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Pharmacoeconomic research

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Pharmacoeconomic research*
• Maarten J. Postma
Pharm World Sci 2003; 25(6): 245–246.
© 2003 Kluwer Academic Publishers. Printed in the Netherlands.
M.J. Postma: Groningen University Institute for Drug
Exploration/University of Groningen Research Institute of
Pharmacy (GUIDE/GRIP), Department of Social Pharmacy,
Pharmacoepidemiology and Pharmacotherapy, Groningen,
The Netherlands (e-mail: m.postma@farm.rug.nl)
Key words
cost–benefit analysis
cost–effectiveness analysis
cost–utility analysis
pharmacoeconomics
Abstract
Efficacy and safety are crucial considerations in judging drugs,
for example, whether or not to include them in a local
formulary. More and more, pharmacoeconomic aspects are
becoming of additional importance. How should we interpret
such pharmacoeconomic studies? To enhance accurate
interpretation of such studies among our readership, we
present the basic concepts of pharmacoeconomics in this
commentary.
Accepted April 2003
*This Commentary was previously published in Dutch as part
of a paper by M.J. Postma, W.J.M.J. Rutten, C.S. de Vries
(Pharmaceutisch Weekblad 2001; 41: 1542–5)
Pharmacoeconomics
Health-care costs are increasing year by year in many
Western European countries. Furthermore, the share
of drug costs in health-care costs is growing annually,
as new and more expensive drugs are introduced on
the market. However, budgets are limited and as a
consequence health-care and drug budgets are be-
coming increasingly strained. One implication is that
pharmacoeconomic considerations increase in rele-
vance in the assessment, registration and reimburse-
ment of drugs. In this field, the science of pharmaco-
economics has evolved over the past decades.
Pharmacoeconomics is part of the broader science
of health economics 1. Health economics concerns the
allocation of scarce resources for health care. Do we
invest in heart transplants or in screening pregnant
women for HIV? In pharmacoeconomics the explicit
focus is on drugs, typically leaving problems with no
or marginal drug involvement to health economics per
se (for example, some forms of screening and health
promotion). Typical pharmacoeconomic questions
are: do we invest in widespread detection and treat-
ment of elevated cholesterol levels or in influenza vac-
cination to avert expensive costs of hospitalisation?
The science of pharmacoeconomics presents analytic
methods to answer such questions in economic terms.
One central concept relates to opportunity costs:
money invested in one area of health care implies a
missed opportunity to invest in another project with
yet other benefits. In principle, pharmacoeconomics
measures ‘value for money’, i.e. how much health gain
for how much money, implying that results are always
based on clinical research as well as both randomised
clinical trials and observational research. Besides clini-
cal data, decision and mathematical models are often
used in pharmacoeconomics.
Commentary
Pharmacoeconomic techniques
Below we present three techniques for pharmacoeco-
nomic analysis that are often used in practice: cost–
benefit analysis, cost–effectiveness analysis and cost–
utility analysis. Illustrations are provided for infectious
diseases and a range of therapeutic and prophylactic
options: early detection, antiretroviral therapy, vacci-
nation and antibiotic therapy.
Cost–benefit analysis
Cost–benefit analysis (CBA) involves a pharmacoeco-
nomic technique that includes only monetary costs
and benefits. Costs may concern those of the drug,
pharmacist’s prescription fee, administration (e.g.,
parenteral) and costs of adverse drug effects. Benefits
may involve costs saved on doctor’s visits and/or hos-
pitalisations due to the adequate use of the drug. Con-
sider the influenza vaccine: costs are EUR 10 per vac-
cinee, benefits are EUR 5000 for any hospitalisation
avoided (with an approximate average length of stay
of 15 days) 2. These costs and benefits are labelled
direct costs/benefits; they can be observed straight-
forwardly in daily health care. Again, the concept of
opportunity costing should be noted: avoided (costs
of) hospitalisation, for example, provides the opportu-
nity (and funds) for the hospitalisation of another per-
son with the same or another disease.
Another type of costs and benefits are the so-called
indirect costs/benefits related to production losses, for
example, through absenteeism at work. Indeed, dur-
ing periods of absenteeism no contribution is made to
national welfare. It depends on the perspective of the
pharmacoeconomic study which types of costs and
benefits are included: has the study been performed
from the perspective of the health-care insurer, the
health-care payer(s), or society as a whole? Only in the
latter case will production losses be included in the
analysis.
The typical outcome of a CBA relates to the net costs
(costs minus benefits). Negative net costs imply that
benefits exceed the costs and that from a pharmaco-
economic point of view the intervention (for example,
a new pharmacotherapy) should be implemented
(given positive health effects). The Appendix shows an
example for calculating net costs for influenza vaccina-
tion among the elderly. For net costs > 0, these should
be worth the health gains achieved (see below).
Cost–effectiveness analysis
As opposed to a CBA, cost–effectiveness analysis (CEA)
further explicates health gains, in terms of infections
averted, complications prevented, cases of chronic dis-
ease averted or number of life-years gained. The con-
cept of life-years gained combines mortality and re-
maining life expectancy at population level for those
groups where fatalities have been averted. Averted
death at a young age yields more life-years gained
than averted death at an older age. The advantage of
the use of life-years gained is that comparison of out-
comes of different types of interventions – therapeutic
or preventive – and different diseases becomes feasible 245
 to a certain degree. A disadvantage is the potential dis-
criminating implications of the technique, for example
with respect to the elderly where by definition fewer
life-years may be gained. Also, given longer remaining
life expectancies for women, a CEA may favour an in-
tervention for women over men, despite similar risk
reductions achieved for both genders (for example,
when prescribing statins).
