Pharmacoeconomics
Basic principles of pharmacoeconomics,
types of pharmacoeconomic analyses
and their relevant use in clinical practice
Barbora Říhová, Ph.D.
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Pharmacoeconomics
• applies the economic principles and methods to the field
of pharmaceuticals and pharmaceutical policy
• assess the overall value of health technologies
– pharmaceutical products, services and programs
– identifies, measures and compares costs and consequences
• provides valuable information to health care decision
makers for allocation of scarce resources
•• pharmaconpharmacon + economics+ economics
(= remedy) (= the science of scarcity and choice)
• Which drug / technology has the highest therapeutic
benefit by using accessible resources?
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Basic principles I
• limited resources x growing value of modern medicine
• cooperation of:
– physicians
– economists
– statisticians
– pharmacists
allocation of resources
= satisfaction of needs of all patients on acceptable
quality level
HEALTH GAP
costs
time
new
technologies
available resources
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Basic principles II
Healthcare payer
(insurance company)
- therapy outcomes
- reimbursement
Society
- all above + productivity loss
Institution / healthcare provider
- therapy outcomes
- profitability
Patient
- health
- quality of life
- co-payments
- satisfaction with
treatment
PERSPECTIVE
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Main parameters in PE
Parameter Example Synonym
costs / resources
the reimbursement of
drug, service,
manpower, loss of
earnings
outcomes
clinical
uricaemia, BP, bout of
depression, mortality
Effect, efficacy,
effectiveness
economic
reduction in GDP, loss
of wages
Benefit
social
social function, quality
of life, utility
Utility
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Cost categorization
Direct medical costs
drugs, lab tests, hospitalizations
Direct non-medical costs
transport
Indirect costs
lost or reduced productivity
Intangible costs
pain and suffering
impact on family home life, work, etc.
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Direct medical costs
• related to treatment
• reimbursed by insurance company
category specification example
pharmaceutical costs
cost of drugs, treatment reimbursement of drug
tests of safety and
effectiveness
kinetic – TDM
biochemistry, physical,
haematology
treatment of adverse
events
ordinary
only if occurred
other costs
hospitalization bed-days
diagnostics
biochemistry, physical,
microbiological
transport ambulance
manpower (staff) wages of health workers
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Indirect costs
• experienced by the patient or society
• inconvenience of the patient in society
• loss of earnings and productivity because of
illness or death
• difficult to measure
• paid by:
– patient (lost earnings)
– employer or society (lost productivity)
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Measurement of productivity loss
• Human-capital approach
– value of human capital as individual's future
contribution to production (or earnings) in full
health
• Friction-cost approach
– value of human capital until replaced by
another worker
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Intangible costs
• pain, worry or other distress that patients or their
family suffer
• impossible to measure in monetary terms
• not considered in economic evaluations (usually)
• might be reported alongside the cost results
Outcomes
identification and
quantification of effectiveness
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Identification and measurement of
outcomes
• the crucial moment of assessment
• outcomes / benefits might be measured in:
– natural units
• life-years saved, strokes prevented, ulcers healed, …
– utility units
• the quality-adjusted life year (QALY)
– economic benefit (money)
• the economic benefits of an employee returning to work after
illness; money saved due to preventive program
• depends on perspective of analysis, availability
and product indication
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Outcomes quantification
Outcomes in economic evaluations
– efficacy
– effectiveness
– utility
– efficiency
– willingness to pay
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Outcomes quantification
• efficacy
– clinical effect under defined conditions (in clinical trials, RCT)
• effectiveness
– clinical effect under real conditions (in real world clinical practice)
• utility
– health state preferred by individuals = quality of life
• willingness to pay
– life is valued according to what individuals are willing to pay for change
that reduces the probability of death or illness = social preferences
How individuals value life and health?
