PHARMACOECONOMICS

METHODS
APT.THRESIA MARIA WONGA,S.FARM.MHLTHECPOL
 AIM

 To help you define and describe CEA

 To help you understand when is appropriate to use CEA
 To provide you with a sound knowledge of applied methods for
conducting CEA as one Pharmacoeconomics studies.
 To help you understand steps to be taken to improve the quality
of CEA.
 To help you have an ability to critique a CEA composite article.
 OUTLINE
 Overview

 Definition And Description, Common application

 The different methods of presenting cost-effectiveness results.

 Advantages and disadvantages of CEA

 Illustrate the use of a cost-effectiveness grid and a cost-effectiveness plane.

 ICER Calculation and when to use it?

 Basic components of CEA

 Compare intermediate- with final-outcome measurements.

 Compare the terms “efficacy” and “effectiveness.”

 Critiquing a CEA composite article.

 Conclusion
 OVERVIEW
 Increasingly, both private and public health care
institutions in the United States are looking toward
medical cost-effectiveness analysis as they consider
complex resource allocation decisions concerning medical
technologies.

 Though many of its key ideas originated in the United

States, medical cost-effectiveness analysis has, until
recently. been more widely accepted and used in a
number of European countries, as well as in Canada,
Australia, and New Zealand.
OVERVIEW
 In particular, the demand for cost-
effectiveness analyses in the United
States appears to have been significantly
influenced by the desire of
pharmaceutical companies to collect
evidence concerning the cost-
effectiveness of their products in order to
encourage managed care organizations
to include their products on formularies.
 DEFINITION

 Cost-effectivenss Analysis (CEA) is a way to examine both the costs and health
outcomes of one or more interventions. It compares an intervention to another
intervention (or the status quo) by estimating how much it costs to gain a unit of
a health outcome, like a life year gained or a death prevented.
 CEA is an economic tool that most common type of pharmacoeconomic analysis
found in the pharmacy literature.
 CEA measures costs in dollars and outcomes in natural health units, which
indicate an improvement in health such as cures, lives saved, or blood pressure or
blood glucose reductions.
 DEFINITION

 Cost-effectiveness analysis (CEA) provides a framework to

compare two or more decision options by examining the ratio of
the differences in costs and the differences in health effectiveness
between options.
 The overall goal of CEA is to provide a single measure, the
incremental cost-effectiveness ratio (ICER), which relates the
amount of benefit derived by making an alternative treatment
choice to the differential cost of that option.
 DEFINITION

Dollar or Monetary Natural unit of health

Units outcome
(mm Hg, mmol/L, a life
year gained or a death
prevented)
 COMMON APPLICATION
Comparison of:
 The two medications with the same type of primary outcome.
 Most frequent for treatment with the same types of health condition.

For example:
1. Two chemotherapy agents for breast cancer – outcomes can be measured in
life years saved,
2. Two ACE inhibitors for blood pressure reduction – outcomes can be
measured in mm Hg (blood pressure reduction)
3. Two screening programs for cervical cancer detection – outcomes can be
measured in percentage of cervical cancer cases prevented
COST-OUTCOME COMPARISON

Monetary
units
COMPARE
Natural units
(mmg Hg,
mmol/L, forced
expiratory
volume [FEV]
 EXAMPLES OF WAYS TO PRESENT COST
AND EFFECTIVENESS RESULTS
When patients have symptoms indicating a stomach ulcer, the health care
provider may make a diagnosis based on:
1. The interview with the patient OR
2. The results of an endoscopy (during which a scope is used to look for evidence
of ulcerations in the stomach lining).
As a result, measuring the results or outcomes of medications used to treat
stomach ulcers may be based on :
3. The patient’s reports of symptom reductions or
4. Follow-up endoscopies.
 EXAMPLES OF WAYS TO PRESENT COST
AND EFFECTIVENESS RESULTS
Data in the table correspond to the costs and outcomes of treating stomach
ulcers using:
1. Three therapy options (drugs A, B, or C) and
2. Two outcome measures, symptom-free days (SFDs, or how many days, on
average, patients did not have gastrointestinal symptoms during the year) and
percent healed (patients in whom endoscopy indicated that the ulcer was
healed).
 EXAMPLES OF WAYS TO PRESENT COST
AND EFFECTIVENESS RESULTS
WHICH ONE YOU’LL RECOMMEND??
 EXAMPLE PROBLEM
 The CER is the ratio of resources used per unit of clinical benefit, and it
implies that this calculation has been made in relation to “doing nothing” or
no treatment.
 In clinical practice, the question is infrequently, “Should we treat the patient
or not?” or “What are the costs and outcomes of this intervention versus no
intervention?”
 More often, the question is, “How does one treatment compare with
another treatment in costs and outcomes?”
 To answer this more common question, an incremental cost-effectiveness
ratio (ICER) is calculated.
 ADVANTAGES AND DISADVANTAGES
ADVANTAGES:
 Familiar to practitioners as health units are common outcomes that are routinely
measured in clinical trials.
 Easier to quantify than CUA/CBA. These outcomes do not need to be converted
to monetary values.
 ADVANTAGES AND DISADVANTAGES
DISADVANTAGES:
 The alternatives used in the comparison must have outcomes that are
measured in the same clinical units.
 You cannot use CEA to directly compare the outcomes of an antihypertensive
product (which may measure mm Hg changes to determine the outcome) with
the outcomes of an asthma product (which may measure forced expiratory
volume [FEV] to determine the outcome).
 Can combine more than one important outcome
 Difficult to collapse both the effectiveness and the side effects into one unit of
measurement
 Requires judgement call. CEA estimates extra cost associated with each
additional unit of outcome, but who is say that incremental cost is worth
added.
 CONDUCTING A CEA

