What is Pharmacoeconomics?What is Pharmacoeconomics?

Joseph A. Paladino, PharmD, FCCPClinical Professor

State University of New York at BuffaloSchool of Pharmacy and Pharmaceutical Sciences

Director, Clinical Outcomes and PharmacoeconomicsCPL Associates LLC

Amherst NYpaladino@cplassociates.com

Cost-Containment: PharmacyCost-Containment: Pharmacy

• Generic substitution

• Therapeutic substitution

• Restrictive formulary

• Restricted usage (appropriate use guidelines)

• Antibiotic order sheets

• Prior authorization

• Automatic stop-orders

• Selective reporting of susceptibilities

• Dose minimization

What’s So Bad About What’s So Bad About Cost-Containment?Cost-Containment?

Doesn’t workDoes not measure clinical benefitsDoes not allow for a valuation of

technology, personnel, or servicesDoesn’t work

What Can Cost-Containment What Can Cost-Containment Accomplish?Accomplish?

• Reduce medication expenditures

What Can Cost-Containment What Can Cost-Containment Accomplish?Accomplish?

• Reduce medication expenditures

• Under Capitation or DRG reimbursement, every single medication dispensed erodes institutional “profit”.

• So, the best you can do is –

What Can Cost-Containment What Can Cost-Containment Accomplish?Accomplish?

• Reduce medication expenditures

• Under Capitation or DRG reimbursement, every single medication dispensed erodes institutional “profit”.

• So, the best you can do is –

Become less of a loser

Do Formulary Restrictions Do Formulary Restrictions Reduce Drug Costs?Reduce Drug Costs?

• Problem: Using “too much” ceftriaxone

– Solution: Restrict ceftriaxone

– Result: Decreased use of ceftriaxone

SUCCESS!!!

But…

Do Formulary Restrictions Do Formulary Restrictions Reduce Drug Costs?Reduce Drug Costs?

• Problem: Using “too much” ceftriaxone

– Solution: Restrict ceftriaxone

– Result: Decreased use of ceftriaxone

SUCCESS!!!

Can you expect the use of another antibiotic to increase?

Benchmarking to Analyze Antibiotic Benchmarking to Analyze Antibiotic Control StrategiesControl Strategies

Rifenburg et al. Rifenburg et al. AJHP AJHP 1996;53:2054-2062 1996;53:2054-2062

88 hospitals in US and Canada

Serial 1993 & 1994 data• Formulary restrictions of advanced generation -lactams• Accompanied by increased expenditures on other antibiotics• Overall, $300/OB/yr increase

Cost-shifting

EFFECT OF MEDICAID 3-DRUG PRESCRIPTION LIMITEFFECT OF MEDICAID 3-DRUG PRESCRIPTION LIMITSoumerai et al. Soumerai et al. NEJMNEJM 1991;325:1072-1077 1991;325:1072-1077

5 months baseline, 11 months cap, 10 months after cap rescinded

Core Rx/pt NJ (no cap) NH (cap) Baseline 2.3 2.8CAP 2.3 1.9 (35%)

Nursing Home AdmissionsPre-Cap % 2.1 2.3CAP (% period) 6.6 10.6 (p=0.006)Post-Cap ret. to baseline

Intended and Unintended Consequences Intended and Unintended Consequences of of

HMO Cost-Containment Strategies: HMO Cost-Containment Strategies: Results from the Managed Care Outcomes Results from the Managed Care Outcomes

ProjectProject Horn SD et al. Horn SD et al. Am J Man CareAm J Man Care 1996;2:253-64 1996;2:253-64

Six HMOs: 3 with strict formulary control

Five diseases: OM, arthritis, epigastric ulcers, HTN, asthma

1 year: 12,997 patients

Co-pay: Prescriptions, Hospitalizations Formulary Restriction: healthcare utilization

(Rx, office visits, ER, hospitalizations)

Does Controlling Purchase PricesDoes Controlling Purchase PricesReduce Drug Expenditures?Reduce Drug Expenditures?

Price controls have been associated with a:

1. 17% reduction in costs

2. 10% reduction in costs

3. 4% increase in costs

4. 5% reduction in costs

Does Controlling Purchase PricesDoes Controlling Purchase PricesReduce Drug Expenditures?Reduce Drug Expenditures?

