Pharmaconomics

PHARMACOECONOMICS
Presented by:
Tavleen Kaur
M.Pharmacology
1339246

"Not everything that
can be counted
counts, and not
everything that counts
can be counted."
- Albert Einstein
(1879-1955)

CONTENTS
 Introduction
 History
 Perspectives of Pharmacoeconomics
 Health economics
 Pharmacoeconomics methodologies
 Evaluating economic analysis
 Concept of outcome research
 Limitation of Pharmacoeconomics
 Pharmacoeconomics & drug development

Definition
 Pharmacoeconomics is the application of economic
analysis to the use of pharmaceutical products,
services and programs, which frequently focuses on
the costs (inputs) and consequences (outcomes) of
that use.
 Pharmacoeconomics is a young science that will
improve with application. Its need is undeniable,
especially in developing countries.

Pharmacoeconomics Find value In :
 Fixing the price of a new drug and re-fixing the price of
an existing drug
 Finalizing a drug formulary
 Creating data for promotional materials of medicines.
 Compliance of requirement for drug license.
 Including a drug in the medical/insurance
reimbursement schemes.

 Introduction of new schemes and programs in hospital
pharmacy and clinical pharmacy.
 Drug development and clinical trials.

Pharmacoeconomics works under :
 Decision makers
 Analysts
 Clinical trail economics
 Patient
 Patient counsellar
 HR
 Healtheconomics

Value Added Traditional
Preclinical
Clinical
Marketing
Pharmacoeconomics
Development
Preclinical
Clinical
Marketing

Pharmacoeconomics
Development Programmes

HISTORY
• In the 1970s Pharmacoeconomics developed
• In 1978 McGhan , Rowland & Bootman , from the
university of Minnesota, introduced the concepts of
cost-benefit & cost-effectiveness analyses
• Term Pharmacoeconomics was first published in
1986 by Townsend.

PERSPECTIVES of PE
 Assessing costs and consequences—the value of a
pharmaceutical product or service—depends
heavily on the perspective of the evaluation.

Hospital / Physician
-
3rd-Party Payer
-
Employer / Society
-
P E R S P E C T I V E

Patient’s Perspective
 Patient perspective is paramount because patients
are the ultimate consumers of healthcare services.
 Costs from the perspective of patients are
essentially what patients pay for a product or
service—that is, the portion not covered by
insurance.

Provider’s Perspective
 Costs from the provider's perspective are the actual
expense of providing a product or service, regardless
of what the provider charges.
 Providers can be hospitals, managed-care
organizations (MCOs), or private-practice physicians.
 From this perspective, direct costs such as drugs,
hospitalization, laboratory tests, supplies, and salaries
of healthcare professionals can be identified,
measured, and compared.

Payer’s Perspective
 Payers include insurance companies, employers, or
the government
 From this perspective, costs represent the charges
for healthcare products and services allowed by the
payer.
 The primary cost for a payer is of a direct nature.

Payer’s Perspective contd….
 However, indirect costs, such as lost workdays (absenteeism),
being at work but not feeling well and therefore having lower
productivity (presenteeism), also can contribute to the total
cost of healthcare to the payer.
 When insurance companies and employers are contracting
with MCOs or selecting healthcare benefits for their
employees, then the payer's perspective should be
employed.

Societal Perspective
 The perspective of society is the broadest of all perspectives
because it is the only one that considers the benefit to society
as a whole.
 All direct and indirect costs are included in an economic
evaluation performed from a societal perspective.
 Costs from this perspective include patient morbidity and
mortality and the overall costs of giving and receiving medical
care.

HEALTH ECONOMICS
• Health economics is the application of the discipline
of economics to the topic of health.
• It include three parameters :-
1. Output of healthcare .
2. Cost of producing better health.
3. Efficiency

PHARMACOECONOMIC METHODS
Economic Humanistic
Cost consequence
Cost benefit
Cost effectiveness
Cost minimization
Cost utility
Quality of life
Patient preferences
Patient satisfaction

Summary of Pharmacoeconomic Methodologies
Method Description Application Cost
Unit
Outcome
Unit
COI Estimates the cost of a disease on
a defined population
Use to provide baseline to compare
prevention/ treatment options
against
$$$ NA
CMA Finds the least expensive cost
alternative
Use when benefits are the same $$$ Assume to
be equivalent
CBA Measures benefit in monetary units
and computes a net gain
Can compare programs with
different objectives
$$$ $$$
CEA Compares alternatives with
therapeutic effects measured in
physical units; computes a C/E
ratio
Can compare drugs/programs that
differ in clinical outcomes and use
same unit of benefit
$$$ Natural units
CUA Measures therapeutic
consequences in utility units rather
than physical units; computes a
C/U ratio
Use to compare drugs/programs that
are life extending with serious side
effects or those producing reductions
in morbidity
$$$ QALY’s
CCA Measures multiple costs and
outcomes without aggregating the
two into a CE or CB ratio.
Examines whether the use of a drug
produces an outcome that decreases
costs and offsets the price cost of
the new therapy
$$ Reported
separately
Key: CBA = cost-benefit analysis; CEA= cost-effectiveness analysis; CMA= cost-minimization analysis; COI=
cost-of-illness evaluation; CUA= cost-utility analysis; CCA= cost consequence analysis