– influenced by ability to pay (high-paid x low-paid workers, favours the rich
over the poor)
• efficiency
= cost-effectiveness
– measures how well resources are used in order to achieve a desired
output
Pharmacoeconomic
analyses
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Stages of PE analysis
1) epidemiology
2) new treatment advantages
3) hypothesis assignment, definition of
research issue
4) study design and realization
5) utilization in practice
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ad 1) epidemiology
• incidence and prevalence
• population of patients: age, therapy reaction,
symptoms relevance, illness stages
• treatment methods
• cost of illness - medical and social
• impact of current therapy on the cost of illness
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ad 2) new treatment advantages
• better short-term efficacy
• better long-term efficacy
• lowering patient monitoring need
• better safety profile of the new medicine, less
adverse effects, less drug interactions
• better compliance (e.g. application once daily)
• more convenient application
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ad 3) decision analysis
1. Perspective:
patient
insurance company
societal
2. Sort of costs and outcomes:
direct medical
indirect
intangible
3. Time horizon
natural units
utility units
monetary values
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ad 4) study design and realization
Types of PE analyses:
• Cost-minimization analysis (CMA)
• Cost-benefit analysis (CBA)
• Cost-effectiveness analysis (CEA)
• Cost-utility analysis (CUA)
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Cost-minimization analysis (CMA)
• the simplest form of economic evaluation
• outcomes of 2 healthcare technologies are assumed to
be equivalent
• basis of comparison are costs alone
• classic example:
– comparison of 2 generic drugs
morbidity technology 1 technology 2
G- infection III.gen. CEF i.m., i.v. III.gen. CEF p.o.
hypertension sartans ACEI
Borrelia meningitis cefotaxim 3times daily ceftriaxon once daily
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Cost-benefit analysis (CBA)
• costs and benefits are measured in monetary units
• used for
– evaluation of therapies with outcomes difficult to
measure with conventional tool
– decision making in health policy
• therapeutic outcomes must be complex (e.g.
vaccination)
– benefit for patient or society
•• How much can be saved by rapid recovery?How much can be saved by rapid recovery?
•• Is the alternative costIs the alternative cost--beneficial?beneficial?
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Cost-benefit analysis (CBA)
• Study results:
– BENEFIT / COST RATIO:
– NET BENEFIT CALCULATION:
• positive x negative
R =
benefits
costs
N = benefits - costs
the comparison of different healthcare interventions,
irrespective of the disease
discounting is essential if perspective is longer than 1 year!
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Cost-benefit analysis (CBA)
cost
benefit
1 2 3 4 5 6 7
Example:
Does it worth to vaccinate?
Is treatment of disease cheaper?
years
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Cost-benefit analysis (CBA)
benefits - costs
Σ benefit
Σ cost
=) net benefit is positive
=) intervention is COST-BENEFICIAL
• costs per 10 years: 80 mil. CZK
• outcomes per 10 y.: 480 mil. CZK
480 – 80 = 400 mil. CZK
• discounting 5%:
(480 – 80) / 1,0510 = 246 mil CZK
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Cost-effectiveness analysis (CEA)
• outcomes measured in natural units
– e.g. complex units: life years gained
– partial units: re-infections, blood pressure, cholesterol
levels
=) searching a drug which has the best impact
on disease history at a reasonable price
=) cost per clinical unit
=) cost per events avoided
=) cost per symptom-free days
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Cost-effectiveness plane
Difference in effects
Difference in costs
I
The new treatment
is more effective
and more expensive
II
The new treatment
is more effective
and less expensive
III
The new treatment
is less effective
and less expensive
IV
The new treatment
is less effective
and more expensive
4 possible quantitative results in a cost effectiveness analysis
REJECT
ACCEPT
Cost-effective?
ANALYSE!
Questionable…
ANALYSE?
