Pharmacoeconomic Dr . Dlivan F. Aziz

pharmacoeconomic Input--- outcome Cost: Price of drug Hospitalization, transportation Outcomes: Improve quality life

pharmaeconomic depends on the corner of Patient Physical Payer Employer/society

pharmacoeconomic Is a set of method to evaluate the: Economic outcome Clinical outcome Humanistic outcome

Clinical outcome Medical events that occur as a result of disease or treatment Such as Reduction of blood pressure Cure rate from breast cancer Pain relief Healing time from duodenal ulcer Prevention of migraine headache

Humanistic outcome Consequences of the disease or treatment on patients functional status or quality of life. Such as: Impact of asthma on patients QoL Post- surgical pain assessment Patient preference for oral compared to IV therapy Satisfaction with amount of information provided

Economic outcome Direct, indirect, and intangible costs compered with consequences of medical treatment alternatives. Such as - decreased length of hospital stay - reduction in the visits to ER - drug cost - reduction in adverse drug effects requiring additional treatment.

How to measure outcomes illness indicator Clincal outcome Humanstic outcome Economic outcome hypertenstion BP RENAL FAILER STROCK MI, CVC death QoL Price/decrease BP dyslipidaemia LDL ML , strock, CVS death Price/decrease of LDL Price to avoid ML

Types of PE studies There are four types of PE studies 1- cost-minimization analysis (CMA) 2- cost-effectiveness analysis (CEA) 3- cost-benefit analysis (CBA) 4- cost-utility analysis (CUA)

Cost categorization Most text book categorize PE-related costs into four types 1. Direct medical cost 2. Direct non medical cost 3. Indirect cost 4. Intangible cost

Direct medical cost Is more obvious costs to measure It related to inputs used directly to provide treatment Ex. Chemotherapy treatment, direct medical cost include: cost of chemotherapy product themselves, cost of other medication given with chemotherapy, IV supplies, lab test, physician visit etc.

Direct non medical test Are costs to the patients and their families that associated with treatment but are not medical in nature. Ex. Using example of chemotherapy patient may cost related to traveling to the hospital, they may need babysitter for their children during treatment.

Indirect cost Involve the costs that results from loss of productivity because of illness or death. Ex. In chemotherapy some indirect cost results from time patient takes off from work to receive treatment or reduce productivity because of the disease or its treatment.

Intangible cost Include costs of pain, suffering, anxiety or fatigue that occur as a result of disease or the treatment of an illness It is difficult to measure or place a monetary value on these type of cost Ex. In chemotherapy nausea and fatigue are common intangible costs of treatment

Types of pharmaceutical analysis Methodology Cost measurement unit Outcome unit Cost-minimization dollars Various- but equivalent in comparative groups Cost-benefit Cost-effectiveness Natural units (life years, mg/dl blood sugar, LDL cholesterol) Cost-utility Quality adjusted life years

CMA Compares the costs of two or more alternatives that have a demonstrated equivalence in therapeutic outcomes (i.e. therapeutically equivalent alternatives) CMA is a relatively straight forward and simple method The advantage of the CMA method is also its disadvantage it cannot be used when outcomes of interventions are different.

CMA Cost per month of selected oral ant diabetic agent drug Glybride (diabeta) 22.50$ Glybride ( mirconase) 29.25$ Glybride (glynase) 24.75$

Cost benefit analysis Evaluation of the cost of an intervention in relation to the outcome, where the outcome is expressed in currency. Examples Cost of a heart drug $ Reduced hospital days $

CBA Advantage Decision makers can determine weather the benefits of a program or intervention exceed the cost of implementation You can compare different programs or interventions with similar or unrelated outcomes

CBA Disadvantage It is difficult to place a monetary value on health outcomes. ( no universal standard method)

Conducting a CBA Determine type of program or intervention to be considered Identify alternatives Identify the cost and benefits Determine the perspective of the study It is recommended that CBA should be conducted from the social perspective

CBA Example Indirect benefit per person= $ 2171 (value of increased productivity) Daily wage rate Average number of missed days Average value of lost productivity Before $ 167 20 $ 3340 after 7 $ 1169

Calculating results of costs and benefits After all costs and benefits have been identified and quantified, results can be presented in the following ways Net benefit calculation Net benefits= total benefits- total costs Net cost= total costs- total benefits Intervention would be considered cost beneficial if: net benefits>0 , net cost<0

Calculating results of costs and benefits Benefit to cost ratio B/C ratio= total benefits/total costs C/B ratio= total costs/ total benefits Interventions are considered cost beneficial if : B/C ratio> 1 C/B ratio <1

example Suppose a decision maker had to choose b/w two proposals for implementation Assume projects are for one year Proposal A: cost $1000, benefit: $2000 Proposal B: cost $ 5000, benefit: $7500 Determine which one is cost beneficial using net benefits and B/C ratio.

