This document discusses pharmacoeconomics and provides definitions, principles, perspectives, types of costs and consequences, and methods of pharmacoeconomic evaluation. Pharmacoeconomics analyzes the costs and benefits of drug therapies to health systems and society. It considers costs from multiple perspectives including patients, providers, payers, and society. Costs include direct medical, direct non-medical, and indirect costs. Consequences include clinical, economic, and humanistic outcomes. Common methods of pharmacoeconomic evaluation are cost-of-illness analysis, cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis. These methods are used to inform healthcare decisions at both the individual patient

1. Prepared by: Shagufta Farooqui
Assistant professor
at
(Indira college of Pharmacy)
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2. Content
1.What is pharmacoeconomics?
2.Principle
3.Perspectives
4.Cost and types
5.Consequences
6.Methods of pharmacoeconomics
7. Applications
8.References
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3. Input costs Output costs
Healthcare
What is pharmacoeconomics?
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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
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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
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6. pharmacoeconomis
costs
consequences
perspectives
Pharmacoeconomics involves
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7. perspectives
patient
provider payer
social
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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
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9. cost
Direct
medical
cost
Direct
nonmedical
cost
Indirect
nonmedical
cost
Intangible
cost
Opportunity
cost
Increment
al cost
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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.
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Costs
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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.
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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
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13. economic clinical
humanist
ic
positive negative
intermedi
ate
consequences
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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.
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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
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16. Methods of pharmacoeconomics evaluation
1.Cost of
illness
2.Cost
minimiza
tion
3.Cost
benefit
4.Cost
effective
ness
5.Cost
utility
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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.
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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.
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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.
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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 .
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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.
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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.
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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
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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
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