PharmacoEconomicsPharmacoEconomics 1998;14:471 1998;14:471

• Germany 1989 (1981- 1992)– Cost increase before control: 5.9% after control: 9.0%

• The Netherlands: price clusters in 1991– Drug expenditures continue to rise

• Canada: drug prices restrained, but– Drug expenditures continue to rise: 3.8%

• US Medicaid (MAC) : – Added restrictive formularies, prior authorization, rebates, generic

incentives

Reference pricing does not address the demand for drugs or the demand for quality care

What Can We Do That Works?What Can We Do That Works?

Antibiotics as Percentage of Total Healthcare CostsAntibiotics as Percentage of Total Healthcare Costs

Antibiotic cost Total cost

0 20 40 60 80 100

Burn

Diabetic foot

Intra-abdominal

HAP

CAP

Total Healthcare Costs (%)

Antibiotic Percentage of Antibiotic Percentage of Total Healthcare CostsTotal Healthcare Costs

CAP Dresser et al. Chest 2001;119:1439-1448

HAP Paladino & Fell. Ann Pharmacother 1994;28:384-389

IA Friedrich et al. Am J Hosp Pharm 1992;49:590-594

DF McKinnon et al. Clin Infect Dis 1997;24:57-63

Burn Nicolau et al. J Burn Care Rehabil 1994;15:244-250

Outcomes-Based Economic AnalysesOutcomes-Based Economic AnalysesMust Consider:Must Consider:

• All possible outcomes– Success

– Failure

– Adverse events

– Indeterminate

– Resistance

• All resources consumed– Personnel: Professional

– Personnel: Service

– Hospitalization

– ER, ambulance

– Office/clinic visit

– Radiology

– Pathology

– Medications

– etc.

Practical Uses of PharmacoeconomicsPractical Uses of Pharmacoeconomics

1. Show value of your position (i.e. YOU!)

2. Demonstrate economic viability of a service

3. Evaluate outcomes of a medication for formularies, guidelines, pathways, etc.

Pharmacist Participation on Physician Pharmacist Participation on Physician Rounds:Rounds:

Adverse Drug Events in the ICUAdverse Drug Events in the ICU Leape LL et al. Leape LL et al. JAMAJAMA 1999;282:267-270 1999;282:267-270

Clinical pharmacists preventable ADEs 66%

Save $270,000 annually

Economic Evaluations of Clinical Economic Evaluations of Clinical Pharmacy Services 1988-1995Pharmacy Services 1988-1995

Schumock et al. Schumock et al. PharmacotherapyPharmacotherapy 1996;16:1188- 1996;16:1188-12081208

Reviewed 104 publications

7 well-conducted trials

CBA 16.7:1

Economic Evaluations of Clinical Economic Evaluations of Clinical Pharmacy Services 1996 - 2000 Pharmacy Services 1996 - 2000

Schumock et al. Schumock et al. PharmacotherapyPharmacotherapy 2003;23:113-132 2003;23:113-132

Evaluated 59 publications: Hospitals 52%

Community Practice 41%

HMOs 3%

Increased rigor in study design

CBA in 16 trials: 4.7:1

  Value of Clinical Pharmacy Value of Clinical Pharmacy ServicesServices

Drug-related morbidity and mortality. Johnson JA, Bootman JL. Arch Intern Med 1995;155:1949-1956.

Reduction in HF events by a clinical pharmacist with a HF management team.Gattis et al. Arch Intern Med 1999;159:1939-1945.

 RCT to assess the cost impact of pharmacist-initiated interventions.

McMullin et al. Arch Intern Med 1999;159:2306-2309. Clinical pharmacy services and hospital mortality rates.

Bond et al. Pharmacotherapy. 1999;19:556-564. Clinical pharmacy services, pharmacy staffing, and the total cost of care in

US hospitals. Bond et al. Pharmacotherapy. 2000;20:609-621.

Practical Uses of PharmacoeconomicsPractical Uses of Pharmacoeconomics

Evaluate outcomes of a medication for formularies, guidelines, pathways, etc.

Benefits of Advanced Antibiotics in AECBBenefits of Advanced Antibiotics in AECB

224 exacerbations in 60 outpatients

1st line agents: Amoxicillin, Erythro, TCN, TMP/SMX

2nd line agents: Cephalosporins

3rd line agents: Amox/clav, Azithromycin, Ciprofloxacin

Failures: more 1st line than 3rd line (19% vs 7%, p<0.05)

Hospitalizations: more 1st line than 3rd line (18% vs 5.3%, p<0.02)

Destache et al. J Antimicrob Chemother. 1999;43A:107-113

Immunosuppressive Drug Costs: Immunosuppressive Drug Costs: Renal TransplantationRenal Transplantation

Canafax et al. Canafax et al. PharmacotherapyPharmacotherapy 1990;10:205-210. 1990;10:205-210.