PE Evaluation
 Pharmacoeconomic evaluations provide a basis for resource
allocation and utilization. It is increasingly becoming
important for health policy decision-making.
 A pharmacoeconomic evaluation may be conducted as an
economic assessment incorporated into clinical trials. Such
trials should compare the new drug/procedure with an older
drug or existing intervention.
 Four techniques are used for economic evaluation, namely,
cost-minimization analysis, cost-effectiveness analysis, cost-
utility analysis and cost-benefit analysis. The choice of the
evaluation method depends on the nature of outcomes and
the context in which the choices need to be made.

Cost Consequence Analysis : CCA
 Most disaggregated of all the economic analyses &
place the greatest burden on decision-makers.This
type of analysis comprises a listing of all relevant costs
and outcomes of drug therapy or healthcare
intervention including direct medical costs, direct
nonmedical costs , indirect costs , clinical costs etc.
 Example : CCA involving drugs used in stroke
prevention which include drug cost, hospital cost ,
other costs and include special monitoring , number of
strokes observed , number of deaths observed, the
rate of clinically meaningful side effect.

Cost Effective Analysis : CEA
 It is a technique designed to assist a decision-maker in
identifying a preferred choice among possible
alternatives.
 Generally it include analytical & mathematical
procedures.
 CEA analysis has applied to health matters where the
programs inputs can be readily measured in dollars
but the programs output are stated in terms of health
improvement created.

Cost Benefit Analysis : CBA
 CBA allows policy & decision makers to make allocative
comparisons & decisions across divergent sectors.
 It include many technical consideration require a degree of
explanation & interpretation to understand how it can be
or has been applied.
 Benefits side s are either difficult to measure , difficult to
convert to dollar or both .
 Example : benefits of improved patient QOL , patient
satisfaction & working condition for the physician are not
only difficult to measure , but are extremely difficult to
convert in dollar value.

Cost Minimization Analysis : CMA
 This type is used when two or more interventions are
evaluated & demonstrated or assumed to be
equivalent in terms of a given outcome or
consequence, cost associated with each intervention
may be evaluated & compared.

Cost Utility Analysis : CUA
 It is a form of cost effectiveness analysis in which the
health outcomes are measured in terms of quality
adjusted life years (QALYs) gained.
 It is used successfully to aid in decisions regarding
health care programs (surgery vs. chemotherapy) ,
instrument that are reliable & sensitive enough to
detect changes with drug treatments (anti-
hypertension agents vs. another) are still needed.

Outcomes
Research
Pharmaco-
economics
Pharmaceutical
Care
Relationship Between Outcomes,
Pharmacoeconomics and Pharmaceutical Care

Contd… Definitions
 Pharmacoeconomics:
The description and analysis of the costs and consequences of
pharmaceutical products and services and their impact on
individuals, health care systems and society.
 Pharmaceutical Care:
The responsible provision of drug therapy for the purposes of
achieving definite outcomes.
 Outcomes Research:
Broadly defined as studies that attempt to identify, measure and
evaluate the end result of health care services in general.

CLINICAL
ECONOMIC
HUMANISTIC
OUTCOMES
RESEARCH
Outcomes Relationship

Clinical
• Efficacy
• Safety
• Impact of therapy
on “natural history”
of the disease
Economic
• Cost Analysis
• Cost-of-Illness
• Cost-Minimization
• Cost-Benefit
• Cost-Effectiveness
• Cost-Utility
Humanistic
• Health Related
Quality of Life
• Patient Satisfaction
• Caregiver Impact
• Patient Preferences
• Functional Status
Health Services Research
•Policy Research •Access •Structure of Care
The assessment of technology (drugs, devices, etc)
Outcomes Research

Applications Of Pharmacoeconomics
Phase II Phase III Marketing
Phase
Regulatory
Phase
Pharmacoeconomic Studies
Research and
Development
Strategy
Pricing and
Reimbursement
Strategy
Communication
to Physicians
and Patients

Pharmacoeconomics and Drug Development
 What is the relationships between
Pharmacoeconomics evaluation & Clinical trials ?
 Pharmacoeconomics studies may be planned &
conducted at the Clinical development & phase IV
stages of post marketing research .

