PHARMACOECONOMICS (PE)

(THEORY AND PRACTICE)

Ms.Pratibha

Guide:
Dr.U.P.Rathnakar MD.DIH.PGDHM
 ROAD MAP

Introduction

History

Definition

Concept

Cost and outcomes

Evaluation methods

Applications

Conduct of PE evaluation

Conclusion
 INTRODUCTION

Resources are always scarce.

Challenge to provide
- quality medical care with minimum
resources.

Balance between
- economic,
- humanistic and
- clinical outcome.
 HISTORY

Health economic is a branch of economics

Mid 1960s – few systemic reference to it
can be found

In 1973 – the first book on this subject was

published

The first time the PE was used in public forum -

in1986,

At a meeting of Pharmacists in Toronto.

When Ray Townsend, from the Upjohn
Company, used the term in a presentation
 DEFINITION

ECONOMICS:

- Is the study of how society decides what

gets produced, how and for whom.
 HEALTH ECONOMICS:

Branch of economics
- Study of
- How scarce resources are allocated for
the health care
- For the maintenance and
impprovement of health among people
 PHARMACOECONOMIC:

Subdivision of health economic

- Process of
- Identification
- Measuring and comparing the cost
and outcome of health care
programme
 CONCEPT

Provides a basis for
- resource allocation and utilization

Nowadays in India primary care providers are
- bombarded with various new drugs
usually of the same family
- having properties similar to the
available (older) drug
Cont………
 Cont…..

Before prescribing any new drug therapy two
question must be important
1. Whether the new drug is equally or
more efficacious in the said disease
as compare to the standard
treatment?

2. Does the new drug have any

pharmacoeconomic advantage over the
existing drugs?
 Pharmacoeconomics

Outcome Cost
MEASURES COST AND OUTCOMES

Determines which alternative gives best

outcome for the resource invested.

Alternative which gives optimum outcome to the

rupee spent.
 COST?

Not same as price

Involves all the resources that are used to

- produce and deliver a particular drug
therapy

Cont……
 Cont……
COST

Direct Non medical Intangible Opportunity

Medical

Direct Indirect

DIRECT MEDICAL:
- Cost related to disease
Eg: Drugs, lab test, hospitalization

DIRECT NON MEDICAL:

- Cost related to illness but not related to
purchasing health care services.
Eg: spent on transportation, hiring of a
room near treatment center

INDIRECT NON MEDICAL:
- Cost of reduced productivity

INTANGIBLE:
- Cost incurred due to disease
- Which cannot be measured in rupee
terms
Eg:
Eg: pain, suffering

OPPORTUNITY COSTS:

- When taking certain course of action

opportunity & cost is lost to use the
next best alternative therapy
 OUTCOMES

Outcomes (consequence)

Clinical Humanistic
(efficacy of (QOL, patient
treatment) satisfaction)
EVALUATION METHODS

Cost minimizition analysis [CMA]

Cost benefit analysis [CBA]
Cost effectiveness analysis [CEA]
Cost utility analysis [CUA]
 Cost--minimization Analysis
Cost

Simplest of the pharmacoeconomics tool

Comparing two drugs of equal efficacy and
equal tolerability

Therapeutic equivalence must be
established between 2 procedures to be
compared

Now no need to compare efficacy or
outcome

Simple comparison of cost
 COST MINIMIZATION ANALYSIS
- - Eg:
Eg:
Comparing two dosage forms of intravenous
clindamycin for prevention of postoperative
infection

Patient undergoing surgery for gangrenous
appendicitis
- Clindamycin 900mg every 8 hour OR
Clindamycin 600mg every 6 hour
- Both showed equal
- efficacy
- safety
- pharmacokinetics
 COST BENEFIT ANALYSIS (CBA)

Both cost and benefits of various

alternatives are reduced to monetary terms

Used to evaluate the desirability of a given
intervention in markets

Intervention vs status quo

 CBA….

Expressed as ratio – B/C ratio

- B/C ratio >1, Programme or treatment is
of value
- B/C ratio = 1, Benefit and cost equal
- B/C ratio < 1, Programme is not
beneficial
 COST EFFECTIVE ANALYSIS (CEA)

Ratio of cost of a treatment alternative and
clinical outcome is compared to another
alternative

Outcomes is not expressed

- in monetary terms
- but in units - (non rupee units)
 CEA…..

