Pharmacoeconomics is essential to reduce burden for patients in the terms of cost and improve the therapeutic effectiveness by selecting alternative treatments. Physician and pharmacist plays an important role in selecting drugs and treatment alternatives. So, proper selection helps to minimize the cost of therapy in patients. Research studies on pharmacoeconomics helps to know the burden of patients paying for their illness.

1. PHARMACOECONOMICS: TO REDUCE
BURDEN FOR PATIENTS
BY: Dr. VISHWAS A T L, Pharm.D
ASSISTANT PROFESSOR
DEPARTMENT OF PHARMACY PRACTICE
BHARATHI COLLEGE OF PHARMACY
BHARATHINAGARA - 571422

2. CONTENTS
History
Definitions
Goals and Needs
Costs
Consequences
Types of evaluations
Steps
Perspectives of Pharmacoeconomics
Applications

3. HISTORY
Pharmacy was finally recognized as a clinical discipline within the healthcare
system in the early 1960s.
Pharmacoeconomics developed its roots in 1970s.
The first book on health economics was published in 1973
In 1978, Mc Ghan, Rowland, and Bootman from the University of Minnesota
introduced the concept of cost-benefit and cost effectiveness analysis.
Bootman by utilizing sophisticated pharmacokinetic protocols, published an
cost-benefit analysis research article on aminoglycoside dosages in 1979.
In 1983, Ohio State University College of Pharmacy initiated a specialized
pharmacy academic program with the objective of providing an overview of the
application of cost benefit and cost effective analysis in healthcare, with emphasis
on their application to the delivery of pharmaceutical care.

4. Continue……
Initially, defined as “Analysis of the costs of drug therapy to healthcare systems
and society”.
The actual term “Pharmacoeconomics” first appeared in the literature in 1986
when Townsend’s work was published to highlight the need to develop research
activities in this new discipline.
 In 1992, a journal named “Pharmacoeconomics” was launched.

5. DEFINITIONS
Economics: It is the study of allocation of limited or scarce resources or inputs
among alternatives to satisfy wants of outputs.
Health economics: It evaluates the behaviour of individuals, firms and markets in
health care.
Outcomes research: It is a research which assesses the effects of programs,
policies, and medical interventions on the health status of the patient, focuses on
clinical, humanistic and economic outcomes.
Pharmacoeconomics: It comes under the economic outcomes which identifies,
measures, and compares the costs and consequences of the use of pharmaceutical
products and services.

6. Pharmacoeconomics representation
Health
care
Consequences
Costs

7. GOALS
The goal of a pharmacoeconomic study is to determine whether the expense
incurred by the use of a new medication is justified in comparison with the
cost of existing medication.
 Also includes potential cost savings resulting from a decrease in the number
of physician visits, emergency room visits, length and number of
hospitalizations, ancillary transportation costs, and the number of days of
work lost by patients taking the new medication.

8. NEEDS OF PHARMACOECONOMICS
To decrease the burden for patients, healthcare professionals and public.
It is essential to find the optimal therapy at the lowest price.
In government sector helps to determine program benefits and its operating expense.
In pharmaceutical manufacturing industries helps to decide among specific research
and development alternatives.
In private sector it can be used for designing insurance benefit coverage.
Additionally, it describes the economic relationship involving drug research, drug
production, distribution, storage, pricing and its use by the society.

9. Costs
Cost is defined as the value of the resources consumed a drug therapy of interest. It
is the amount paid to the suppliers by the patient.
Direct medical cost
Costs
Direct non-medical cost
Indirect cost
Intangible costs

10. TYPES OF COSTS
Health care costs are categorised as..
Direct medical cost: This is what is paid for specialized health resources and
services. It includes the physician’s salaries, the acquisition cost of medicine,
consumables associated with drug administration, staff time in preparation and
administration of medicines, laboratory costs of monitoring for effectiveness and
adverse drug reactions.
Direct non-medical cost : This includes cost necessary to enable an individual
receive medical care such as lodging, special diet and transportation, lost work
time (important to employers) such as acute Otitis media in paediatric patients
with professional parents who lost work time during the treatment of their kid.