CBA Decision rule: choose treatment with the highest net benefit when comparing with alternatives

Cost- effectiveness analysis Is a form of economic evaluation whose goal is to identify, examine, and compare the relevant cost and consequences of competing drug regimens and interventions. Costs are expressed in monetary terms Outcome measure in non-dollar units CEA involves comparing programs or treatment alternatives with different safety and efficacy profiles.

CEA Consequences are measured in their natural units such as: -cases cured -lives saved -hospitalization prevention Results are expressed as cost-effectiveness ratio (CER) and/or Incremental CER (ICER).

CEA Results are expressed as a cost effective ratio Eg. Cost/treatment Cost/outcome Cost/life saved Outcome must be measured in the same unit to compare intervention.

CEA A therapy is seemed to be a cost-effective strategy when outcome is worth the cost relative to competing alternatives. In other words, scarce resources are utilized to acquire the best value on the market.

CEA Cost-effective is NOT the least expensive Less expensive and at least as effective More expensive with an additional benefit worth the additional cost Less expensive and less effective - extra benefit provided by competing therapy is not worth the extra cost.

CEA Cost- effectiveness Lower cost Same cost Higher cost Lower effectiveness A B C Same effectiveness D E F Higher effectiveness G H I

CEA Comparing a new drug with the current standard treatment. If the new treatment is: 1-more effective and less costly (cell G) 2-more effective at the same price (cell H) 3- has the same effectiveness at the lower price (cell D). So the new therapy is considered cost effective (blue color)

CEA On the other hand, if new drug is : 1- less effective and more costly (cell C) 2- has the same effectiveness but cost more (cell F) 3- has lower effectiveness for the same cost (cell B) Then the product is Not effective ( red colour).

CEA If the new drug is: 1- more expensive and more effective (cell I) 2-less expensive but less effective (cell A) 3- has the same price and the same effectiveness as the standard product (cell E) For the cell E other factors may be considered to determine which medication might be best. For other an ICER is calculated to determine the extra cost for each extra unit of outcome.

CEA- steps Objectives: which medicine regimen is preferred to achieve the desired clinical outcome List the different options (medicine and other treatments) to achieve the desire clinical outcome Identify and measure for each option: cost and clinical outcome Calculate the incremental cost-effectiveness ratio. Perform sensitivity analysis. Adjust cost of variables and re-analyse to confirm results

Average cost-effectiveness Specifies the cost of an agent required to achieve each unit of effect An ACER represents the total cost of a program or treatment alternative divided by its clinical outcome to yield a ratio representing the dollar cost per specific clinical outcome gained, independent of comparators.

The ACER can be summarized as follows : Average cost-effectiveness= cost of drug/ resulting effect = cost per unit of effect achieved

Average cost-effectiveness ACE of agent A= cost of drug/resulting effect = $50.00/ 50 unit of effect = $100 per unit effect ACE of agent B= $150.00/90 unit of effect = $ 166 per unit effect

Incremental cost analysis (ICA) When comparing 2 therapies, ICA assesses what the added cost per net effect for alternative therapy would be ICA is the difference in total cost of 2 therapies divided by difference in effectiveness of the 2 therapies

example Therapy A: costs $ 2500 and saves 10 lives C/E ratio= $250/life saved Therapy B: costs $5000 and saves 15 lives C/E ratio= $333/life saved ***ICA: $5000-2500/15-10 =$ 500/life saved

Incremental cost effectiveness analysis Makes comparison to other therapeutic options, standard of care, or doing nothing (placebo) Fundamental ratio= Cost option (B) (total cost per treatment)- cost option (A)/ effect option (B) (effectiveness)- effect option (A) = cost to achieve one unit of effect

Incremental analysis The additional costs that one service or program imposes over anther, compared with the additional effects, benefits, or utilities it delivered .