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Cost-effectiveness ratio (CER)
• Complex changes of effectiveness:
– life years gained
10
7
10
5
0
5
10
drug A drug B
costs (x100 000) life years
Cost-effectiveness ratio (CER):
CA / EA ? CB / EB
1 000 000 / 10 ? 700 000 / 5
100 000 CZK / year <<<< 140 000 CZK / year
CER =
Cost of intervention
Therapeutic effect
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No difference in CER?
10
7
10
7
0
5
10
drug A drug B
costs (x100 000) life-years
CA / EA ? CB / EB
1 000 000 / 10 ? 700 000 / 7
100 000 CZK / year = 100 000 CZK / year
CER reflects cost per unit independently of other treatment options
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Incremental cost-effectiveness analysis
• incremental cost per unit of effectiveness
= cost per unit by switching from one
treatment option to an alternative treatment
option
– the extra cost per unit gained
Incremental Cost-Effectiveness Ratio:
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ICER
7
10
7
10
0
5
10
drug A drug B
costs (x100 000) life-years gained
ICER =
ICER = 100 000 CZK / LYG
ICER =
ICER = 60 000 CZK / LYG
1 000 000 – 700 000 1 000 000 – 700 000
10 – 7 10 – 5
10
7
10
5
0
5
10
drug A drug B
costs (x100 000) life years
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Cost-utility analysis (CUA)
• utility = preference of health state determined by patient or
general public
CUA
• the impact of treatment on factors of greatest importance to the
patient
– pain, mobility, social performance,…
– PROs – patient-reported outcomes
• measures effects on morbidity (quality of life) and mortality
(quantity of life)
= QALY (Quality Adjusted Life Year)
• enables the comparison of different healthcare interventions,
irrespective of the disease
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QALY calculation
• QALY
– length of life x quality of life
• utility = 1 -) perfect health
• utility = 0 -) death
• utility < 0 -) worse than death
1 year of perfect health (100%) 1 QALY
2 years 50% perfect health 1 QALY
2 years 100 % perfect health 2 QALY
2 years 25% perfect health 0,5 QALY
treatment of patient with 50% perfect health becoming to 75% 0,25 QALY gained
treatment of 4 patients with 50% perfect health becoming to 75% 1 QALY gained
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Cost-utility analysis (CUA)
costs (CZK)
estimated
survival
utility QALY
drug A 20 000 4,5 years 0,60 2,7
drug B 10 000 3,5 years 0,72 2,5
Example:
Cost-effectiveness incremental ratio:
Pe = (20000-10000) / (4,5-3,5) = 10 000 CZK / 1 LYG
Cost-utility incremental ratio :
Pu = (20000-10000) / (2,7-2,5) = 50 000 CZK / 1 QALY
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QALY x LYG
QALY
• chronic diseases
– slow progression (RA)
– uncomfortable
symptomatology (GERD)
– impact on work and mental
potential (schizophrenia)
– with exacerbations (asthma)
• elimination of adverse effects
– vomiting after chemotherapy
LYG
• progressive diseases
– high mortality
– poor prognosis
– serious complications
• asymptomatic disease
with serious
consequences
– dyslipidaemia
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Use of CUA:
• simple method for reimbursement of
different technologies
• no reflection of individual preferences
– length of life x quality of life?
