1. Pharmacoeconomic
Dr . Dlivan F. Aziz

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

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

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

5. 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

6. 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

7. 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.

8. 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

9. 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)

10. 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

11. 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.

12. 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.

13. 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.

14. 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

15. 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

16. 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.

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

18. 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 $

19. 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

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

21. 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

22. 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

23. 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

24. 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

25. 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.

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

27. 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.

28. 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).

29. 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.

30. 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.

31. 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.

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

33. 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)

34. 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).

35. 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.

36. 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

37. 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.

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

39. 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

40. 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

41. 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: $ /15-10
=$ 500/life saved

42. 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

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

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

45. 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

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

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

48. 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.

49. 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.

50. 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

51. 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

52. 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.

53. 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).

54. 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.

55. RS
Perfect health
100
Patient’s preference 0.65 50
death

56. 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.

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

58. 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.

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

60. 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

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

62. 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.

63. 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

64. 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.

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

66. 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.