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  1. 1. by:Sanghmitra priyadarshini M.Pharma (pharmacology)
  2. 2. Input costs Output costs HEALTHCARE
  3. 3.  Term first coined in 1986 by Townsend ―thedescription and analysis of the costs of drug therapy to health systems and society‖ Rl Townsend (1986)
  4. 4. Description and analysis of the costs andconsequences of pharmaceutical productsand services and their impact onindividuals, health care systems andsociety.
  5. 5.  ―Research that identifies, measures and compares the costs (resources consumed) and the Economic, Clinical and Humanistic Outcomes of diseases, drug therapies and programmes directed to these diseases.‖
  6. 6.  Objectivesof pharmacoeconomics and outcomes research must originate within three dimensions when considering results and value of healthcare • Acceptable clinical outcomes • Acceptable humanistic outcomes • Acceptable economic outcomes
  7. 7. Outcome research-Means toidentify, measure, evaluate theresult of healthcare researchesin generalCost-It is value of resourcesconsumed by a program or drugtherapy of interestConsequences-Effects, outputs or outcomes ofprogram or drug therapy ofinterest
  8. 8. The ―point of view‖ considered in economic analysesinfluences the outcomes and costs considered to bemost relevant:Patient Perspectives•According to patient•E.g.- Insurance copayments, Indirect costs, Drug costsProvider perspectives•Provider can be a hospital govt./ pvt.•E.g.-Lab tests, HospitalizationPayer perspectives-•Direct costs•E.g. Govt., Insurance companySocietal perspectives-•Broadest•Considers benefits of society•Include morbidity & mortality
  9. 9. OUTCOMES INCLUDESClinical Cure, comfort and survivalHumanistic Physical, emotional, social function, role performanceEconomic Expense, saving, cost avoidance Prasanna R. Deshpande, Pharm D, Manipal,India
  10. 10. Positive Consequences- Life-years gained , Improved health related quality of lifeNegative Consequences- Adverse effects, toxicity Prasanna R. Deshpande, Pharm D, Manipal,India
  11. 11.  Cost –of –illness evaluation Cost benefit analysis Cost minimization analysis Cost effective analysis Cost utility analysis Prasanna R. Deshpande, Pharm D, Manipal,India
  12. 12.  Identification, measurement, comparison of the benefits and cost of program or treatment alternatives Consequences are measured in terms of total costs associated with the programme. B/C > 1 treatment is of value B/C= 1 benefits equal to cost B/C< 1 not economically beneficial Prasanna R. Deshpande, Pharm D, Manipal,India
  13. 13.  When two or more intervention has equal therapeutic outcome Involves the determination of least costly alternative Alternative must have assumed or demonstrated equivalency in safety and efficacy Example- Anti-ulcers Prasanna R. Deshpande, Pharm D, Manipal,India
  14. 14.  Determines which program or treatment accomplishes a given objective at least cost In CEA the effectiveness is expressed in terms of monetary units that describes the desired objectives Lives saved Disability days avoided Cases treated Prasanna R. Deshpande, Pharm D, Manipal,India
  15. 15.  Method for comparing treatment alternatives that integrates patient preferences and HRQOL. Resources consumed is measured in monetary units Health outcomes adjusted for quality is quality adjusted life year (QALY). QALY- is a measure of disease burden, including both the quality and the quantity of life lived 1.0 QALY = Disease free yr. 0.5 QALY = Yr. spent with specific disease Prasanna R. Deshpande, Pharm D, Manipal,India
  16. 16. New Drug Investigational Approval - New Drug - IND NDA Basic Research Phase I Phase II Phase IIITime (months) 42.6 15.5 24.3 36.0 = 119.4Direct Cost ($million) 65.5 9.3 18.6 20.2 = 113.6Capitalized Cost 155.6 17.8 30.3 27.1 = 230.8
  17. 17. 1 2 3 Drug D Drug C Drug B Drug AEffectiveness 1. Break-even Price 2. Efficiency Price 3. Premium Price Total Cost of Treatment
  18. 18. •Subject determination•Comparator – alternative medical programme•Time horizon•Perspective•Cost analysis•Discounting•Clinical outcomes•Type of analysis•Incremental analysis•Sensitivity analysis•Results presentation
  19. 19.  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 Time-value of money adjustment • 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.
  20. 20.  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.
