Pharmacoeconomics and Its Applications

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Pharmacoeconomics Applications

PHARMACOECONOMICS DEFINITION, EVALUATION, AND ITS APPLICATIONS

Uday Venkat Mateti and Anantha Naik Nagappa

Manipal College of Pharmaceutical Sciences, Manipal University, Manipal

Read about Definition, Cost , Outcomes, and Evaluations

Define Pharmacoeconomics?

The resources scarcity is a limiting factor for the provision of health care services. It is always better to work with optimized resources utilization plan. Hence the best use of resources comes into the practice. The health care scenario is much complex and difficult to make decision unless thoroughly analyzed. There is a need for analyzed data to adopt a rational decision making. The pharmacoeconomics is defined as "description and analysis of the costs and consequences of pharmaceutical products, services and their impact on individuals, health care systems and society".

Define Pharmacoeconomic research?

The health economics and pharmacoeconomics is a systematic approach for collating and computing the cost of competitive cost among the products or services. It is also not the cost of the product alone can be a deciding factor however comparison of clinical outcomes and quality of life need to be considered before taking a final decision. Pharmacoeconomic research comprises of identifying, measuring, and comparing the cost, risks, and benefit of programs, services or therapies and determining which alternative produces the best health outcomes for resources invested.

Define Cost?

The cost is a multi-meaning term which means different for different stakeholders like government, hospitals, insurance companies, and patients. The cost is the total resources consumed in providing a good service.

Classify different types of Costs?

Types of Costs

Direct medical cost:

The direct cost incurred during the provision of care for example cost of medicines, laboratory tests, doctor's fee, and hospitalization charges.

Direct non-medical costs:

The cost for non-medical services such as cost of transportation to hospital, food, family care, and hotel room expenses

Indirect non-medical costs:

The Cost incurred duet to patients/attendant inability to earn wages due to disease as considered as indirect non-medical costs. For example, cost of reduced productivity, salaries lost due to morbidity, income forgone due to premature death, and resignation of job due to inability to work

Intangible cost:

There are some costs which are non monitory types for example psychological costs of a disease and which are not clearly expressed in money. Other example for intangible cost includes, cost of - pain, unhappiness, suffering and distress.

Define Outcome?

The outcome is the measure of result of intervention for example a treatment with a drug can be an intervention and there can be outcome of that intervention which may be measure in terms of clinical, humanistic and economic. It may be also defined as the effects, outputs, or outcomes of the program of drug therapy of interest.

Classify different types Outcomes?

The outcomes include the Clinical, Economic and Humanistic.

The clinical outcomes are improvement in health, cure, clinical symptoms, comfort, morbidity and survival. The economic outcomes may be savings in direct, indirect and intangible costs among competitive alternatives. The humanistic outcomes are representing as improvements in Quality of life (QOL) andquality-adjusted life year (QALY)

Enumerate the different types of Pharmacoeconomic Evaluations?

The Pharmacoeconomic evaluations are depends on utilization of results which are classified as Cost of illness analysis, Cost minimization analysis, Cost benefit analysis, Cost effective analysis and Cost utility analysis.

1. Cost of illness analysis

The cost of illness is intendment to bring clarity in complex expenditures of cost. In this there is a classification of cost which recognizes and estimates the overall cost of a particular disease for a defined population. This also known as "Burden of disease" involving the measure of the direct cost and Indirect cost. For examples: Cost of diabetes in India, peptic ulcer, mental disorders, cancer, etc. This method is not used to compare competing treatment alternatives, but to estimate the financial burden of a disease.

2. Cost Minimization Analysis (CMA)

The main aim of the cost minimization analysis includes preparing an overall summary of two competitive alternatives treatments. Here a table of classified cost of both the treatments is computed to give a clear idea regarding the differences in the both treatments on different aspects. For example acquisition cost and monitoring cost. It involves the determination of least costly alternative. While making comparison the baseline efficacy/ final efficacy should be fixed so that the both treatments are compared in an equal manner. The following table contains worked out example of CMA.

Table 1: Cost Minimization Analysis of two formulations of drugs

Example

Cost of therapies

Drug A

Drug B

Cost

Acquisition

250

350

Administration

75

0

Monitoring

75

25

Adverse effects

100

25

Subtotal

500

400

Outcomes

Antibiotics effectiveness

90%

90%

Note: Drug B is better than Drug A

CMA is Simple to conduct but however the Outcomes must be fixed to a constant value before the analysis

3. Cost Effective Analysis (CEA)

CEA is a comparison of the costs of two or more clinical interventions. In CEA the effectiveness is expressed in terms of monetary units that describes the desired objectives for example the number of lives saved, disability days avoided, and life years saved.

Incremental cost effectiveness ratio (ICER) = Cost A (INR) ? Cost B (INR)

Effect A (%) ? Effect B (%)

This formula yields the additional cost required to obtain the additional effect gained by switching from drug A to drug B.

Table 2: Cost Effective Analysis of two formulations of drugs

Example

Cost of therapies

Drug A

Drug B

COST

Acquisition

250

350

Administration

75

0

Monitoring

75

25

Adverse effects

100

25

Subtotal

500

400

OUTPUT

Extra years of life

1.5

1.6

* Cost Effectiveness ratio for Drug A = 500/1.5 = 333

* Cost Effectiveness ratio for Drug B = 400/1.6 = 250

Note: In cost effective analysis, cost of drug per extra year of life gain with Drug B is 330-250 = 80 INR less than with Drug A.

