2. Economics
• 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, now or in the future,
among various people and groups in society.
3. Efficacy Data
• Management of efficacy endpoints based on evidence enables
clinicians to maximize prescribing skills
• Evidence-based healthcare is a determination of the mix of
those services, drug products, and procedures that maximise
benefits and reduce risks.
4. Opportunity Cost
• Time and money as resources can only be spent once – choice
is unavoidable.
• O.C. is defined as the amount that a resource could earn in its
highest valued alternative use.
• How do you invest your time?
• Why take valuable time to learn about pharmacoeconomics and
outcomes research?
5. Cost Data
• Management of resource consumption enables patients to
maximize purchasing power-
– Individual level- managing insurance co-payments
– Group level- managing insurance premiums across groups
and maximizing the number of insured patients
– Govt level- sustaining public programs
6. Pharmacoeconomics
• The process of identifying, measuring, and comparing the
costs, risks, and benefits of programs, services, or therapies
• To determine which alternative produces the best health
outcome for the resource invested
• Most impactful when making decisions about a population
rather than individual
• “Costs vs. Consequences of Alternatives”
8. Cost of Illness Evaluation
• Also termed cost consequence model
• Description: Estimates the cost of a disease within a defined
population
• Application: Provides a baseline for evaluating the impact of
prevention/treatment options
• Measurement Units: Monetary ($)
• Example: Cost of peptic ulcer disease
9. Cost Minimization Analysis
• Description: Identifies intervention cost differences between
similar alternatives
• Application: Identify least costly alternative when
outcomes/consequences are identical
• Measurement Units: Monetary for intervention costs (no
outcomes measured)
• Example: Comparing costs of Drug A and Drug B, which have
evidence of equal efficacy for a given condition and safety
10. Cost Benefit Analysis
• Description: Identifies net cost impact of an intervention
• Measurement Units: Monetary for both intervention costs and
outcomes
• Calculated: Benefit($)/Cost ($)
• Application: Compare programs or agents with different
objectives or 1 program against a return on investment
benchmark
• Example: Clinical pharmacy service vs. other institutional
service
11. Cost Effectiveness Analysis
• Description: Compares costs of two or more alternatives versus
outcomes measured in natural units
• Measurement Unit: Monetary for cost, outcome in physical
measures i.e., event avoided
• Incremental cost to achieve a one unit increase in outcome
ICER = ∆Cost/∆Effect
= (CTx1 – CTx2)/(ETx1 – ETx2)
• Application: Compare treatment alternatives for a given
condition that differ in outcomes and costs
• Example: Osteoporosis Drug A vs Drug B on fracture risk
reduction ($/fracture avoided)
12. Cost Utility Analysis
• Description: Subset of cost effectiveness analysis -outcomes
are measured in utility units
– Utilities represent patient preferences and quality of
life/functional status associated with disease and/or
treatment
• QALY: Quality adjusted life year – factor of life expectancy and
utility
– e.g., 4 years at 25% QOL = 1 year at 100% QOL
• Application: Same as CEA, useful when treatment extends life
and/or effects quality of life
• Example: Compare cancer chemotherapy regimens
13. Economic Modeling
• Analytic models used to predict economic consequences of
coverage, treatment, and access decisions
– budget impact, cost effectiveness, cost minimization
– E.g., evaluate the impact of adding drug A to the formulary
• Constructed by health plans, pharmaceutical manufacturers,
academic groups, and consultants
14. Economic Modeling
• Good practice guidelines for model development should utilized
in constructing models
– Promote transparency, minimize bias
• Guidelines also exist to facilitate the evaluation of
pharmacoeconomic studies