Eg:
Eg:
- 4 Statins compared Fluvastatin
Lovastatin,, Simvastatin,
Lovastatin Simvastatin, Pravastatin
- Outcome: rate of success in achieving the LDL
goal of therapy
- Cost: drug cost, physician cost, lab cost
- Fluvastatin lowest CEA ratio for LDL reduction
of 25% or less
 CEA--ACEA
CEA

1. Average cost effective analysis[ACEA]:

Cost in rupee of option ‘A’ / clinical outcome

- when this ratio is compared to another
option ‘B’
- one with least ACER is selected
 CEA--ICEA
CEA

2. Incremental cost effective analysis:

This helps to know the

- increase in cost to get better outcome
between two options
 COST UTILITY ANALYSIS (CUA)

Drugs/intervention with different outcomes are

compared

Outcomes measured in ‘utility units’ ,
i.e. Quality Adjusted Life Years (QALY)
Eg:
Eg:
Ondansetron Vs Metoclopramide in
patient receiving high dose Cisplatin
therapy
Cont……
 CUA …..

Cost: direct cost of the drug,
material, labour

Clinical outcome: counting emesis
episode in 24 hours after
antiemetic and extrapyramidal
reaction after metoclopramide
 CUA….

Example, intervention A

Allows a patient to live for 3 additional years

Than if no intervention had taken place, but
only with a quality of life weight of 0.6,

Then the intervention confers 3 * 0.6 = 1.8
QALYs to the patient [A]

If intervention B confers 2 extra years of life
at a quality of life weight of 0.75,

Then it confers an additional 1.5 QALYs to
the patient. [B]

The net benefit of intervention A over
intervention B is therefore 1.8 - 1.5 = 0.3
QALYs.
 Quality--adjusted life years, or QALYs,
Quality

Is a way of measuring disease burden,

Including both the quality and the quantity of
life lived

As a means of quantifying in benefit of a
medical intervention.

Based on the number of years of life that
would be added by the intervention.

Each year in perfect health is assigned the
value of 1.0 down to a value of 0 for death.

I If the extra years would not be lived in full
health -the extra life-
life-years are given a value
between 0 and 1 to account for this.
Methodology Cost measurement units Outcome measurement
units

CMA Rupees or monetary units Assumed to be equivalent

CEA Rupees or monetary units Natural units[Bp, blood

sugar, life years]

CBA Rupees or monetary units Rupees or monetary units

CUA Rupees or monetary units QALY or other utilities

 Application of Pharmacoeconomics:
Pharmacoeconomics:

1. Pricing of a new drug

2. Re-
Re-pricing of an old drug
3. Generation of a data for promotional
material
4. Legislative requirement for drug
licensing and medical reimbursement
5. Justify clinical pharmacy evaluation
Cont……
 Use …..

6. Used to justify use of pharmacy

products and pharmaceutical care
7. Principle of Pharmacoeconomic also
influences health care decision making
and individual patient care
8. Earlier clinical decisions were solely
based on outcomes. Now cost, outcome,
humanistic outcome are also considered

Conduct of pharmacoeconomic evaluation:
1. Define the problem
2. Assembe the study team
3. Identify treatment alternative
4. Decide on correct pharmacoeconomic
method
5. Decide monetary value of clinical
outcome
6. Make analysis
7. Present result
8. Implement

Eg: Pain from osteoarthritis

Pain results in significant disability and resource
utilization

NSAIDs
- effective pain relief
- Less expensive than Cox-
Cox-II inhibitor
- associated with a significant risk of adverse
effects
- Dyspeptic symptoms
- More serious non-
non-dyspeptic effects-
effects-
symptomatic ulcers, ulcer hemorrhage,
ulcer perforation

Cox- II inhibitors
Cox-
- effective pain relief
- substantially more expensive than Cox-
Cox-1
inhibitors
- associated with lower risk of GI side effects

NSAIDs are inexpensive compared to Cox- Cox-II
inhibitor:
- But won’t the more expensive agent pay for
itself many times over by preventing an
expensive GI bleed?
- Dyspeptic symptoms are decreased by
15%
- Clinically significant ulcer complications are
reduced by 50%

Risk reduction for GI complications seen with
Cox--II inhibitors is unlikely to offset their
Cox
increased cost in the management of average
risk patients with osteoarthritis pain
- With no history of GI bleed, choose naproxen
- With history of GI bleed, choose Cox-Cox-II
inhibitor
 CONCLUSION

Is a young science, which is still testing its
methodology.

The science will improve with application and
value of the analysis to clinicians

Principle and methods balances the cost and
outcomes and provides the best possible health
care to the with available resources.

Time and money can only be spent once-once- choice
is inevitable. Whether done unconsciously or
with a consistent process, health care
professionals are constantly evaluating patient
care choices & acting on them.
 REFERENCE

Avery’s text book, author, publishers,city,

publishers,city, year,
Page

The national medical journal of India
vol.17:no.2:2004

Essentials of PE, By: Karen L. Rascati,
Rascati, Lippincot
Williams and Wi

Cost--Effectiveness Analysis: Methods and
Cost
Applications by Henry M. Levin,
Levin, Patrick J.
McEwan,, Patrick J. McEwan
McEwan