pharmacoeconomics

1. Pharmaco-Economics
Dr. RenuYadav
Resident Pharmacology

2. Contents
• Definition
• Cost Classification
• Outcome and Perspective
• Types of PE Analysis
• Cost Effectiveness Plane
• Application of PE
• Methods of PE
• PE Steps
• Conclusion

3. Definition
• Pharmacoeconomics is the discipline concerned with optimal
allocation of resources to maximize population health from the use
of medicines.
• Pharmacoeconomics has been defined as the description and
analysis of the costs of drug therapy to health care systems and
society.

4. Treatment
Cost Outcome
Only left
Cost analysis (partial
economic analysis).
Only right
Clinical analysis/outcome
analysis (not economic
analysis).

5. Cost Classification
• Direct : From the persepective of healthcare funder including staff cost,
capital , drug acquisition cost.
• Indirect : From persepective of a society as a whole eg loss of earning, loss of
leisure time, etc
• Intangible : Pain worry , other distress. Measured in terms of quality of life.
• Opportunity Cost : lost opportunity, revenue forgone

6. Outcome
• The term outcome is increasingly being used to describe the result
and value of healthcare intervention.
• It’s a multidimensional term More focused on resource use, or
economic outcome of healthcare decision.
• Whereas patients want to focus on humanistic outcome of a
therapy.

7. Types of Outcome
• Economic
• Clinical
• Humanistic

8. Pharmacoeconomics is a type of outcomes research, but not all outcomes
research is pharmacoeconomic research.

9. Perspective
• Perspective is an economic term that describes whose costs are relevant
based on the purpose of the study.
• Most appropriate and comprehensive perspective is that of society.

10. Why pharmacoeconomics???

11. Evaluating Different Types of Analysis
• Efficacy: optimal circumstances
• Effectiveness: usual circumstances
• Efficiency: cost-effectiveness
Comparison with alternative therapy/therapies requires consideration of costs
to be included, perspective, timeframe, effectiveness metric, discount rate,
assumptions disease endpoints assessed by indices of therapeutic outcome

12. Types of PE Analysis
• Cost - minimization analysis
• Cost - effectiveness analysis
• Cost - utility analysis
• Cost - benefit analysis
• Others - cost of illness analysis , cost - consequence analysis

13. Cost - Minimization Analysis
• Simplest to conduct because the outcomes are assumed to be equivalent;
thus, only the costs of the intervention are compared.
• Example:
1. Comparing cost of drug A and drug B which have equal efficacy for a
given condition.
2. Generic drugs
• Disadvantage : Cannot be used when outcome is different.

14. Study Example of CMA
Cost-Minimization Analysis of Metformin and Acarbose in
Treatment of Type 2 Diabetes.
(https://doi.org/10.1016/j.vhri.2015.03.012)
Zhiliu Tang, PhD,Lizheng Shi, PhD Monika Sawhney, PhD, Huimei Hu, MPA, Hengjin Dong, PhD

15. Cost-Effectiveness Analysis
• CEA measures outcomes in natural units (e.g., mm Hg, cholesterol levels, symptom-
free days [SFDs], years of life saved)
• Average cost effectiveness ratio (ACER)
• Cost is measured in MONETARY UNITS, and outcomes are measured in terms of obtaining a specific
therapeutic outcome.These outcomes are often expressed in physical units, natural units, or
nondollar units (lives saved, cases cured, life expectancy, or drop in blood pressure).The results of
CEA are also expressed as a ratio—either as an average cost-effectiveness ratio (ACER) or as an
incremental cost effectiveness ratio (ICER).
• An ACER represents the total cost of a program or treatment alternative divided by its clinical
outcome to yield a ratio representing the dollar cost per specific clinical outcome gained,
independent of comparators.
• This formula yields the additional cost required to obtain the additional effect gained by switching
from drug A to drug B.

16. • Example: difference of fall in mmHg with amlodipine with telmisartan
compared with difference in their prices.
• Advantage: outcomes are easier to quantify, comfortable for practioners.
• Disadvantage: 1.Programs with different outcomes cannot be measured.
2. Different side effects of different medications cannot be
compared (eg fexofenadine and diphenhydramine).
3. Can’t determine if added benefit is worth added cost.

