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Pharmacoeconomics and Outcomes Research
“COST EFFECTIVENESS ANALYSIS”

BY: Dr. Delina Hasan, M.Kes, Apt
Presented At International Conference
ISPOR Indonesia Chapter 2018
DH-SHORTCOURSE-ISPOR 2018 1
Preview
 Economic concepts
 Data types & sources
 Types of pharmacoeconomic analyses
 Perspective
 Cost-effectiveness and incremental
analysis
 Sensitivity analysis
 Steps to pharmacoeconomic literature
evaluation
 Case studies for clinical practice and policy
building
Opportunity Cost
 Time and money as resources can
only be spent once – choice is
unavoidable.
 O.C. is defined as the amount that a
resource could earn in its highest
valued alternative use.
 How do you invest your time?
 Why take valuable time to learn about
pharmacoeconomics and outcomes
research?
Economics is:
 The study of how individuals &
society end up choosing, with or
without the use of money, to employ
scarce resources that could have
alternative uses, to produce various
commodities & distribute them for
consumption now, now or in the
future, among various people and
groups in society. Paul Samuelson
Pharmacoeconomics and
Outcomes Research
 Using data to distinguish your
practice
Data about efficacy
clinical and humanistic
Data about cost
resources consumed to achieve
efficacy endpoints (investment)
Efficacy Data
 Management of efficacy endpoints
based on evidence enables clinicians
to maximize prescribing skills
 Evidence-based healthcare is a
determination of the mix of those
services, drug products, and
procedures that maximise benefits
and reduce risks.
Cost Data
 Management of resource consumption
enables patients to maximize
purchasing power-
• Individual level- managing insurance co-
payments
• Group level- managing insurance
premiums across groups and maximizing
the number of insured patients
• Govt level- sustaining public programs
Value Is the Goal of Practice
 Minimizing the ratio of cost to

efficacy creates value- best return on
investment
 Enhances your ability to deliver a

superior product
Basic Value of Medical Care
 Evidenced by general trends:
• Increased use of medical care and prescription
drugs
• Mortality rates of certain diseases have
significantly declined
• Mean length of hospital stay has also declined
 Despite this general evidence, few specific
data regarding the actual costs and
benefits attributed to drugs and medical
therapies exist
Objectives
 Objectives of pharmacoeconomics
and outcomes research must
originate within three dimensions
when considering results and value
of healthcare
• Acceptable clinical outcomes
• Acceptable humanistic outcomes
• Acceptable economic outcomes
Types of Pharmacoeconomic
Analysis
Methodology Cost measurement Outcome unit

unit
Cost minimization Dollars Various- but
equivalent in
comparative groups
Cost benefit Dollars Dollars
Cost effectiveness Dollars Natural units (life

years, mg/dl blood
sugar, LDL
cholesterol)
Cost utility Dollars Quality adjusted life
years
Common Misconceptions When
Applying Pharmacoeconomic
Principles
 Cost-effective care is initially the cheapest alternative
in a manner similar to other investments, least cost
option may lead to greater costs downstream
 Cost-effective care is outcome that generates

“biggest” effect in a manner to similar investments,
smaller increments of outcome may be achieved at a
lower overall cost
Perspective
 The “point of view” considered in
economic analyses influences the
outcomes and costs considered to be
most relevant:
• Provider
• Patient
• Payer
• Society
Comprehensive Definition of
Cost-effectiveness
 A therapy is deemed to be a cost-

effective strategy when the outcome
is worth the cost relative to
competing alternatives. In other
words, scarce resources are utilized
to acquire the best value on the
market.
HOW TO CONDUCT CEA
1. Frame The problem to be analyse
2. Identifythe baseline and options to
be analyze
3. Identify the out come measure
4. Identify the relevant cost
5. Construct the decision model
6. Analyze and interpret the Results
7. Perform Sensitivity analysis
8. Prepare presentation of results
Average Cost-effectiveness
 Specifies the cost of an agent
required to achieve each unit of
effect. No comparison is made to
alternative agents.
Average cost-effectiveness
Cost of drug
Resulting effect = Cost per unit of effect
achieved
Average Cost-effectiveness
 Average cost-effectiveness of Agent A

