CHAPTER:2

PHARMACOECONOMICS

BY
Mrs. K.SHAILAJA., M. PHARM.,
LECTURER
DEPT OF PHARMACY PRACTICE,
SRM COLLEGE OF PHARMACY
 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.
 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.
 Types of pharmacoeconomic
evaluations:

„ Cost-minimization analysis (CMA)

„ Cost-benefit analysis (CBA)

„ Cost-effectiveness analysis (CEA)

„ Cost-utility analysis (CUA)

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

 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).
 Disadvantage
„ It is not helpful in assessing a single programme.
Thank you