Dr. Dlivan Fattah Aziz MSc university of Aberdeen, Scotland Pharmacoeconomics Dr. Dlivan Fattah Aziz MSc university of Aberdeen, Scotland

Economics Is the study of the production and consumption of goods and the transfer of the wealth to produce and obtain those goods. Economics explains how people interact within markets to get what they want or accomplish certain goals. Economics is the science of scarcity and choice.

Health economics Is a branch of economics that studies: -The maintenance and improvement of health among people -Analysis the supply and demand for healthcare -Provides a structure for understanding decisions and their consequences.

pharmacoeconomics Is a branch of health economics Is defined as the comparison of the costs and consequences of two or more alternative courses of action. Costs are the recourses consumed to perform an activity or implement a decision. While consequences are the outcomes- positive and negative- of that action or decision.

pharmacoeconomics So PE is the study of use (input) and outcome (output) of medicine. Input------ outcome Economic resources--- health and economic consequences Cost ------ consequences

The Pharmaceutical Industry -- Produce medicines Drug discovery Drug development Drug safety and efficacy Marketing Make money Shareholders

The Pharmaceutical Business Global manufacturing * Medicines Worth Trade surplus in 2009 £7 bn (2007 £4.3 bn) UK pharmaceutical exports £20 bn (2007 £14.6 bn) > £280,000 per employee (2007 £235,000 per employee) Research and development Expenditure £4 bn 28% of entire research spend by manufacturing sector

Pharmaceutical companies R and D spend in 2010 in the UK spent £4.6 billion an investment of over £12.5 million every day! More then 25% of all UK industry-supported research and development In the UK 67,000 employees 25,000 in R & D

The drug development process 10-12 years and approx £550 Million

New development model Personalised medicine Biology driven Drugs for more specialised targets Smaller groups Specific disease types Personalised medicine Drugs tailored to an individual

New drugs from 1970 - 2000

Growth of Biopharmaceuticals

The current market Competition Likelihood of success Others in area? Will our drug be better? Company’s position in the disease area Reputation Marketing experience Likelihood of success Revenue will exceed costs Disease prevalence and severity Overall sales and price

Competition Marketplace Register early Better product Competitive intelligence No obligation to divulge information

Commercial success Efficiency in drug development Fewer projects 66% of R & D costs Fewer projects Cost per project increases significantly Especially in the clinical phase In £££ phase III > phase II > phase I Speed Longer in development means less revenue Patent expiry

Stopping a project Value / balance Chance of success Using resources Low/limited Using resources Reluctance of work force Difficulties Opportunity costs Redeployment Resources Human and technical

Serendipity In research - Surprise = discovery! In development - Surprise = disaster! Sildenafil Market now - was a side effect

microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. It also focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize it's production and capacity so it could lower prices and better compete in its industry.

macroeconomics is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. 

Economics Basics: Supply and Demand  Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price. the relationship between price and quantity demanded is known as the demand relationship

Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. 

The Law of Demand The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good.

A, B and C are points on the demand curve A, B and C are points on the demand curve. Each point on the curve reflects a direct correlation between quantity demanded (Q) and price (P). So, at point A, the quantity demanded will be Q1 and the price will be P1, and so on. The demand relationship curve illustrates the negative relationship between price and quantity demanded. The higher the price of a good the lower the quantity demanded (A), and the lower the price, the more the good will be in demand (C).

The Law of Supply unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.

A, B and C are points on the supply curve A, B and C are points on the supply curve. Each point on the curve reflects a direct correlation between quantity supplied (Q) and price (P). At point B, the quantity supplied will be Q2 and the price will be P2, and so on.

Time and Supply Unlike the demand relationship, however, the supply relationship is a factor of time. Time is important to supply because suppliers must, but cannot always, react quickly to a change in demand or price. So it is important to try and determine whether a price change that is caused by demand will be temporary or permanent.

Supply and Demand Relationship Equilibrium When supply and demand are equal the economy is said to be at equilibrium. At this point, the allocation of goods is at its most efficient because the amount of goods being supplied is exactly the same as the amount of goods being demanded. At the given price, suppliers are selling all the goods that they have produced and consumers are getting all the goods that they are demanding.

As you can see on the chart, equilibrium occurs at the intersection of the demand and supply curve, which indicates no allocative inefficiency. At this point, the price of the goods will be P* and the quantity will be Q*. These figures are referred to as equilibrium price and quantity.

Disequilibrium  1- Excess Supply If the price is set too high, excess supply will be created within the economy and there will be allocative inefficiency.

At price P1 the quantity of goods that the producers wish to supply is indicated by Q2. At P1, however, the quantity that the consumers want to consume is at Q1, a quantity much less than Q2. Because Q2 is greater than Q1, too much is being produced and too little is being consumed. The suppliers are trying to produce more goods, which they hope to sell to increase profits, but those consuming the goods will find the product less attractive and purchase less because the price is too high.

2. Excess Demand Excess demand is created when price is set below the equilibrium price. Because the price is so low, too many consumers want the good while producers are not making enough of it.

In this situation, at price P1, the quantity of goods demanded by consumers at this price is Q2. Conversely, the quantity of goods that producers are willing to produce at this price is Q1. Thus, there are too few goods being produced to satisfy the wants (demand) of the consumers. However, as consumers have to compete with one other to buy the good at this price, the demand will push the price up, making suppliers want to supply more and bringing the price closer to its equilibrium