR Distance Learning Program

Learning ObjectivesBy the end of the Introduction to Pharmacoeconomics

module you will be able to:State the role of Pharmacoeconomics (PE) in medical decision‐makingDefine the types of PE/cost‐effectiveness analyses (CEA) Explain the societal, patient and payer tradeoffs involved in using PE for medical decision‐making

3Renée J. Goldberg Arnold, PharmD, iDLP

Learning Objectives (cont’d.)Understand the difference between and usefulness of average and incremental (marginal) CEAState the definition of utility measurement and its use in cost‐utility analysisUnderstand the elements essential to a published CEA


IntroductionCan the health system support the additional cost for each life saved if the new drug is both more costly and more effective than previous therapies? If a new drug or device is less costly, but less effective, than existing therapies, how much of a diminution in efficacy can society/payers/patients withstand in order to save money? How much money must be saved in order to make it "cost‐effective" to accept a reduction in efficacy over existing strategies?


Use of Pharmacoeconomics/Cost‐Effectiveness Analyses

drug registrationformulary decision‐makingtherapeutic guideline determinationindividual patient decisions


Benefits from PE Analysis of Health Care Programs

Intangible benefits (value of health per se to individual consumer)Future health costs avoidedIncreased productive output due to improved health statusUse of evidence‐based medicine to make best choices for population and individuals


Outcomes Assessment and Pharmacoeconomics

Outcomes assessment: determination of end result of use of healthcare technologyFinite societal resources require consideration of opportunity costs (value of alternative uses of those resources)Healthcare reform has required methods to evaluate economic and societal value of goods and services Pharmacoeconomics evaluates value for money expended on healthcare technologies


Objectives of PharmacoeconomicsApplication of economic principles to drug therapy interventions (prevention and/or cure)Research that identifies, measures, and compares the costs (resources consumed) and consequences of pharmaceutical products and services

Improve individual and public health outcomesProvide for more rational decision‐making o Formulary managemento Medication choiceo System resource allocation


Steps in evaluating type of analysisEfficacy: optimal circumstancesEffectiveness: usual circumstancesEfficiency: cost‐effectiveness

Comparison with alternative therapy/therapiesRequires consideration of costs to be included, perspective, timeframe, effectiveness metric, discount rate, assumptionsDisease endpoints assessed by indices of therapeutic outcome


Influence of Compliance with Medication on Cost‐Effectiveness

Full Compliance

Partial Compliance

DBP ($/QALY) ($/QALY)

≥105 mmHg $4,850 $10,500

95-104 mmHg $9,880 $20,400

Kozma CM, Reeder CE, Schulz RM: Economic, clinical and humanistic outcome: A planning model for pharmacoeconomic research. Clin Ther 15:1121-1132, 1993.


Questions

Is the treatment effective? What will it cost? How do the gains compare with the costs?

Typically, one chooses the option with the least cost per unit of measure gainedRepresented by ratio of cost to effectiveness (C:E)Called cost‐effectiveness analysis (CEA)


Types of CEACost‐minimization analysis (CMA)

Determines costs assuming equivalent benefitsMay be presented as cost consequence

Cost‐benefit analysis (CBA)Measures benefit in monetary unitsDifficult to value, e.g., a life

Cost‐effectiveness analysis (CEA)Cost‐utility analysis (CUA)

Incorporates quality‐of‐life adjustments into effectiveness metric


Definition of Utilities

Quantified preferences for specific health states


Expression of UtilityUtility measures yield a single value that reflects overall quality of life (QoL) Preference‐weighted measure used to produce point‐in‐time expression of well‐being

1.0 (for asymptomatic full function)0 (for death)

Used to impart QoL component to an effectiveness value, such as life‐years gained, to establish QALYs


Framework for Determining Costs

InputsUnitsValuesTimingUncertainty


Cost/QALY Comparisons

17

Direct and Indirect CostDirect medical and nonmedical costs

Medical: Related to providing medical services, e.g., hospital care, physician fees, drug costs, costs of adverse eventsNonmedical: Expenses, such as transportation costs, that are direct result of illnessMost frequently included in CEA

Indirect cost associated with changes of individual productivityExample: lost time from work (absenteeism) and unpaid assistancefrom a family member

Intangible costs (pain and suffering)


Consequences

Monetary benefitsEffectiveness: years of life saved, hospitalizations averted, complication‐free episodes, etc.Utility measurements: quality‐adjusted life years (QALYs)


Average and Marginal (Incremental) Cost‐Effectiveness

Average Cost‐Effectiveness= resources consumed per unit of output

Average cost is derived by dividing total cost by volume or quantity of output

Marginal (Incremental) Cost‐Effectiveness= change in total cost of producing one additional (or one less) unit of output.


