Pharmacoeconomics (Basics for MD Pharmacology)

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  1. 1. Pharmacoeconomics (For MD Pharmacology) Dr. Advaitha M. V
  2. 2. TERMINOLOGIES Health economics : Health Economics is an applied field of study that allows for the systematic and rigorous examination of the problems faced in promoting health for all This is achieved By applying economic theories of consumer, producer and social choice.
  3. 3. The aim of Health economics : is to identify what is most efficient, so that the greatest amount of benefit (Pharmaceutical products/ Health services) can be bought for a given amount of money or resources.
  4. 4. Pharmacoeconomics (PE) It is a branch of Health economics. Definition : Research that identifies, measures and compares the costs (resources consumed) and the Economic, Clinical and Humanistic Outcomes of diseases, drug therapies and programmes directed to these diseases. Term first coined in 1986 by Townsend
  5. 5. Who takes Key Interest in PE Health care funders Pharmaceutical Companies. Governments. Social security funds. insurance companies. REMARKS : They struggle to meet their rising costs. They make many efforts to contain drug costs, by price negotiation, patient co-payments or dedicated drug budgets.
  6. 6. COSTS AND BENEFITS Cost classification 1.Direct Cost Cost from the perspective of the healthcare funder. Includes staff costs, capital costs, drug acquisition costs.
  7. 7. Contd.. Direct cost Cost from the perspective of the Patient Medications, Supplies, Laboratory tests, Healthcare professionals' time, Hospitalization. Direct costs are relatively easy to measure.
  8. 8. 2.Indirect Cost It is Cost from the perspective of society as a whole: for example : loss of earnings, loss of productivity, loss of leisure time, due to the illness, and cost of travel to hospital etc.
  9. 9. This would include not just the patient themselves but also their family and society as a whole. Many of these are difficult to measure, and there is some controversy over how to value these.
  10. 10. 3.Intangible Cost It is the pain, worry or other distress which a patient or their family might suffer. These may be impossible to measure in monetary terms, but are sometimes captured in measures of quality of life.
  11. 11. Scenario : 1.Laparoscopic Appendectomy with Sevoflurane Versus 2. Open Appendectomy with Ether
  12. 12. 1. Direct Cost is High.(For equipment, Specialized Surgeon, cost of anaesthetic) Indirect cost is less (Less No. of days at Hospital in Post Operative Period) Intangible cost is less.(Less Pain and suffering, Minimal Scar )
  13. 13. 2. Direct Cost is less.(No special equipments, Medications are relatively cheap.) Indirect cost is High. (Has to stay more no. of days Post OP) Intangible cost is High.(More Pain and suffering, Conspicuous Scar)
  14. 14. Benefits The benefits we expect from an intervention might be measured in: 1. Natural units e.g. years of life saved, strokes prevented, peptic ulcers healed etc.
  15. 15. 2.Utility units Utility is an economists word for satisfaction, or sense of well being. It is an attempt to evaluate the quality of a state of health, and not just its quantity.
  16. 16. E.g, The Quality Adjusted Life Year (QALY) is one widely used measure, which attempts to integrate both quality and the quantity of life. [QALYs represent the number of full years at full health that are valued equivalently to the number of years as experienced]
  17. 17. QALYs are calculated as the average number of additional years of life gained from an intervention. Then it is multiplied by a utility judgment of the quality of life in each of those years.
  18. 18. For example, A person might be placed on hypertension therapy for 30 years, which prolongs his life by 10 years at a slightly reduced quality level of 0.9. In addition, the need for continued drug therapy reduces his quality of life by 0.03. Hence, the QALYs gained would be 10 x 0.9 - 30 x 0.03 = 8.1 years. The valuations of quality may be collected from surveys; a subjective weight is given to indicate the quality or utility of a year of life with that disability.
  19. 19. Method of Economic evaluation Cost minimization analysis. Cost effectiveness analysis. Cost utility analysis. Cost benefit analysis.
  20. 20. Cost minimization analysis (CMA) This involves measuring only costs. It is applicable only where the outcomes are identical . An e.g. Prescribing a generic preparation Vs brand Drugs ( Generic has lower cost but same health outcomes ).
  21. 21. An Exercise , Drug X (Rs 20 for 10 tab) and X1 (Rs 45 for 10tab) are Antihypertentensives which Prolongs Life Expectancy by 15yrs and 20 yrs respectively in Patients with essential Hypertension. Please suggest can Cost Minimization analysis be used to include one this Drugs in our Hospital Pharmacy ??