Mean valuesALG-AZA-P CSA-AZA-P

Treatment period 3/83-10/84 9/84-12/86Number of Patients 30 301 year survival 93% 100%Drug Costs ($) $2,017 $6,004

ALG-AZA-P: antilymphoblast globulin - azathioprine - prednisoneCSA-AZA-P: cyclosporin - azathioprine - prednisone

Immunosuppressive Drug Costs: Immunosuppressive Drug Costs: Renal TransplantationRenal Transplantation

Canafax et al. Canafax et al. PharmacotherapyPharmacotherapy 1990;10:205-210. 1990;10:205-210.

Mean valuesALG-AZA-P CSA-AZA-P

Drug Costs ($) $2,017 $6,004

Hospitalization ($) $18,146 $13,459

LOS (days) 12 + 8 7 + 4

Rehospitalization ($) $6,364 $1,508

LOS (days) 7 + 6 5 + 4 ALG-AZA-P: antilymphoblast globulin - azathioprine - prednisoneCSA-AZA-P: cyclosporin - azathioprine - prednisone

Azithromycin IV/PO versus Azithromycin IV/PO versus Cefuroxime Cefuroxime ± ± Erythromycin IV/POErythromycin IV/PO

266 Hospitalized Patients with CAP266 Hospitalized Patients with CAP

Cost Cure Cost-Effectiveness RatioAzithromycin $4104 78% $5265:expected success

Cefuroxime ± Erythromycin $4578 75% $6145: expected success

P value 0.059 NS 0.05

Paladino et al. Chest. 2002;122: 1271-1279

CAP

$6332 5 days

$8865 7 days

$5106 4 days

$2533 2 days

IV (0.02)

IV/PO (0.98)

Gati n = 98

$15,823 14 days

IV (0.03)

$5827 4 days

$19,355 11 days

$5598 4 days

$8590 8 days

Ceftn = 105

Ceft alone n = 70

Ceft + Eryn = 35

IV/PO (0.97)

IV/PO (1.0)

S (0.5)

F (0.01)

S (0.99)

F (0.5)

F (1.0)

S (0.96)

F (0.04)

S (0.89)

F (0.11)

28

Pharmacoeconomics 101Pharmacoeconomics 101

Sick patients cost more than healthy ones….

Effects of Cost and Compensation on Effects of Cost and Compensation on Adoption of a Cost-Effective Drug Adoption of a Cost-Effective Drug

Kolassa et al.Kolassa et al. Pharmacoeconomics Pharmacoeconomics 1998;13:223-2301998;13:223-230 • 1 of 3 versions of a questionnaire sent to 1,300

pharmacy directors in the US

• 353 (27%) usable responses

• Pharmacy budget will increase by either

$250, $1,750, or $3,250 per case

• Differing salary compensation conditions

• Each case will save the hospital $2,500 (14%)

Cost vs. Economics: ResultsCost vs. Economics: ResultsKolassa et al.Kolassa et al. Pharmacoeconomics Pharmacoeconomics 1998;13:223-2301998;13:223-230

EACH SCENARIO WAS COST-EFFECTIVE!

• More will restrict use at $3,250 than at lower costs (p<0.001)

• More will restrict use, regardless of cost, if their personal salary is contingent on drug budget control (p=0.001)

• Department-based budgeting is a disincentive to cost-effective decisions

RealityReality

$$$$$$$$

Endpoints in Studies of Infections: Endpoints in Studies of Infections: Traditional Traditional andand NewNew

Niederman M. 2001Niederman M. 2001

• Clinical: cure, failure– Time to clinical response– Time to return to work– Time until next infection (AECB)

• Bacteriologic: eradication, superinfection, reinfection– Prevention of resistance

• Economic: money spent on drugs, hospitalization– Money saved by being well, Cost of lost productivity

Although Drug Prices Are ImportantAlthough Drug Prices Are Important::

• Overall costs are dependent on overall outcome (economics)

• Sick patients cost more than healthy ones

• It is cost-effective to quickly cure the patient

The most expensive medication is one that does not work.