This document provides an introduction to pharmacoeconomics. It defines pharmacoeconomics as the description and analysis of the costs of drug therapy to healthcare systems and society. Pharmacoeconomics is a sub-discipline of health economics that evaluates the costs and effects of pharmaceutical products. There are four main types of pharmacoeconomic evaluations: cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis. These evaluations compare the costs and outcomes of alternative drug therapies to determine the most cost-effective option. Quality-adjusted life years are used to measure health outcomes in cost-utility analysis by incorporating both quality and quantity of life.

1. CHAPTER:2
PHARMACOECONOMICS
BY
Mrs. K.SHAILAJA., M. PHARM.,
LECTURER
DEPT OF PHARMACY PRACTICE,
SRM COLLEGE OF PHARMACY

2. Introduction
„ Compares the value of one pharmaceutical drug or
drug therapy to another.
„ To guide optimal healthcare resource allocation, in a
standardized and scientifically grounded manner.
„ Evaluation provides us with the methodology to
determine those treatment options, which will yield
the maximum health gain per unit of currency spent.

3. Definition:
Pharmaeconomics have been defined as “the
description and analysis of the costs of drug theraphy
to health care systems and society”.
„ sub-discipline of health economics .
„ study evaluates the cost (expressed in monetary
terms) and effects (expressed in terms of monetary
value, efficacy or enhanced quality of life) of a
pharmaceutical product.

4. Types of pharmacoeconomic
evaluations:
„ Cost-minimization analysis (CMA)
„ Cost-benefit analysis (CBA)
„ Cost-effectiveness analysis (CEA)
„ Cost-utility analysis (CUA)

5. „ Uses tools for examining the impact (desirable,
undesirable) of alternative drug theraphy and other
medical interventions.
„ Share the common feature of comparing inputs (cost)
with outcomes (benefits) resulting from drug
intervention .
„ Cost of drug therapy relates not only to the price of
the drug but also includes direct and indirect costs.
„ Direct costs:-costs of staff and capital.
„ Indirect costs:-include loss of earnings, loss of
productivity and cost of travel to hospital.

6. „ Quality Adjusted Life Year (QALY) is a measure of
health outcome which includes quality and quantity
of life.

7. Cost minimization analysis:
„ Measures and compares input costs, and assumes
outcomes to be equivalent.
„ Simplest method ,to compare costs of alternative
therapies that have: identical clinical effectiveness
(including adverse reactions, complications and
duration of therapy), but different costs choose the
least cost alternative among equivalent or equally
efficacious alternatives .

8. „ Example:
The evaluation of two generically equivalent
drugs in which the outcome has been proven to be
equal, although the acquisition and administration
cost may be significantly different.

9. Cost effectiveness analysis:
„ If two or more drug therapies have the same
treatment objective but different degrees of efficacy
then cost-effectiveness analysis may be performed.
„ Assigns a monetary value to the measure of effect .
Incremental Cost Effectiveness Ratio = Cost A - Cost B
(ICER) Effect A – Effect B

10. Disadvantages
„ 1.It is a narrow measure as only one outcome is being
measured.
„ 2. It is not useful in assessing a single programme.
„ 3. It cannot be used to compare more disparate
alternatives

11. Cost Benefit Analysis
„ CBA, sometimes called benefit–cost analysis (BCA),
is a systematic process for calculating and comparing
benefits and costs of a project, decision
or government policy .
„ To improve the decision making process in allocation
of funds to health care programs.

12. Disadvantages
„ Use is limited by need to place monetary valuations
on health outcomes.
„ Cost utility analysis is more widely used as results
are presented in terms of cost per QALY.

13. Cost Utility Analysis:
„ An adaptation of cost effectiveness analysis.
„ Measures an intervention's effect on
both quantitative and qualitative aspects of health
(morbidity and mortality).
„ Focuses on increased quality of life.
„ Expressed as cost per quality-adjusted life years
(QALY).

14. Disadvantage
„ It is not helpful in assessing a single programme.

15. Thank you