  22. 22. Ans : No Why The outcome or the Health benefit of the 2 drugs are not equivalent. so we cannot use CMA.
  23. 23. Methods of Economic Assessment Answer : Case study : Hospital vs Home Model 1st Since the clinical efficacy of the 2 programs is equivalent, we should look at the difference in length of stay and costs. The hospital-home model has less expenditures and is thus more cost-effective 2nd cost-minimization analysis.
  24. 24. Cost-Effectiveness Analysis A Scenario : The Government Organization has to decide Whether to launch Oral Polio Vaccine (OPV) or Inactivated Polio Vaccine (IPV) Programme. ?? Cost : OPV is cheaper To IPV.
  25. 25. Effects : OPV : 1. Provides herd immunity ( it provides immunity even to non-immunized) which is essential in countries like India. Does not requires highly trained personnel. Useful in controlling epidemics.
  26. 26. Effects of IPV : It is safe to administer as it contains inactivated virus. Especially in People over 50 yrs, With corticosteroid/Radiation therapy.
  27. 27. So, Basically we are comparing two treatments with different efficacy and costs to achieve a similar outcome.
  28. 28. Another E.g, Whether to Implement Pentavalent Vaccine Or Go for DPT with optional influenza and HBV vaccine In our Govt Health set-up ? ?!?! Still Debate is On..
  29. 29. Cost-effectiveness analysis (CEA) is a way of summarizing the health benefits and resources used by competing healthcare programs So that policy makers can choose among them. CEA involves comparing programs or treatment alternatives with different safety and efficacy profiles.
  30. 30. Cost is measured in Money. Outcomes are measured in terms of obtaining a specific therapeutic outcome. Outcomes are expressed in physical units, natural units e.g., lives saved, cases cured, life expectancy, or drop in blood pressure.
  31. 31. The results of CEA are expressed as a ratio either as an Average cost-effectiveness ratio (ACER) or Incremental cost-effectiveness ratio (ICER).
  32. 32. Average Cost Effective Ratio(ACER) An ACER : represents the dollar cost per specific clinical outcome gained, independent of comparators. It is given by Formula.
  33. 33. This allows the costs and outcomes to be reduced to a single value to allow for comparison. Using this ratio, the clinician would choose the alternative with the least cost per outcome gained.
  34. 34. The most cost-effective alternative is not always the least costly alternative for obtaining a specific therapeutic objective. In this regard, cost-effectiveness need not be cost reduction but rather cost optimization
  35. 35. Incremental Cost Effective Ratio (ICER) Often clinical effectiveness is gained at an increased cost. Is the increased benefit worth the increased cost? Incremental CEA can be used to determine the additional cost and effectiveness gained when one treatment alternative is compared with the next best treatment alternative.
  36. 36. Thus, instead of comparing the ACERs of each treatment alternative The additional cost that a treatment alternative imposes over another treatment is compared with the additional effect, benefit, or outcome it provides.
  37. 37. An E.g, Already there is an existing ART Regimens in Govt health set up.. Lately, research shows A few new drugs are to be added and some drugs are to be removed from the regimen to increase the effectiveness of treatment. However this modified treatment comes with an additional cost. Question Is this modified treatment (additional benefit) worth the additional cost ?
  38. 38. The ICER is given by Formula : This formula yields the additional cost required to obtain the additional effect gained by switching from drug A to drug B.
  39. 39. CEA is useful in balancing cost with patient outcome, determining which treatment alternatives represent the best health outcome per dollar spent. CEA can provide valuable data to support drug policy, formulary management, and individual patient treatment decisions.
  40. 40. Globally, CEA is being used to set public policies regarding the use of pharmaceutical products (national formularies) in countries such as Australia, New Zealand, Canada etc.
  41. 41. HANDLING THE RESULTS OF CEA- Cost effectiveness Plane
  42. 42. Quadrant II : is highly recommended. Quadrant I : it is most common scenario. It is recommended But.. A judgement must be made regarding whether the additional benefits are worth the extra costs of the new drug. This might be defined by a previously agreed ICER threshold value.
  43. 43. Quadrant IV : Not recommended or Excluded. Quadrant III : Challenge and justify to retain or to replace the standard drug when compared with this new drug.
  44. 44. Calculation Cost in Dollars Life Expectancy in yrs Incremental Cost (Alt-Std) in dollars