PE and Drug Development
Phase I
 Cost of illness , Clinical benefits (in achieved order to have
a marketable product)
Phase II
 Cost of illness, QOL, Resources utilization, Instrument
costs.
Phase III
 How much money is spent in new drug development ?
 Patient related costs(as large number of patient are
involved in this trail)

PE and Drug Development
Phase IV
 Post marketing Pharmacoeconomics studies are extremely
important in that they allow evaluation of the costs &
consequences of drug therapy without the altered
interventions that occur in strictly controlled clinical trials.
 Pharmacoeconomics evaluation may be secondary objective of
a trail designed primarily to safety & efficacy.
 Pharmacoeconomics evaluation may be the principle purpose
of a clinical trail .
 A Pharmacoeconomics evaluation may be done retrospectively
using clinical data obtained in previous.

Putting Theory into Practice
 Mission - To provide pharmacoeconomics and
outcomes research, education, and consulting
services to assess the value of pharmaceutical
products and services in today’s healthcare systems.
Applied Pharmacoeconomics

1. Drug Therapy Evaluation
 Pharmacoeconomics principles and methods have been applied
to assist clinicians and practitioners in making more informed
and complete decisions regarding drug therapy.
 Selecting the most cost effective drug for an organizational
formulary is important.
 It is equally important to determine the most appropriate way
to use and prescribe these agents.
 It is also useful for making a decision about an individual
patient ‘s therapy.
 Evaluating the impact a drug has on patient’s health related
quality of life can be useful when deciding between two agents
for customizing a patient’s pharmacotherapy.

2. Clinical Pharmacy Service Evaluation
 Pharmacoeconomic principles and methods has been
used for justifying the value of various health care
services ,especially pharmacy services.
 When a specific service is competing for hospital
resources, pharmacoeconomics can provide the data
necessary to justify that service maximizes the
resources allocated by health care system
administrators.
 It is also useful in determining the value of existing
service, estimating the potential worth of
implementing a new service.

Limitations of Pharmacoeconomics
 Pricing decisions for pharmaceuticals usually follow a
two-step process. A final economic evaluation needs
to be based on a prior clinical-pharmacological
evaluation of a new drug in light of therapeutic
alternatives.

However, major limitations for this evaluation process
may be encountered. Most notably a lack of
(1) evidence-based data,
(2) clinical endpoint data,
(3) direct comparator studies or
(4) an impaired "assay sensitivity" may cause uncertainty about
the appropriate value of a new drug. Moreover situations with
(5) incremental, small benefit,
(6) lack of precedents in case of innovations or
(7) obvious "efficacy-effectiveness gaps" may pose challenges in
the pricing decision process for pharmaceuticals.

PE in Today’s Scenario
 Drug development is very expensive process
 Duration of development – 10 to 15 yrs
 Patent life – 20 yrs.
 Patent life starts with preclinical phase.
 All new drugs are very expensive when they come in
market.

International Society of
Pharmacoeconomics & Outcomes Research
 The mission of ISPOR is to increase the efficiency,
effectiveness, and fairness of health care to improve
health.
 ISPOR is recognized globally as the authority for
outcomes research and its use in health care decisions
towards improved health.
 The ISPOR scope and sphere of influence includes
outcomes researchers, health technology developers
and assessors, regulators, health economists, health
care policy makers, payers, providers, patients,
populations, and society as a whole.

ISPOR Members
 ISPOR outreach to over 11,300 members. ISPOR
worldwide members come from different work
environments –
 50% from research organization and academic
institutions, 12% from government organizations,
health technology assessment agencies, hospitals and
clinical practice, and 38% from pharmaceutical,
biotechnology and medical device industries. Visit
Website - http://www.ispor.org.

Activities of ISPOR : India chapter
• Preparation of Pharmacoeconomics guidelines for
India
• Symposia & Workshop on Pharmacoeconomics
• Symposia on Clinical Outcome Studies
• Symposia on Health Care and Policy-issues
• Second International Conference on
Pharmacoeconomics & Outcomes Research

Health Care Budget
 In both developed and developing countries there is increased
cost of health care > 10 %
 Expensive techniques for diagnosis and treatment of disease.
So health care sector is becoming very expensive.
 Health care includes:
1. cost of drug
2. infrastructure
3. salary of physician , pharmacist, nurses, administration in
hospitals.
4. payers like insurance.

Objectives of health care budget :
 Decrease health care cost.
 Increase evidence based medicine.
Health care provider’s role:
1. Quality of care
2. Patient satisfaction
3. Cost effectiveness

Conclusion
 In our developing economy, India, the words
“pharmacoeconomics” and “outcomes research” are
new to health care practitioners, but we are
determined to familiarize ourselves with these
concepts and put them into practice.
 In most developing countries, the patients continue to
suffer due to an ignorance about information, and
practice and resources being overburdened. There is a
universal need to optimize both, which is possible by
adopting the practice of pharmacoeconomics,
outcomes research, and Health Technology
Assessment.

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Pharmaconomics

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