The CEA does not need any benefit information and examines interventions from two angles: cost and effectiveness. However, there are two main criticisms of cost effectiveness analysis first; policy makers cannot use results of CEA from different studies, if they use different outcomes. Second, a single outcome often cannot capture all the effects of an intervention.

4. Cost benefit analysis (CBA)

In CBA, identification, measurement, comparison of the benefits and cost of program or treatment alternatives. Consequences are measured in terms of total costs associated with the program.

If, B/C > 1 treatment is of value, B/C= 1 benefits equal to cost, B/C< 1 not economically beneficial

Table 3: Cost benefit analysis of two formulations of drugs

Example

Cost of therapies

Drug A

Drug B

COST

Acquisition

300

400

Administration

50

0

Monitoring

50

0

Adverse effects

100

0

Subtotal

500

400

BENEFITS

Days at work (INR)

1000

1000

Extra Month of Life (INR)

2000

3000

Subtotal

3000

4000

Benefit to cost ratio for Drug A = 3000/500 = 6/1

Benefit to cost ratio for Drug B = 4000/400 = 10/1

Net Benefit of Drug A = 3000-500 = 2500

Net Benefit of Drug B = 4000-400 = 3600

Note: In cost Benefit Analysis, net benefit gained with drug B is 1100 INR more than with Drug A.

The advantage of CBA is decision making and the limitations are it is over-simplistic and it is difficult to perform because it requires both cost and benefits to be measured in monetary terms.

5. Cost Utility Analysis (CUA)

In CUA the comparison of a treatment program and its alternatives, irrespective is carried out irrespective of disease condition. It integrates the patient preferences and quality of life (QoL) data. The multiplication of utility and life years gained is called "quality adjusted life years gained" (QALY). For example Treatment of Cancer, renal replacement therapy, etc.

Example

Cost of therapies

Drug A

Drug B

COST

Acquisition

250

350

Administration

75

0

Monitoring

75

25

Adverse effects

100

25

Subtotal

500

400

UTILITY

Extra years of life

1.5

1.6

Quality of life

0.33

0.25

QALY

0.50

0.40

Cost utility ratio for Drug A = 1000

Cost utility ratio for Drug B = 1000

Per extra quality of life year

Note: In Cost utility analysis, the investment cost of Drug A is 100 INR less than the cost of Drug B although cost to utility ratio is same

Advantages includes appropriate for programs which are life extending with serious side effects (e.g., cancer chemotherapy) and those which produce reductions in morbidity rather than mortality (e.g., medical treatment of arthritis). The main disadvantages include, lack of agreement on measuring utilities, difficulty comparing QALYs across patients and populations, and difficulty in quantifying patient preferences.

References

1. Mateti Uday Venkat, M Kranthi Venkat, Anantha Naik Nagappa. Pharmacoeconomics: the missing link in health care System. Journal of Pharmaceutical Research 2011. 10(1): 10-13.

2. William F. McGhan. Introduction to Pharmacoeconomics. In: Renee J.G. Arnold. Pharmacoeconomics from theory to practice. Editors. New York: Crc Press, 2010. p. 4-5.

3. Rascati KL. Future issues. In: Rascati KL, editor. Essentials of Pharmacoeconomics. Philadelphia: Lippincott, Williams, & Wilkins, 2008. p. 227-36

4. International Society for Pharmacoeconomics and Outcomes Research (ISPOR): Online Available: http://www.ispor.org/news/Mission.aspx [Cited on 10 June 2014]

About the Author

Anantha Naik Nagappa's picture

I am professor, intrested in developing the community pharmacy services in India, We have an association called ASSOCIATION OF COMMUNITY PHARMACISITS OF iNDIA. CHECK AT www.acpi.in for further detials

Comments

Albert Ana-Maria's picture

Different costs for drugs with the same effect we meet with them every day, but what about patients who are hard to get cheaper medicine has the same effect as the most expensive? How We can convince without crossing line and without hurting them ?

Srinivas's picture

what is the role of a clinical pharmacist in pharmacoeconomics?

Anantha Naik Nagappa's picture

The pharmacist is always dealing with drugs in hospitals, retail outlets of dispensing counters. He/she aware of the prices of various brands and can be of great help in perceived in the patients on doctors and unnecessary wastage of money on expensive brands.

Prof Anantha Naik Nagappa

My Page : http://www.pharmainfo.net/ananthanaik

Anantha Naik Nagappa's picture

The pharmaceutical industry in private sector are responsible for marketing expensive branded medicines which they are able to sell by joining with hand in glove with prescribers. despite of availability of generic medicines this problem is so difficult to combat despite of government of India persuasion of prescribers to write only generic medicines by order of Medical counsel of India. Further government has opened Jan Aushadhi scheme in all dist.hospitals and major medical facilities because the poor public knowledge regarding generic medicines

Prof Anantha Naik Nagappa

My Page : http://www.pharmainfo.net/ananthanaik

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