  21. 21.  Evaluate: • The quality of the journal • Qualifications of authors • Title and abstract- unbiased? • Study methodology  Perspective, study design, outcomes and appropriate alternatives, costs and appropriate discounting, sensitivity analysis, & data sources • Sponsorship- could bias be introduced? • Incremental results  What is the conclusion and does it differ between subgroups? How much does allowance for uncertainty change conclusion?Vogengerg, FR editor. Introduction to Applied Pharmacoeconomics, 2001
  22. 22. PerspectivesPatient 3rd-Party Payer-Clinical Care -Clinical Cure-Quality of life -Cost-Out-of-pocket -CustomerCost perception of-Satisfaction with value treatmentprocess Employer / Society -Clinical CureHospital / Physician -Cost-Clinical Cure -Productivity-Profit from treatment
  23. 23. Relationship betweenOutcomes, Pharmacoeconomics andPharmaceutical Care outcomes research pharmaco- economics pharmaceutical care
  24. 24. PHARMACOECONOMIC METHODSEconomic HumanisticCost consequence Quality of lifeCost benefit Patient preferencesCost effectiveness Patient satisfactionCost minimizationCost utility
  25. 25. Summary of Pharmacoeconomic MethodologiesMethod Description Application Cost Outcome Unit UnitCOI Estimates the cost of a disease on Use to provide baseline to compare $$$ NA a defined population prevention/ treatment options againstCMA Finds the least expensive cost Use when benefits are the same $$$ Assume to be alternative equivalentCBA Measures benefit in monetary units Can compare programs with different $$$ $$$ and computes a net gain objectivesCEA Compares alternatives with Can compare drugs/programs that $$$ Natural units therapeutic effects measured in differ in clinical outcomes and use physical units; computes a C/E same unit of benefit ratioCUA Measures therapeutic Use to compare drugs/programs that $$$ QALY‘s consequences in utility units rather are life extending with serious side than physical units; computes a effects or those producing reductions C/U ratio in morbidityCCA Measures multiple costs and Examines whether the use of a drug $$ Reported outcomes without aggregating the produces an outcome that decreases separately two into a CE or CB ratio. costs and offsets the price cost of the new therapy
  26. 26. Specific Decisions for PEApplications MICRO Clinical Decisions Formulary Management Drug Use Guidelines Disease Management Justification of Pharmacy Services Resource Allocation MACRO
  27. 27.  Established with financial support from the Department of Health and Children Aims to promote expertise in Ireland for the advancement of the discipline of pharmacoeconomics through education, practice and research C entre D ep t of H ealth R esearch E d u cation
  28. 28. Methodology Cost measurement Outcome unit unitCost minimization Dollars Various- but equivalent in comparative groupsCost benefit Dollars DollarsCost effectiveness Dollars Natural units (life years, mg/dl blood sugar, LDL cholesterol)Cost utility Dollars Quality adjusted life years
  29. 29.  Cost-effective care is initially the cheapest alternative in a manner similar to other investments, least cost option may lead to greater costs downstream Cost-effective care is outcome that generates ―biggest‖ effect in a manner to similar investments, smaller increments of outcome may be achieved at a lower overall cost
  30. 30.  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
  31. 31. Pharmacoeconomic StudiesResearch and Pricing and Communication toDevelopment Reimbursement Physicians and Strategy Strategy PatientsPhase II Phase III Regulatory Marketing Phase Phase
  32. 32. Drug Therapy Evaluation-Selecting the most cost-effective drugs for an organizational formularymaking a decision about an individual patient‘s therapycustomizing a patient‘s pharmacotherapy.CLINICAL PHARMACY SERVICE EVALUATION Determining the value of an existing service, Estimating the potential worth of implementing a new service, Capturing the value of a ―cognitive‖ clinical intervention Industry – marketing, pricing, performance guarantees Managed Care – protocols, guidelines, formularies Physicians – individual patient treatment decisions, prescribing, payor- performance Consumers – education, autonomy Government – pricing, approval, formularies, policy Institutions – protocols, guidelines, formularies Pharmacists – formularies, protocols, guidelines, pharmaceutical care services or program evaluation
  33. 33.  To assist clinicians and practitioners in making more informed and complete decisions regarding drug therapy in providing cost effectiveness data to support the addition or deletion of a drug.Eg. In patients with relapsed Non-small cell lung carcinoma(NSCLC), treatment with erlotinib was found to be cost-saving versus docetaxel and cost-effective versus best supportive care. In this study erlotinib is found to be more efficacious & cost effective compare to docetaxel in Netherlands for patients with relapsed NSCLC.
  34. 34. P & T Committee.Eg. Community-acquired pneumonia is a frequent cause of hospitalization in the United States. In this study comparison of intravenous monotherapy with either levofloxacin or azithromycin against combination of cefuroxime plus erythromycin. The drug acquisition costs of levofloxacin was the most expensive of the three regimens ($126 vs. $80 and $83 for azithromycin and cefuroxime/erythromycin, respectively). When the costs of supplies and administration, adverse drug events, and treatment failures were included in the analysis, levofloxacin and azithromycin were found to be similar in cost per pneumonia cure ($208 vs. $228). Taking pharmacoeconomics data into consideration, Levofloxacin or azithromycin when used as monotherapy, were more cost-effective than the cefuroxime/erythromycin combination.
  35. 35.  Influencing prescribing pattern of physicianEg. A prospective observational study (POS) assessing the standard of care was conducted over two months and was compared with a proactive conversion program (PCP). A cost-minimization analysis was performed. A pharmacist-managed proactive program that used predetermined clinical criteria for converting levofloxacin therapy from i.v. to p.o. without physician approval reduced length of stay and institutional health care costs without compromising clinical outcomes.