$50.00
50 units of effect = $1.00 per unit
 Average cost-effectiveness of Agent B

$150.00
90 units of effect = $1.60 per unit
Incremental Cost-effectiveness
Analysis
 Makes comparisons to other
therapeutic options, standard of
care, or “doing nothing” (placebo)
 Fundamental ratio
Cost optionB – Cost optionA
Effect optionB – Effect optionA
=
Cost to achieve one unit of effect
Incremental Cost Analysis
1.6
1.4
1.2
1
0.8
Cost
0.6
0.4
0.2
0
Placebo Agent A Agent B
Incremental Effect Analysis
90
80
70
60
50
40 Units of Effect
30
20
10
0
Placebo Agent A Agent B
Comprehensive Incremental Cost-
effectiveness
 $150 - $50 $100
90 – 50 units = 40 units
=
$2.50 per unit of effect achieved
Therefore, because Agent A is an available

alternative with a lower average cost per
unit of effect achieved, the cost-
effectiveness of using Agent B is diminished.
The cost of Agent B is not in line with the
product it delivers- a poor value.
Grid Representing All Possible
Relationships of Cost to Effect Between
Two Competing Alternatives
Cost of alternative A
relative to alternative
B
Lower Equal Higher
Effectiveness +/-
-
alternative A Lower Trade -
Dominated
off
relative to
alternative B Equal + Arbitrary -
+
+/-
Higher Domina +
Trade-off
nt
Measuring Efficacy Data Variables
 What product (effect) can be consistently
expected from use of drug or health service?
 Usually determined from clinical trials
• Seek direct relationship to morbidity and mortality
 Survival/ death
 Myocardial infarction avoided
• May rely on surrogate probably related to final
outcome to enhance feasibility of analysis
 Hemoglobin changes
 LDL cholesterol changes
 Intimal vessel wall thickness changes
• Randomized controlled clinical trial is gold
standard for deriving efficacy data
Measuring Cost Data Variables
 What resources are consumed to produce one
unit of the effect?
Direct costs
drug product acquisition costs
drug preparation & administration
costs
drug monitoring costs
treatment costs of adverse effects
Indirect costs
example of institution indirect cost
Discounting Costs
 In order to draw most valid conclusion
about costs generated over time to achieve
an effect in the future, it is necessary to
consider that there is a time preference
associated with money
 Time-value of money adjustment
• Money in hand is worth more than the same
amount sometime in the future (we like to be
paid as soon as possible, but prefer to pay at the
last possible moment)
• Therefore future costs must be adjusted to
reflect present value.
 A $1000 cost one year from now requires only $930.00
in hand today assuming a 7% return on investment.
Sensitivity Analysis
 Conclusions drawn from an economic analysis
may change, depending on the uncertainty of
cost and effects considered.
 S.A., by altering important variables & then
recalculating results, tests the validity of
conclusions:
• Would Agent A still be most cost-effective if
the effect of Agent B was greater than
measured in clinical trial?
• Would Agent A still be most cost-effective if
the monitoring costs of Agent B were actually
lower?
 S.A. becomes increasingly important as
assumptions are made to a greater degree.
Steps to Pharmacoeconomic
Literature Evaluation
 Evaluate:
• The quality of the journal
• Qualifications of authors
• Title and abstract- unbiased?
• Study methodology
 Perspective, study design, outcomes and appropriate
alternatives, costs and appropriate discounting,
sensitivity analysis, & data sources
• Sponsorship- could bias be introduced?
• Incremental results
 What is the conclusion and does it differ between
subgroups? How much does allowance for
uncertainty change conclusion?
Cases for Development
 Formulary decision making (policy)
• Appropriate place for eplerenone (Inspra ®) and spironolactone
(generic) on Inpatient formulary of tertiary care academic
medical center
 Clinical decision making for acute therapy (bedside)
• Choosing between low molecular weight heparin or
unfractionated heparin for the treatment of acute proximal deep
vein thrombosis
 Clinical decision making for chronic therapy
(bedside)
• Choosing between selective cyclooxygenase inhibitor and
traditional non-steroidal anti-inflammatory agent for
management of osteoarthritis pain
 Other suggestions?
Treatment of Pain Resulting from
Osteoarthritis
 Pain results in significant disability and resource utilization
• affects 15% of US population
• results in > 100,000 hospitalizations annually
 NSAIDs
• effective pain relief
• 24 – 30% the cost of Cox-II inhibitors
• associated with a significant risk of adverse effects
 Dyspeptic symptoms
 More serious non-dyspeptic effects- symptomatic ulcers, ulcer hemorrhage,
ulcer perforation
 Cox- II inhibitors
• effective pain relief
• substantially more expensive than NSAIDs
• associated with lower risk of GI side effects
How should I treat my patient?
 NSAIDs are inexpensive compared to
Cox-II inhibitor:
• But won’t the more expensive agent pay
for itself many times over by preventing
an expensive GI bleed in my patient?
 Dyspeptic symptoms are decreased by 15%
 Clinically significant ulcer complications are
reduced by 50%
Risk of GI bleed: How Much Can It
Be Altered?
 Not all osteoarthritis patients have an
equal risk of developing a GI bleed
• Is paying extra for GI protection justified in all
patients?
 How much can the risk of GI bleed be
altered by using a Cox-II inhibitor instead
of an NSAID?
• What value is really purchased for the extra
cost?
• The relative risk reduction of GI complications
with Cox-II inhibitor catches our eye- but actual
risk reduction is small
 1-2% for overall ulcer complications
 1% for serious hemorrhage and perforation
Cost-effectiveness analysis
Population Drug Total Qualys Incremental
Annual Gained cost per
Cost Qualy gained
No Hx Naproxen $4859 15.2613 -