ICER

Determining the type of

program or intervention to be
considered.
Dominant
Identifying alternatives.

Dominated
CEA GRID

Very common
finding.
 CEA PLANE

 The cost-effectiveness plane serves to clarify when these choices

may be easy or difficult. It is typically drawn with the
differences in cost (or the incremental cost) on the y-axis and the
differences in effectiveness (or incremental effectiveness)
between the two options on the x-axis
 CEA PLANE

Alternative is more effective

Alternative is more effective
and less expensive (dominate
and more expensive.
the standard comparator)

Alternative is more effective

Alternative is less effective and less expensive. (be
and less expensive. dominated by the standard
comparator)
CEA PLANE
 CEA PLANE

 Visual method for representing the comparison of alternatives.

 Iffall in quadrant I , the decision maker must decide if the
higher effectiveness is worth the higher cost.
 Iffall in quadrant III , the decision maker must decide Is the
lower price enough to outweigh the lower effectiveness?
 If fall in quadrant II , then it is considered cost-effective.
 If fall in quadrant IV , then it is not considered cost-effective.
 ICER USE???

Lower cost vs
Lower Higher cost vs
effectiveness Lower
effectiveness

USEFUL TOOL
Decision maker
 ICER CALCULATION
 The ICER is the ratio of the difference in costs divided by the difference in outcomes.

 If incremental calculations produce negative numbers, this indicates that one treatment,
the dominant option, is both more effective and less expensive than the other,
dominated option.
 The magnitude of the negative ratio is difficult to interpret, so it is suggested that
authors instead indicate which treatment is the dominant one.
 When one of the alternatives is both more expensive and more effective than another,
the ICER is used to determine the magnitude of the added cost for each unit in health
improvement.
EXAMPLE PROBLEM
CEA GRID OF ULCER EXAMPLE

Drug B – Drug A
Drug C – Drug B
Drug C – Drug A
CEA PLANE OF ULCER EXAMPLE

DRUG B dominant than DRUG

C and DRUG A.
BASIC COMPONENTS OF A CEA
PERSPECTIVE OF STUDY

SOCIETAL
PERSPECTIVE
 PERSPECTIVE OF ANALYSIS
 Choosing the perspective or set of perspectives to be considered in a CEA is
essential, since this choice determines the cost values to be contained in the analysis.
 An analysis from the societal perspective considers all costs,
 An analysis from the patient perspective would only consider costs borne by the
patient.
 The third-party payer (insurance) or health system perspective where costs for which
these entities are responsible are considered in the analysis;
 The hospital or health agency perspective includes the costs of providing various
health services.
 Whenever possible, the societal perspective should be included in the set of
perspectives to be considered in analysis, since it is the broadest and is
recommended for the reference case analysis by the Panel on Cost-Effectiveness in
Health and Medicine, although the most recent edition of the book developed based
on this panel recommends also including the third-party perspective.
 TIME HORIZON
 The analyst must decide a priori how long the costs and effects of the various
interventions in the analysis will be tracked.
 This is usually determined by the clinical features of the illness or its treatment.
 For example, a CEA of a new antibiotic for acute dysuria treatment in otherwise
healthy women might appropriately HAVE A VERY SHORT TIME
HORIZON of only a month, as there are virtually no long-term effects of either
the disease or its treatments.
 On the other hand, CEAs designed to value the effects of cardiovascular risk
reduction need to assess the outcomes for MUCH LONGER TIME PERIODS;
typically, such an analysis would follow treatments and effects until death.
 In any case, all strategies must be followed and/or modeled for the same time
horizon.
 SCOPE OF THE ANALYSIS