Decision‐Making in PE Analysis

More Effective

Less Effective

More Costly Trade-off Reject (dominant)

Less Costly Accept (dominant)

Trade-off


PerspectiveSocietal vs payer vs patientNHS and other “nationalized” payer systems suggest societal perspective; benefit in QALYsShort‐term outcomes; employer‐sponsored vscountry‐sponsored

Examples of benefits here might be MI avoided or complication‐free episodes


Population Segmentation

Developing countriesAge Race (antihypertensive agent approved only for African‐American patients)Gender (Weinstein and Stason CV model1)Health system (e.g., present state of screening)

1Weinstein MC, Stason WB (1985). Cost-effectiveness of interventions to prevent or treat coronary heart disease. Annu Rev Public Health, 6, 41-63.


DiscountingFuture costs and effects are discounted

Positive rate of time preferencePrefer:

Receive dollars nowPay out dollars later

PV = FC x DF (n,r)


Sensitivity Analysis

Analysis of uncertain values around key variables


UncertaintyParameter

Structural


Implications

“Given that the process of estimating subgroup‐specific input parameters usually involves reducing sample size, it is even more important to assess the implications of parameter uncertainty fully.”


CEA Reporting FormatsJournal articlesPolicy decisions


CEA Reporting Formats (elements)BackgroundViewpoint/perspectiveAnalytic typePatient populationComparatorsSource/Quality of medical evidenceRange/Measurement of costs (physical and monetary terms)Measure of benefit (e.g., LYG, QALYs)


CEA Reporting Formats (elements, con’t.)

Adjusting timing of costs/benefitsDealing with uncertaintyIncremental analysis of costs/benefitsOverall study results and limitations


June 29, 2006: “A federal vaccine advisory panel unanimously recommended that 11‐ and 12‐year‐old girls receive a new vaccine designed to protect against cervical cancer.” Wall Street Journal


Case Study: HPV Vaccine CEAGoldie SJ, Kohli M, Grima D, et al. Projected clinical benefits and cost‐effectiveness of a human papillomavirus 16/18 vaccine. J NatlCancer Inst. 2004;96(8):604‐15.Goldie and colleagues developed a cost‐utility model to evaluate cancer incidence and mortality, lifetime costs, life expectancy and incremental cost‐effectiveness ratios projected to be associated with cervical cancer and human papillomavirus (HPV) vaccine in the prevention of cervical cancer. This case study will be used as an example of the use of CEA in medical decision‐making.


Should CEA be uniformly applied in medical decision-making?

ProAllow explicit modeling of decision pointsFinite resourcesObjectiveCommon good

ConIndividual patients


Summary

Ratio of cost to effectivenessEvaluates additional cost for additional unit of effectivenessCEA may be used to make policy decisions among competing therapies with fixed resources available


References

1. Arnold R. Use of interactive software in medical decision making. In: Ekins S, ed. Computer Applications in Pharmaceutical Research and Development. Hoboken: John Wiley & Sons, Inc.; 2006.

2. Drummond M, Sculpher M, Torrance G, O'Brien B, Stoddart G.Methods for the Economic Evaluation of Health Care Programmes. 3rd ed Oxford: Oxford University Press; 2007.

3. Arnold RJ. Cost‐effectiveness analysis: should it be required for drug registration and beyond? Drug Discov Today. 2007;12(21‐22):960‐5.

4. Goldie SJ, Kohli M, Grima D, et al. Projected clinical benefits and cost‐effectiveness of a human papillomavirus 16/18 vaccine. J NatlCancer Inst. 2004;96(8):604‐15.


ReferencesDetsky AS, Laupacis A. Relevance of cost‐effectiveness analysis to clinicians and policy makers. JAMA. 2007;298(2):221‐224.Rascati K. Essentials of Pharmacoeconomics; Philadelphia:LippincottWilliams & Wilkins; 2008. Goldberg Arnold R. Health economic considerations in cardiovascular drug utilization. In: Frishman W, Sonnenblick E, eds. Cardiovascular Pharmacotherapeutics. 2nd ed. New York: McGraw Hill, Inc.; 2003:43.Gold MR. Cost‐effectiveness in Health and Medicine; Oxford:OxfordUniversity Press:1996.


ReferencesMuennig P, Khan K. Designing and Conducting Cost Effectiveness Analysis in Medicine and Health Care; Jossey‐Bass;2002. Drummond M. Economic Evaluation in Health Care: Merging Theory with Practice;Oxford:Oxford University Press ;2007.Bootman L, Townsend R, McGhanW. Principles of Pharmacoeconomics . 3rd ed. Cincinnati:Harvey Whitney Books; 2004.


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