  36. 36.  Useful for making a decision about an individual patient‘s therapy. Evaluating the impact a drug has on a patient‘s HRQOL can be useful when deciding between two agents for customizing a patient‘s pharmacotherapyEg. An author performed cost utility analysis from government‘s perspective that there is increased compliance with ACE inhibitors in type 1 diabetic nephropathy due to cost reduction. ACE inhibitor therapy found to be cost effective with an increase of 0.147 in the number of quality-adjusted life-years (QALYs) and an annual cost savings of $849 per patient. ACE inhibitor therapy for type I diabetes with macroproteinuria improves patient outcomes, with a decrease in cost for end stage renal failure services.
  37. 37.  Justify the value of various health care services, particularly pharmacy services.Eg. Clinical Pharmacy Services, Pharmacy Staffing, and the Total Cost of Care in United States Hospitals. In this study, relation & association of clinical pharmacist services, staffing & total cost of care was evaluated in the united states. The database constructed from National clinical Pharmacy service database,1992. Data were collected from 3422 hospitals in the united states. Out of 14 clinical pharmacy services, 6 services were found to reduces total cost of care. For ex. Service like drug information reduces cost of 12.14 times compare to that of drug cost reduction. Service like protocol management reduces cost of 12.59 times compare to that of drug cost reduction. Services like admission drug history reduces cost of 32.64 times compare to that of drug cost reduction. So, it is concluded that some clinical pharmacy services and clinical pharmacists may be able to lower the total cost of care in the united states. It also suggest that increase in staffing levels of clinical pharmacists and pharmacy administrators are associated with lowering of 30% of hospital‘s total cost.
  38. 38.  Pharmacoeconomics can be useful in determining the value of an existing service, estimating the potential worth of implementing a new service, or capturing the value of a ―cognitive‖ clinical intervention.Eg. Cost Effectiveness of A Clinical Pharmacist on A Neurosurgical Team. In this retrospective study of services of dedicated pharmacist in neurosurgical team for the duration of 4 years was reviewed. From 2156 patients, 11250 interactions were recorded. Total cost saving is $718260 over the duration of the study that includes hospital stays, readmission rates, and pharmacy cost.
  39. 39.  Providingdrug information services by clinical pharmacists helps to reduce the total cost of care.Eg. Clinical Pharmacy Services, Pharmacy Staffing, and the Total Cost of Care in United States Hospitals. In this study, pharmacist provided unbiased drug information services which lowers total cost of care up to 28% of all hospital related compare with drug morbidity & mortality. In addition, ADRs in hospital are often preventable if detected early & with better information system it is likely to be accepted by other health professionals. Each $ of pharmacist‘s salary associated with $602.16 reduction in total cost of care.
  40. 40. ADR monitoring services by clinical pharmacists helps to reduce the total cost of care by reducing ADR related admission.Eg. Clinical Pharmacy Services, Pharmacy Staffing, and the Total Cost of Care in United States Hospitals. Adverse drug reactions are the most common untoward events occurring in hospitals & significantly increase the cost of care. This study suggest that the presence of this service indicates a hospital that has an active program to detect and prevent ADRs, and thus may reduce the cost of care associated with these problems. A cost reduction of $1,610,841.02 in total cost of care/hospital was associated with the presence of the service. Each $ of pharmacist‘s salary associated with $2988.57 reduction in total cost of care.
  41. 41.  Providing services of drug management protocol to hospital.Eg. Clinical Pharmacy Services, Pharmacy Staffing, and the Total Cost of Care in United States Hospitals. Pharmacist provided drug protocol management services achieves high level of trust by medical staff due to improvement of patients‘ condition with lower cost. A reduction of $1,729,608.41 in total cost of care reduction/hospital was associated with the presence of drug protocol management . Each $ of pharmacist salary cost was associated with $1048.25 reduction of total cost of care.
  42. 42.  Pharmacists‗ participation on medical ward rounds.Eg. Clinical Pharmacy Services, Pharmacy Staffing, and the Total Cost of Care in United States Hospitals. In medical rounds major decisions of therapy is discussed. Presence of pharmacist helps in better patient care with reduction in cost. A reduction of $7,979,720.45 in total cost of care/hospital was associated with pharmacists participation on medical rounds. Each $ of pharmacist salary cost was associated with $252.11 reduction of total cost of care.
  43. 43.  Service of clinical pharmacist in taking medication history of patients.Eg. Clinical Pharmacy Services, Pharmacy Staffing, and the Total Cost of Care in United States Hospitals. As up to 28% of patient admission is due to drug related morbidity & mortality. In addition taking medication history helps to avoid unnecessary cost burden on patient in early stage of therapy. Pharmacist is the best person to identify it. A reduction of $6,964,145.17 in total cost of care/hospital was associated with pharmacist-provided admission drug histories. Each $ of pharmacist salary cost was associated with $776.64 reduction of total cost of care.
  44. 44.  Pharmacoeconomics can guide choices among alternative medications, treatment regimens and services based on a combination of costs and outcomes. Results and interpretation of pharmacoeconomic studies are influenced by the perspective of the study—there is no one ―right‖ answer. 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.
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