One may now say that, for example, antenatal HIV
testing for early detection and initiation of antiretrovi-
ral combination therapy has lower net costs per life-
year gained at EUR 1000 3 than influenza vaccination
for the elderly with EUR 3750 per life-year gained (see
Appendix).
Cost–utility analysis
The concept of life-years gained is of no use as an out-
come if the intervention considered does not prevent
mortality, despite improving the health state of pa-
tients. This is the case for detection of asymptomatic
infection with Chlamydia trachomatis among women
and subsequent antibiotic therapy. An untreated
C. trachomatis infection may result in pelvic inflamma-
tory disease (PID), chronic pelvic pain, ectopic preg-
nancy and infertility 4. Therefore CEAs for C. trachoma-
tis interventions often express its outcome as net costs
per serious complication averted, such as PID and/or
infertility. Use of this outcome, however, does imply
that C. trachomatis screening cannot be compared
with the above-mentioned HIV testing and influenza
vaccination. For this purpose one may apply a cost–
utility analysis (CUA), where health gains are trans-
formed into utilities, for example by using ‘quality ad-
justed life-years’ (QALYs).
The QALY concept evaluates health states: perfect
health corresponds to a value of 1 and death to 0. In-
termediate values correspond with various diseases
and disease stages. Obviously, a year lived with chronic
pelvic pain is valued lower than a year lived in perfect
health. If, in Amsterdam, C. trachomatis screening
would prevent 10,000 person-years in chronic pelvic
pain and chronic pelvic pain involves a decrease in
quality of life by 10% (0.9 instead of 1.0), 1000 QALYs
would be gained. If net costs were EUR 1 million, net
costs per QALY would be EUR 1000. The above-men-
tioned antenatal HIV screening would then be ‘as ex-
pensive’ as testing for asymptomatic C. trachomatis, if,
for the illustrative purpose taken here, we do not take
quality-of-life impacts of HIV into account.
An obvious disadvantage of CUA relates to the ex-
act valuation of health states: does chronic pelvic pain
decrease quality of life by 10% or maybe even 11%?
This outcome may also depend on the exact method
used for the valuation and may differ when patients or
doctors are asked to give an evaluation.
Conclusion
As the resources are limited, choices have to be made
about where to spend money on health care; rational
decisions have to be taken in this field. To enable the
246
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Ministry of Health to make rational decisions in allocat-
ing resources, a standardised approach is required in
order to objectively compare the outcomes of different
health-care interventions, including pharmacothera-
pies. For that purpose, the Ministry, together with the
Health Insurance Council, has recently developed and
issued guidelines for pharmacoeconomic research 5.
Although these guidelines are specified for new drugs
in particular, the ultimate goal of pharmacoeconomics
is to underpin and explain choices made and alloca-
tions that arise, and monitor the economic impacts of
all types of interventions implemented.
References
1 Gold MR, Siegel JE, Russel LB, Weinstein MC. Cost-effectiveness
in Health and Medicine. New York: Oxford University Press,
1996.
2 Postma MJ, Bos JM, van Gennep M, Jager JC, Baltussen R,
Sprenger MJW et al. Economic evaluation of influenza vaccina-
tion; assessment for the Netherlands. PharmacoEconomics
1999; 16: 33–40.
3 Postma MJ, van den Hoek JAR, Beck EJ, Heeg BMS, Jager JC,
Coutinho RA et al. Farmaco-economische evaluatie van uni-
versele HIV-screening in de zwangerschap; een kosten-effecti-
viteitsanalyse voor Amsterdam. Ned Tijdschr Geneeskd 2000;
144: 749–54.
4 Postma MJ, Bakker A, Welte R, van Bergen JEAM, van den Hoek
JAR, de Jong-van den Berg LTW, Jager JC. Screening op asymp-
tomatische infectie met Chlamydia trachomatis in de zwanger-
schap; gunstige kosteneffectiviteit bij een prevalentie van ten-
minste 3%. Ned Tijdschr Geneeskd 2000; 144: 2350–4.
5 College voor Zorgverzekeringen (CvZ). Richtlijnen voor Farma-
co-economisch Onderzoek. Amstelveen, The Netherlands: CvZ
1999
Appendix
Assume that non-vaccinated elderly people have a
risk of hospitalisation due to influenza (complica-
tions) of 1 per 1000 per year. Assuming hospitalisa-
tion costs of EUR 5000, 1000 elderly would cause
hospital costs of EUR 5000 per year if no influenza
vaccination would be done. Effectiveness of the in-
fluenza vaccine is 50% in averting hospitalisation,
and the vaccine costs EUR 10, including doctor’s
administration costs. Then, vaccinating 1000 eld-
erly people costs EUR 10,000 and reduces hospital
costs by 50% (benefits of EUR 2500). Net costs are
estimated at EUR 10,000 ⫺ 2500 ⫽ EUR 7500 per
1000 elderly people, or EUR 7.50 per vaccinee. We
conclude that no cost savings occur, a cost–benefit
approach is insufficient and health gains have to be
made explicit.
Health gains are expressed in life-years gained.
Based on death certificates we may estimate that an
influenza-related death corresponds to 10 life-years
lost. Furthermore, influenza-related mortality
among elderly people equals 0.5 per 1000 per in-
fluenza season. The total number of life-years lost is
5 (0.5 ⫻ 10). Effectiveness of influenza vaccination
with respect to mortality equals 40%. Vaccination
may thus avert an expected 2 life-years lost (40% of
5 life years). The cost–effectiveness ratio is then:
EUR 7500/2 ⫽ EUR 3750 per life-year gained.