3. Input costs Output costs
Healthcare
What is pharmacoeconomics?
3 8/11/2019
4. Pharmacoeconomics has been defined as the description and analysis of the
cost of drug therapy to healthcare system and society.
pharmacoeconomics
Pharmakon-
drug
Oikonomia-
management of
houselod
Oikas-house
Nomas-law
Definition
4 8/11/2019
5. Outcome research .
Means to
Identify,measure,evaluate the result of health care researches in general.
Cost.
It is the value of resources consumed by a program or drug therapy of interest.
Consequences.
Effects, outputs or outcomes of program or drug therapy of interest.
Outcome
research
cost consequences
Principle
5 8/11/2019
8. Assessing costs and consequences:
1.Patient perspectives.
Acccording to patient
E.G Insurance copayments, Indirect costs, Drug costs
2.Provider perspectives.
Provider can be hospitals, managed-care organization.
3.Payer perspectives.
Direct cost
E.G insurance company ,employers or the Government.
4.Social perspectives.
Broadest
Considers benefits of society
Include morbidity and mortality
Perspectives
8 8/11/2019
10. The value of resources consumed by a program or drug therapy,of interest, is
defined as cost.
Health care costs are categorized as..
1.Direct medical costs.
Drugs and equipment, medical supplies ,Laboratory and Diagnostic
tests,Hospitilizations,and Physician visits.
Direct medical costs can be subdivided into
Fixed and variable.
10
Costs
8/11/2019
11. 2.Direct nonmedical costs.
That are result of illness or disease but do not involve purchasing
medical services.
Transportation to and from health care facilities, Extra trips to the
emergency department, child or family care expenses, special diets etc.
3.Indirect nonmedical cost.
Morbidity cost –loss of reproductivity (missing work)+Mortality cost -Loss
of years of service due to premature death.
Two techniques are used to estimate indirect cost
1.Human capital(HC)
2.Willingness to pay(WTP) methods.
11 8/11/2019
12. 4.Intangible costs :
Nonfinancial outcomes of disease and medical care such as pain, suffering,
inconvenience and grief.
5.Opportunity costs:
Economic benefits forgone when using one therapy instead of the next best
alternative therapy.
Value of alternative forgone
6.Incremental costs.
The extra cost required to purchase an additional units of effects
12 8/11/2019
14. Consequences (Outcomes):
Is defined as the effects ,outputs ,or outcomes of the program or drug therapy
of interest.
Consequences are categorized as.
Economic outcomes:
Comparing direct ,indirect, intangible costs with the consequences of medical
treatment alternatives.
Clinical outcomes:
Medical events occur as a result of disease or treatment (e.g. safety and efficacy
end point).
Humanistic outcomes:
Consequences of disease or treatment on patient functional status such as
physical function, social function ,general health and well-being and life
satisfaction.
14 8/11/2019
15. Positive outcomes -Desired effects of a drug.
Negative outcomes -ADR or toxicity of a drug.
Intermediate outcome- Can serve as a proxy for more relevant final outcome
15 8/11/2019
16. Methods of pharmacoeconomics evaluation
1.Cost of
illness
2.Cost
minimiza
tion
3.Cost
benefit
4.Cost
effective
ness
5.Cost
utility
16 8/11/2019
17. Cost of illness (COI)Evaluation
COI identifies and estimates the overall costs of a particular disease for a defined
population.
COI evaluation also known as burden of illness.
It involves measuring the direct and indirect costs attributable to a specific
disease Such as diabetes ,mental disorder, or cancer
COI Evaluation is not used to compare competing treatment alternatives but to
provide an estimation of the financial burden of a disease.
17 8/11/2019
18. Cost Minimization analysis
Cost minimization analysis involves the determination of the least costly
alternative. When comparing two or more treatment alternatives .
With CMA the two alternatives must be equivalent therapeutically .
For e.g.
If a drug A and B are antiulcer agents equivalent in efficacy and adverse drug
reaction ,then the costs of using these drugs could be compared using CMA.
18 8/11/2019
19. Cost benefit Analysis
Cost benefit analysis is a method that allows for identification ,measurement
and comparison of the benefits and costs of a program or treatment alternative.
Both the costs and the benefits are measured and converted into equivalent
dollars .
These costs and benefits are expressed as a ratio(a benefit to cost ratio)
Many CBAs measure and quantify direct costs and direct benefits only due to
difficulties in measuring indirect and intangible benefits.
This approach is widely used in health economics.
19 8/11/2019
20. Cost effectiveness analysis
CEA is a way of summarizing the health benefits and resources used by
competing healthcare program so that policymakers can choose among them.
It measures effectiveness(health benefits) in natural units(e.g years of life saved
,disease healed ) and the cost in money.
It compares therapies with qualitatively similar outcomes in a particular
therapeutics area. for instances, in severe reflux oesophagitis,using a proton
pump inhibitor compared to using H2 blockers .
20 8/11/2019
21. The results of CEA are expressed as a ratio either as an average cost-
effectiveness Ratio (ACER)or as an incremental cost effectiveness ratio(ICER)
1.ACER= health care costs/clinical outcome
This allows the cost and outcomes to be reduced to a single value to allow for
comparison.
2.ICER=Difference in cost (A-B)/Difference in benefits(A-B)
This formula yields the additional cost required to obtain the additional effect
gained by switching from drug A to drug B.
21 8/11/2019
22. Cost utility Analysis
CUA is the most appropriate method to use when comparing programs and
treatment alternatives that are life extending with serious side effects (e.g. cancer
chemotherapy ),those whose produce reduction in morbidity rather than mortality
(e .g , medical treatment arthritis),
and when HRQOL (Health related quality of life) is the most important health
outcome being examined.
CUA can compare cost,quality,and quantity of patients years.
22 8/11/2019
23. Methods Description Applications
COI
Estimates cost of a disease
on define population
Use to provide baseline to
compare prevention/treatment
options against.
CMA
Finds the least expensive
cost alternative
Use when benefits are the same
CBA
Measures benefits in
monetary units and
computes a net gain
Can compare programs with
different objectives
CEA
Compares alternatives with
therapeutics effects
measured in physical units
Can compare drugs /programs
that differ in clinical outcomes
and use the same unit of benefits
CUA
Compares consequences in
utility units rather than
physical units
Use to compares drug /programs
that are life extending with
serious side effects
23 8/11/2019
24. Applications
In decision making
regarding drug therapy
Selecting cost effective
drug for an
organizational
formulary
Supports clinical
decisions ,ranging from
the level of patient to
entire healthcare
system
24 8/11/2019