11. Indirect cost : This is the cost incurred by the patient, family, friends or society.
Many of these are difficult to measure, but should be of concern to society as a
whole. This includes productivity loss in the society, unpaid care givers, lost wages,
expenses of illness borne by patients, relatives, friends, employers and the
government and loss of leisure time.
Intangible costs: These are costs related with the patient’s pain and suffering,
worry and other distress of the family members of a patient, effect on quality of life
and health perceptions. For example, patients of rheumatoid arthritis, cancer or
having terminal illnesses in which quality of life is suffered due to adverse reactions
of the drug treatment.
Total costs = Direct cost+ Indirect costs + Intangible costs

12. OUTCOME/ CONSEQUENCES
Consequence is defined as the effects, outputs, or outcomes of the program of drug
therapy of interest.
There are mainly three types of outcomes which includes,
1. Economic outcomes
Reduction in resource use or saving.
Savings due to treatment.
Production gain to return to work.
2. Clinical outcomes: Medical event that occur as a result of disease or treatment.
Laboratory values
Number of lives saved
Number of deaths prevented
Number of disability days reduced

13. 3. Humanistic outcomes: Effect on patient’s functional status or quality of life.
Changes in health related quality of life measures ( HRQOL)
Quality adjusted life years ( QALY)
Outcome can also be,
- Positive: desired effect of drug.
- Negative : undesired or adverse effect of drug
- Pharmacoeconomic evaluation include both.

14. PHARMACOECONOMIC EVALUATIONS
Pharmacoeconomic evaluations include any study designed to assess the costs
(resources consumed) and consequences (clinical, humanistic) of alternative
therapies. There are five major types of Pharmacoeconomics analyses. In each type
of analysis, economic inputs are measured in dollars and the measurement of
outcomes differs.
Cost-minimization analysis
Cost-effectiveness analysis
Cost-utility analysis
Cost-benefit analysis
Cost of illness

15. COST-MINIMIZATION ANALYSIS
Cost-minimization analysis (CMA) involves the determination of the least costly
alternative when comparing two or more treatment alternatives.
With CMA, the alternatives must have an assumed or demonstrated equivalency in
safety and efficacy (i.e., the two alternatives must be equivalent therapeutically).
Once this equivalency in outcome is confirmed, the costs can be identified,
measured, and compared in monetary units (dollars).
CMA is a relatively straightforward and simple method for comparing competing
programs or treatment alternatives as long as the therapeutic equivalence of the
alternatives being compared has been established.
If no evidence exists to support this, then a more comprehensive method such as
cost-effectiveness analysis should be employed.

16. Objective: The objective of this method is to select the least costly among multiple
equivalent interventions.
Advantages:
CMA is a relatively straightforward and simple method for comparing competing
programs or treatment alternatives.
Employing CMA is appropriate when comparing two or more therapeutically
equivalent agents or alternate dosing regimens of the same agent.
Disadvantages:
It cannot be used to evaluate programmes or therapies that lead to different
outcomes.
Example: - If a hospital decides to introduce compulsory prescribing of generic
names of drugs instead of their brand names, then the pharmacoeconomic evaluation
of this would be done by CMA.