ICER ICER = TC1-TC2/E1-E2 TC1= total cost of treatment for drug 1 E1= effectiveness of drug 1 E2= effectiveness of drug 2

CEA example Drug A Total cost for 100 patient = $10000 Effectiveness=10 strokes prevented Drug B Total cost for 100 patient= $60000 Effectiveness= 50 strokes prevented

example Agent Total Cost for 100 pts Stroke prevented Cost/stroke prevent Drug A $ 10000 10 $ 1000 Drug B $ 60000 50 $ 1200

Incremental cost effectiveness analysis $ 60000-$10000/50-10 = $50000/40 = $1250 per additional stroke prevented

Cost-utility analysis In CUA the benefits are measured in healthy years, to which a value has been attached. Some research consider CUA as a subset of CEA because the outcomes are assessed using special type of clinical outcome measure, usually the quality-adjusted life-year (QALY). CUA takes patients preferences, also referred to as utilities, into account when measuring health consequences.

Quality adjusted life years QALY: combines quantity and quality of life. It is calculated by estimating the total number of life- years gained from treatment and weighting each year with a quality of life score to reflect the quality of life in that year. For example, a patient living for 10 years but with quality of life , 0.7 on a scale of 0 to 1 ( with 0 as death and 1 as perfect health), would live for seven (0.7*10) QALYs.

QALYs Adjust quality of life years saved to reflect evaluation quality of life If healthy QALY = 1 If unhealthy QALY <1 QALY can be <0

Steps in calculating QALYs 1- develop a description of each disease state or condition of interest 2- choose the method for determining utilities 3- choose subjects who will determine utilities 4- multiply utilities by the length of life for each option to obtain QALYs

1- develop a description of each disease state or condition of interest The description should concisely depict the usual health effect experience by disease state or condition. It should include the amount of pain or disease restrictions on activity.

2- choose the method for determining utilities The three most common method for determining preference 1- rating scale RS 2- standard gamble SG 3- time tradeoff TTO. These methods use to determine where disease state fall b/w 0.0 (dead) and 1.0 (perfect health).

Rating scale An RA consist of a line on a page with scaled markings somewhat like thermometer with perfect health at the top 100 and death at bottom 0. As example: if they place a disease as 70 on the scale, the disease state is given a utility score of 0.7.

RS Perfect health 100 Patient’s preference 0.65 50 death

SG In this method each subject is offered two alternatives Alternative one is treatment with two possible outcomes: either return to normal life or immediate death. Alternative two is the certain outcome of a chronic disease for life based on a person’s life expectancy. Example: a kidney transplant with 20% probability of death or 80% chance of running normal life, or certain dialysis for the rest of his life.

SG Probability p Healthy Alternative 1 Probability 1-p Dead Disease state

TTO In this method the subject is offered two alternatives. Alternative one a certain disease state for specific length of time (t). Alternative two is being healthy for time (x) which is less than t. For example: alternative 1 being blind for 50 years or alternative 2 being able to see for 25 years then followed by death.

TTO Utility value Alternative 2 Healthy 1.0 Alternative 1 Disease state Dead 0 x t Utility calculated for the condition is x/t

Comparisons of three methods The advantage of RS: Is many disease states or condition can be described to each subject Can be conducted via a questionnaire Does not need face to face interview Less cognitively demanding than the other two methods More familiar to people

Disadvantage of RS: They do not incorporate time into utility score as easily as the other two methods

Advantage of SG It is consider as a ‘’ gold standard’’ and based on economic theory Disadvantage of SG Few disease states or conditions can be ‘’cured’’ by intervention that bring a person back to life Need face to face interview that takes more resources.

advantage of TTO Is more adaptable to disease state or condition than SG Disadvantage of TTO As with SG it needs face to face interview

Step4/ choose subjects who will determine utilities Subject is a person who would be questioned to determine the utility. Who is this subject? The patient with disease (understand better than public) The health care professional (understand various diseases, but not able to rate discomfort as patient do) The caregiver (young child, person with dementia) People from general population.

example of CUA Cost for treatment $ Years of life saved Utility for each year life saved QALYs Drug A $ 10.000 4.5 0.6 2.7 Drug B $20.000 3.5 0.72 2.5 CEA $20.000-$10.000/4.5years-3.5years = $10.000 per extra year CUA $20.000-$10.000/2.7-2.5 =$ 50.000 per QALYs gained

Other type of analysis CCA, cost- consequences analysis when only a list of costs and a list of various outcomes are present without direct calculation. COI, cost of illness, when research wants to determine the annual cost of illness. Ex. The direct cost of treating hypernatremia in the USA on annual basis were estimated to range b/w $1.6 billion and $3,6 billion.