17. Study Example of CEA
• Cost-effectiveness analysis of metformin + dipeptidyl peptidase-4
inhibitors compared to metformin + sulfonylureas for treatment of
type 2 diabetes
Christina S. Kwon, Enrique Seoane-Vazquez & Rosa Rodriguez-Monguio BMC Health Services
Research volume 18, Article number: 78 (2018)

18. Cost - Utility Analysis
• CUA is a subset of CEA.
• Measuring quality of life or utility not years of life
(Quality-adjusted life Year(QALY) represent the number of full years at full health that are valued
equivalently to the number of years as experienced)
• Range from 1.0 for “perfect health” to 0.0 for “dead.”
• Disadvantage: there is no consensus on how to measure these
utility weights, and they are more of a “rough estimate” than a
precise measure.

19. Study Example of CUA
• Cost-Utility Analysis of Screening Intervals for Diabetic Retinopathy in
Patients With Type 2 Diabetes Mellitus
• Sandeep Vijan, MD, MS; Timothy P. Hofer, MD, MS; Rodney A. Hayward, MD Author Affiliations
JAMA. 2000;283(7):889-896. doi:10.1001/jama.283.7.889

20. Cost - Benefit Analysis
• Cost and outcome are both measured in monetary terms.
• Advantage - Easy to determine if the benefit of a program exceed
cost of implementation
-Compare multiple programs.
• Disadvantage - Imprecise placement of monetary values to health
outcome.

21. Study Example of CBA
• Cost-benefit analysis of vaccination: a comparative analysis of
eight approaches for valuing changes to mortality and morbidity
risks.
• Minah Park, Mark Jit & Joseph T. Wu BMC Medicine volume 16, Article number: 139 (2018)

22. Cost - Consequence Analysis
• If only a list of costs and a list of various outcomes are presented,
with no direct calculations or comparisons, this is termed a cost-
consequence analysis (CCA).

23. Cost of Illness Analysis
• Determines the total economic burden (including prevention, treatment,
losses caused by morbidity and mortality, and so on) of a particular
disease on society.
• Direct
• Indirect
• Intangible
• Opportunity

24. • Advantage : Indicates the magnitude of resources needed for a specific
disease or condition.
• Used to compare the economic impact of one disease versus another

25. Cost - Effectiveness Plane
• This cost-effectiveness plane
is a visual method for
representing the comparison
of alternatives.
• 4 quadrants

26. Cost - Effectiveness Plane
Difference in cost
Difference in
effect
Q 1
Q2
Q3
Q4

27. Applications of Pharmacoeconomics
• Quantify the value of pharmacy products and pharmaceutical care
services
• Clinical and policy decision making
• Drug therapy evaluation
• Clinical pharmacy service evaluation

28. PE Evaluation Steps
1. Define the pharmacoeconomic problem
2. Assemble a cross-functional study team
3. Define the appropriate study perspective
4. Identify treatment alternatives and outcomes
5. Identify the appropriate pe method to employ
6. Place a monetary value on treatment alternatives and outcomes

29. 7. Identify resources to conduct study in an efficient manner
8. Identify probabilities that outcomes may occur in the study population
9. Employ decision analysis
10. Discount costs or perform a sensitivity or incremental cost analysis
11. Present study results
12. Develop a policy or an intervention
13. Implement policy and educate professionals
14. Follow up documentation

30. Conclusion
• Healthcare sector is not just a small area but it became an
industry now. It has more dimensions to explore.
• Pharmacoeconomic acts as socioeconomics too.
• It relates patients, society, and economy, to drug therapy

31. References
• Karen l. Rascati (ESSENTIALSOF PHARMACOECONOMICS)
• Review articleAsian Journal of Pharmaceutical and Clinical Research
• LisaA . Sanchez (pharmacoeconomics principles, methods and application)
• Dyfrig A. Hughes (DOI:10.1111/j.1365-2125.2012.04247.x)
• TomWalley, M.D.(Pharmacoeconomics and Economic Evaluation of DrugTherapies)
• DetskyAS, LaupacisA.Relevance of cost-effectiveness analysis to clinicians and policy
makers. JAMA. 2007;298(2):221-224.
• Goldberg Arnold R.Health economic considerations in cardiovascular drug utilization. In:
FrishmanW, SonnenblickE, eds. Cardiovascular Pharmacotherapeutics. 2nd ed. NewYork:
McGraw Hill, Inc.; 2003:43.
• Gold MR. Cost-effectiveness in Health and Medicine; Oxford:Oxford University Press:1996

32. THANK YOU