17. COST-EFFECTIVENESS ANALYSIS (CEA)
CEA is a technique designed to assist a decision-maker in identifying a preferred
choice among possible alternatives.
Generally, cost-effectiveness is defined as a series of analytical and mathematical
procedure that aid in the selection of a course of action from various alternative
approaches.
The costs of drug treatments include acquisition costs, physician involvement, and
nursing costs for administration of the drug.
The effectiveness of drug treatment is measured in tangible measures such as
length of hospital stay, duration of treatment required, and mortality rate.
The key measure of the evaluations is the incremental cost effectiveness ratio
(ICER), which can be determined as follows:
Incremental cost effectiveness ratio= Cost of drug A - Cost of drug B
Benefits of drug A - Benefits of drug B

18. Advantages:
CEA evaluates multiple drug treatments for the same condition.
The results of a CEA are expressed as cost/outcome for both therapies.
Disadvantages:
It does not allow comparisons to be made between two totally different areas of medicine with
different outcomes.
Example:
In a treatment of illness the cost of drug A is 300 rs and cure rate will be 67.4, where as cost of drug
B is 200 rs and cure rate will be 45.6. calculate average cost effectiveness.
Drug A = 400 Rs= 5.9 Rs/ successful treatment, Drug B = 200 Rs = 4.3 Rs/ Successful treatment
67.4 45.6
ICER = 400-200 = 200 = 9.17 rupees/ Additional successful rate
67.4 – 45.6 21.8
Interpretation: It costs an additional 9.17 rupees to gain one additional successful case with drug A

19. Cost effective plane

20. COST-UTILITY ANALYSIS
Cost-utility analysis (CUA) is an economic tool in which the intervention
consequences is measured in the terms of quantity and quality of life.
Results often are expressed as cost per quality-adjusted life-year (QALY) gained.
Outcomes are adjusted for quality by using "utility" values or weights.
Results of CUA are also expressed in a ratio, a cost-utility ratio (C:U ratio).
QALYs represent the number of full years at full health that are valued
equivalently to the number of years as experienced.
In this context, utility represents the preference expressed for a particular health
state.
Utility values range from 0 to 1, with 0 being death and 1 representing perfect
health.

21. Advantages
CUA is the most appropriate method to use when comparing programs and
treatment alternatives that are life extending with serious side effects.
CUA is a method for comparing treatment alternatives that integrates patient
preferences and health related quality of life.
CUA can compare cost, quality, and the quantity of patient-years.
Disadvantages
CUA is employed less frequently than other economic evaluation methods
because of a lack of agreement on measuring utilities, difficulty comparing
QALYs (quality adjusted life years) across patients and populations.
Pharmacoeconomists sometimes want to include a measure of patient preference
or quality of life when comparing competing treatment alternatives.

22. Example: Comparing patients with and without treatment for illness as follows,
Patient with treatment Patient without treatment
Estimated survival = 10 years Estimated survival = 5 years
Estimated quality of life = 0.7 Estimated quality of life = 0.5
(Relative to ‘perfect health’) (‘Relative to perfect health’)
QUALYs = 10 X 0.7= 7.0 QUALYs = 5X0.5= 2.5
QUALY gain from treatment ‘X’ = 7-2.5 =4.5 QUALYs
If the cost of treatment is 6000 rupees then the cost per QUALY is 1,333 per
QUALY.
( It is obtained by 6,000 rupees/4.5 additional QUALYs )

23. COST-BENEFIT ANALYSIS
CBA is the most comprehensive and the most difficult of all economic evaluation
techniques.
Cost-benefit analysis (CBA) is a method that allows for the 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
in the year in which they will occur.
Thus, totally different interventions can be compared, making it a useful tool for
resource allocation by policy-makers.
CBA also can be used when comparing programs with different objectives
because all benefits are converted into dollars and to evaluate a single program or
compare multiple programs.

24. Advantages
It is a basic tool that allows for the identification, measurement, and comparison
of the benefits and costs of a program or treatment alternative.
CBA should be employed when comparing treatment alternatives in which the
costs and benefits do not occur simultaneously.
Both the costs and the benefits are measured and converted into equivalent dollars
in the year in which they will occur.
Disadvantages
One limitation of cost-benefit analysis lies in the difficulty of placing a dollar
value on health.
The most difficult and challenging part of CBA lies in calculating the benefits in
economic terms.