 An analysis might be relevant for an entire population or for only

a relatively small population subgroup.
 For example, if an intervention is to be directed toward elderly
patients with diabetes in order to prevent diabetes complications,
limiting the scope of the analysis to an elderly, diabetic
population is a logical choice, while if the question is regarding
diabetes prevention in adults, a broader population scope is
required.
 MEASURING AND VALUING COSTS
 Cost data can be obtained from clinical trials, but more often other
sources will need to be utilized. In addition, the analyst will need to
choose between micro-costing or macro-costing methodologies or some
mix of the two, often based on the perspective taken in the analysis.
 Micro-costing enumerates and identifies each item that is incorporated
into a particular service, requiring detailed data on supplies used,
personnel, room, and instrument costs, and often needing time-and-
motion studies to accurately capture medical service costs.
 Macro-costing (or gross costing) uses data, often from large government
databases, to estimate average costs for a care episode, for example, the
average cost of coronary artery bypass grafting or of a hospital stay for
pneumonia.
 MEASURING AND VALUING OUTCOMES

 The effectiveness outcome for the analysis must be chosen and outcomes data
found, often based on data availability.
 Randomized trials are excellent data sources on the effects of therapies, but
study entrance criteria frequently limit applicability to a more general patient
population.
 Cohort studies are useful for risk factor determination and for determining the
natural history of an illness.
 MEASURING AND VALUING OUTCOMES
 Administrative databases are excellent sources for broad population-based
estimates of disease and for the effectiveness of therapies, unlike randomized
trials which, in general, estimate efficacy.
 BUT administrative databases often pose difficulties in accounting for possible
confounding variables in the data set.
 Meta-analyses provide summary measures for parameters, but studies
considered are generally limited to randomized trials, thus limiting
generalizability.
 MEASURING AND VALUING OUTCOMES

 The perspective of the analysis may also influence the effectiveness outcome
chosen.Life years or quality-adjusted life years (QALYs) gained are certainly
relevant for analyses using the relatively broad-based societal or health system
perspectives, but may not be as important when a narrower perspective is
chosen, such as that of an individual hospital, when effectiveness measures such
as bed day saved or drug administration error avoided might be more relevant.
 TIME PREFERENCE

 The differential timing of costs and outcomes should be

considered in the analysis.
 This is typically accomplished through the use of discount rates,
where costs and outcomes that occur in the present have higher
values than those in the future
 CHOICE OF ANALYTIC MODELING
METHOD
 The analytic model must also be selected. Cost data from clinical
trials can allow relatively straightforward calculation of ICERs
between management options, often the intervention arms of the
clinical trial.
 More often, data for the analysis must come from a variety of
sources and may require a decision analysis model as a
framework for data synthesis.
 ACCOUNTING FOR UNCERTAINTY
 A sensitivity analysis to elucidate the effects of uncertainty on model results
should be performed.
 During model construction and validation, sensitivity analysis is useful as a
“debugging tool” to assure that the model behaves as it was designed to behave.
 After the model is finished, sensitivity analysis is useful to determine which
variables have a large impact on the outcomes.
 Sensitivity analyses can be used to determine the cost-effectiveness ratio in
specified subgroups of an analysis, as well as to determine how much a change in
one variable will alter the cost-effectiveness ratio.
 Finally, probabilistic sensitivity analyses can be used to produce a version of a
confidence limit or probability range around the cost-effectiveness ratio.
 INTERMEDIATE OUTCOMES VS
PRIMARY OUTCOMES
 Ideally it captured the complete effects on morbidity and
mortality when comparing alternative therapies.
 BUT its NOT PRACTICAL  time or monetary resources.
 Primary or final outcomes, such as the cure of a disease, the
eradication of an infection, or life years saved are preferred units
of measurement.
 Intermediate or surrogate outcomes, such as laboratory measures
or disease markers (e.g., cholesterol levels or blood pressure
measurements) are used as proxies or surrogate endpoints.
 EFFICACY VS EFFECTIVENESS

 Data using for pharmacoeconomic method from RCT.

 RCTs are the gold standard for determining if a medication is
efficacious, and they are required by the Food and Drug
Administration (FDA) before a medication can be approved for
use in the United States.
 RCTs are used to establish efficacy—“if a drug can work”—
under relatively ideal conditions.
 Pharmacoeconomic studies are more interested in the assessment
of effectiveness—“if a drug does work”—in real-world practice.
 USING DATA FROM RCT

 Results from RCTs SHOULD BE USED WITH CAUTION in

pharmacoeconomic analyses.
 Both costs and outcomes may be different under RCT conditions
compared with when used in the general population.
 In RCTs, specific groups of patients are recruited for the studies.
 Patient recruitment criteria may exclude patients outside of a
specific age range and those with confounding comorbidities.
 RCTs capture data for a short time period, even for chronic
conditions.
 USING DATA FROM RCT