of GI
Cox-II $16,443 15.3033 $275,809
ulcer
inhibitor
Hx of GI Naproxen $14,294 14.7235 -
ulcer
Cox-II $19,015 14.8081 $55,803
inhibitor
Cardiovascular Effect of Cox-II
Inhibitors
 How do cardiovascular problems affect my choice
of using Cox-II inhibitors or NSAIDs?
Population Drug Annual Qualys Incremental

Cost Gained cost per
Qualy gained
All Naproxen $5,037 15.2539 -

patients
Cox-II $16,620 15.2832 $395,324
)
Clinical Decision Making
 Risk reduction for GI complications
seen with Cox-II inhibitors is unlikely
to offset their 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-II
inhibitor
Clinical Decision Making
 In all patients with osteoarthritis, the
decision to use Cox-II inhibitor should
be made with awareness of the effect
of the added risk for cardiovascular
events on cost-effectiveness
• Currently, there is not enough information
available, but it may be prudent to avoid
these drugs in patients with cardiovascular
history, even in patients with history of GI
bleed
REFERENCE
 Spiegel MR et al. Annals Internal
Medicine 2003;138:10(795-806)

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Pharmacoeconomics and Outcomes Research

“COST EFFECTIVENESS ANALYSIS”

 Minimizing the ratio of cost to

 Enhances your ability to deliver a

Methodology Cost measurement Outcome unit

Cost effectiveness Dollars Natural units (life

 Cost-effective care is outcome that generates

 A therapy is deemed to be a cost-

 Average cost-effectiveness of Agent A

 Average cost-effectiveness of Agent B

Therefore, because Agent A is an available

 More serious non-dyspeptic effects- symptomatic ulcers, ulcer hemorrhage,

No Hx Naproxen $4859 15.2613 -

Population Drug Annual Qualys Incremental

All Naproxen $5,037 15.2539 -

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