25. COST OF ILLNESS
A cost-of-illness (COI) evaluation identifies and estimates the overall cost of a
particular disease for a defined population.
This evaluation method is often referred to as burden of illness and involves
measuring the direct and indirect costs attributable to a specific disease.
The costs of various diseases, including diabetes, mental disorders, and cancer, in
the United States have been estimated.
By successfully identifying the direct and indirect costs of an illness, one can
determine the relative value of a treatment or prevention strategy.
COI evaluation is not used to compare competing treatment alternatives but to
provide an estimation of the financial burden of a disease. Thus, the value of
prevention and treatment strategies can be measured against this illness cost.

26. STEPS IN PHARMACOECONOMIC ANALYSIS
A well-designed pharmacoeconomic analysis involves 10 steps:
Defining the problem
Determining the study's perspective,
Determining the alternatives and outcomes,
Selecting the appropriate pharmacoeconomic method,
Placing monetary values on the outcomes,
Identifying study resources,
Establishing the probabilities of the outcomes,
Applying decision analysis,
Discounting costs or performing a sensitivity or incremental cost analysis, and
Presenting the results, along with any limitations of the study.

27. PERSPECTIVES OF PHARMACO-ECONOMICS
1. Patient Perspective:- Patient perspective is paramount because patients are the
ultimate consumers of healthcare services. Costs from the viewpoint of patients are
basically what patients pay for an item or administration that is, the segment not
secured by protection.
2. Payer Perspective:- Payers include insurance companies, employers, or the
government. From this perspective, costs represent the charges for healthcare
products and services allowed or reimbursed by the payer. The primary cost for a
payer is of a direct nature. However, indirect costs, such as lost workdays
(absenteeism), being at work but not feeling well and therefore having lower
productivity (presenteeism), also can contribute to the total cost of healthcare to
the payer.

28. CONTINUE…..
3. Societal Perspective:- Theoretically, all direct and indirect costs are included in
an economic evaluation performed from a societal perspective. Costs from this
perspective include patient morbidity and mortality and the overall costs of
giving and receiving medical care. An evaluation from this perspective also
would include all the important consequences an individual could experience.
4. Provider Perspective:- Costs from the provider's perspective are the actual
expense of providing a product or service, regardless of what the provider
charges. Providers can be hospitals or private practice physicians. From this
perspective, direct costs such as drugs, hospitalization, laboratory tests, supplies,
and salaries of healthcare professionals can be identified, measured, and
compared.

29. PHARMACOECONOMICS APPLICATIONS IN PHARMACY
The application of pharmacoeconomics also can be useful for making a decision
about an individual patient's therapy.
Pharmacoeconomic principles and methods have been applied commonly to assist
clinicians and practitioners in making more informed and complete decisions
regarding drug therapy.
Electing the most cost-effective drugs for an organizational formulary is important.
However, it is equally important to determine the most appropriate way to use and
prescribe these agents.
The most recent application of pharmacoeconomic principles and methods has been
for justifying the value of various healthcare services, particularly pharmacy services.
Pharmacoeconomic data can be a powerful tool to support various clinical decisions,
ranging from the level of the patient to the level of an entire healthcare system.

30. One of the primary applications of pharmacoeconomics in clinical practice today is to
aid clinical and policy decision making. Through the appropriate application of
pharmacoeconomics, practitioners and administrators can make better, more informed
decisions regarding the products and services they provide.
Healthcare practitioners, regardless of practice setting, can benefit from applying the
principles and methods of pharmacoeconomics to their daily practice settings. Applied
pharmacoeconomics is defined as putting pharmacoeconomic principles, methods, and
theories into practice to quantify the value of pharmacy products and pharmaceutical
care services used in real-world environments.
Cost-benefit analysis is a method that allows for the identification, measurement, and
comparison of the benefits and costs of a program or treatment alternative. The benefits
realized from a program or treatment alternative are compared with the costs of
providing it.
Cost-minimization analysis involves the determination of the least costly alternative
when comparing two or more treatment alternatives

31. THANK YOU