 Patients in RCTs are routinely monitored more closely than in general medical practice
(which can increase monitoring costs), and they are likely to be more adherent to
medications because they know they are being monitored (which can increase the cost
of the drug and the magnitude of the outcomes).
 When RCT data are used to estimate costs and outcomes in the general patient
population, the above limitations should be addressed.
 Researchers should be sure to exclude protocol-driven costs, such as frequent
monitoring of patients or laboratory tests that are conducted more often than in usual
practice.
 They should also conduct sensitivity analyses to account for possible differences
between RCT results and results that may be seen in a broader array of patients.
 CONSENSUS AND DEBATE
 There is general agreement by researchers on many aspects of performing CEAs
(e.g., discounting of costs and sensitivity analysis should be conducted when
appropriate)
 There is no agreement on other aspects (e.g., what discount rate should be
selected, what method should be used to value productivity).
 In 1995, an article by Luce and Simpson addressed these areas of consensus and
debate.
 For example, although there is agreement on the need for discounting when it
comes to measuring costs or outcomes in dollar values, there is no universal
agreement on whether or not to discount nonmonetary outcomes.
 CONSENSUS AND DEBATE
 One side contends that, as with monetary gains, people would rather receive
health gains today instead of in the future, so future health gains should be
discounted to their present value.
 Others point out that with some health outcomes (i.e., years of life), you cannot
trade future gains (being alive in 10 years) with present gains (being alive
today).
 In addition, if researchers decide to discount health gains, there is further debate
about whether to discount health gains at the same rate as monetary costs.
 Because of this ongoing debate, many researchers provide results using a
sensitivity analysis that uses various rates of discounting (including 0% to
reflect no discounting).
 CONSENSUS AND DEBATE

 In 1993, the US Public Health Service (PHS) commissioned the

Panel on Cost-Effectiveness in Health and Medicine.
 The panel was composed of a multidisciplinary group of experts
and charged with developing a consensus on appropriate methods
for conducting health-related to cost-effectiveness analyses.
 A book by Gold et al. was published in 1996 as a result of this
endeavor, and included a “reference case” example using
suggested standard methods outlined by the panel.
CRITIQUING A CEA COMPOSITE
ARTICLE.
CRITIQUING A CEA COMPOSITE ARTICLE
 QUESTION?

1. Complete title? 9. Adjustment or Discounting?

2. Clear objective? 10. Reasonable Assumptions?

3. Appropriate Alternatives? 11. Sensitivity Analyses?

4. Alternatives Described? 12. Limitations Addressed?

5. Perspective Stated? 13. Generalizations Appropriate?

6. Type of Study? 14. Unbiased Conclusions?

7. Relevant Costs?
8. Relevant Outcomes?
CEA GRID
 EXERCISE

 There are three 3-month-long options to treat studentitis, a

depression-like condition in which a student thinks he or she
will be in college forever with no option for parole. Results
(effectiveness) cannot be determined until students have been
exposed to the treatments for a period of 3 months. Option I is
the standard option, which consists of group counseling.
Option II consists of a new studentitis medication that has no
side effects. Option III consists of a combination of the new
medication and group counseling.
 EXERCISE
 The costs of the standard option, Option I (counseling), are $100
per month.
 This treatment alone is measured to be effective in 40% of the
cases.
 The costs of Option II (medication) are $50 per month for the
medication. This treatment alone is measured to be effective in
60% of the cases.
 The costs of Option III (counseling and medication) are the
combined costs of Options I and II. The effectiveness of this
combination treatment is measured to be 90%.
 Each option includes 3 months of therapy for these 3 months:
 Calculate a CER for:
a. Option I
b. Option II
c. Option III
 Calculate an ICER comparing Option I (the standard) with Option II.
 Calculate an ICER comparing Option I (the standard) with Option
III.
 CONCLUSION

 CEA is the most common type of pharmacoeconomic research seen in the

literature.
 The advantage of using CEA is that outcomes are measured in clinical units,
which are familiar and acceptable to clinicians.
 The disadvantages are that only one outcome at a time can be compared and
that although an ICER can provide an estimate of the additional cost for the
additional clinical benefit, readers must make a judgment call as to whether
the additional cost is worth the additional benefit.
 Costs and outcomes can be presented independently without calculating
ratios using CCA, by calculating the average cost per outcome using a CER
or by calculating the incremental cost per incremental outcome using an
ICER.
 CONCLUSION
 To graphically illustrate the results of a CEA, a cost-effectiveness grid, cost-effectiveness
plane, or cost-effectiveness frontier may be used.
 Although the measurement of final or primary outcomes is preferred, intermediate
outcomes may be a more practical measure for some diseases or conditions.
 If data from randomized controlled trials (RCTs) are used, the term cost-efficacy analysis
may be more appropriate because results may not be similar to those of everyday clinical
practice.
 Although there is consensus on many of the methods used for CEA, there is still debate
on others, leading to a lack of standard rules for CEA research.