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ad 5) utilization in practice
• decision making in national health policy
– drug registration, price settings and
reimbursement
• decision making in health services
(hospitals)
– inclusion to positive lists
• clinical guidelines
• patient satisfaction
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Impact of new drug on the market:
•• Budget impact analysis (BIA)Budget impact analysis (BIA)
Quality of life measurement
WHO 5 QoL
EQ-5D
FACT-C
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Quality of life questionnaires
• specific - disease specific questionnaires
– Functional Assessment of Cancer Therapy (FACT), Asthma
TyPE questionnaire, Arthritis Impact Measurement Scale
(AIMS), Multiple Sclerosis Quality of Life Inventory (MSQLI),
Beck Depression Inventory (BDI)
• generic (general) – quality of life questions, questions
on social emotional and physical functioning, pain, self-
care
– EuroQoL (EQ-5D), Nottingham Health Profile, Short Form 36
(SF36), Sickness Impact Profile
Methods to asses quality and quantity of life
– QALY (Quality Adjusted Life Year)
– DALY (Disability Adjusted Life Year – WHO)
– HYE (Health Year Equivalent)
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The EQ-5D descriptive system
• comprises 5 dimensions of health:
– mobility
– self-care
– usual activities
– pain/discomfort
– anxiety/depression
• each dimension comprises 3 levels:
– no problems
– some/moderate problems
– extreme problems
• a unique EQ-5D health state is defined by combining 1
level from each of the 5 dimensions
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By placing a tick in one box in each group below, please indicate which
statements best describe your own health today:
Mobility
I have no problems in walking about
I have some problems in walking about
I am confined to bed
Self-Care
I have no problems with self-care
I have some problems washing or dressing myself
I am unable to wash or dress myself
Usual Activities (e.g. work, housework, family or leisure activities)
I have no problems with performing my usual activities
I have some problems with performing my usual activities
I am unable to perform my usual activities
Pain / Discomfort
I have no pain or discomfort
I have moderate pain or discomfort
I have extreme pain or discomfort
Anxiety / Depression
I am not anxious or depressed
I am moderately anxious or depressed
I am extremely anxious or depressed
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EQ-5D
• a total of 243 possible health states is defined in
this way
• each state is referred to in terms of a 5 digit
code.
– 11111 indicates no problems on any of the 5
dimensions
– 11223 indicates no problems with mobility and
selfcare, some problems with performing usual
activities, moderate pain or discomfort and extreme
anxiety or depression.
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0
10
20
30
40
50
60
70
80
90
100
„To help people say how good or bad a health state
is, we have drawn a scale (rather like a thermometer)
on which the best state you can imagine is marked
100 and the worst state you can imagine is marked 0.
We would like you to indicate on this scale how good
or bad your health state is today, in your opinion.
Please do this by drawing a line from the box below
to whatever point on the scale indicates how good or
bad your health state is today.“
You own
health state
today
The EQ VAS
records the respondents self-rated health
status on a vertical graduated (0-100)
visual analogue scale
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FACIT
• FACIT = Functional Assessment of Chronic Illness
Therapy
• FACT-G: Functional Assessment of Cancer
Therapy – General
– constitutes the core of all subscales; the FACT-G can be
used with patients of any tumor type
• FACT-C: For patients with Colorectal cancer
www.facit.org
Pharmacoeconomics
in the Czech Republic
and in the world
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Pharmacoeconomic evaluation in the world
Australia, New Zealand Required for new drugs since 1993
Canada (BC, Ont.) Required for new drugs since 1995/6
Denmark Might be required or optional since 1997
France Might be required since 1997
Finland Required for new drugs since 1998
Italy Might be required since 1998
UK Authority of NICE since 1999
Sweden, Norway Required for new drugs since 2002
Netherlands Required for new drugs since 2003
Germany Cost-benefit analysis since 2007
Czech Republic CEA, BIA since 2008
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Cost-effectiveness thresholds
• USA…………………. 67.000 EUR / QALY
(93.500 USD/QALY )
• UK (NICE)..………… 38.000 EUR / QALY
(30.000 GBP /QALY)
• Canada……………… 56.000 EUR / QALY
(83.900 USD/QALY)
• Australia…………….. 35.000 EUR / QALY
(51.000 USD/QALY)
• Netherlands...………. 80.000 EUR/QALY
• Sweden.…………….. 70.000 EUR/QALY
• Czech Republic????
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T. Doležal; 2009
CR: GDP per capita in 2006
PE society: 346 000 - 1 037 000 Kč / QALY
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Pharmacoeconomics in the Czech Republic
www.farmakoekonomika.cz
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Pharmacoeconomics in the Czech Republic
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Pharmacoeconomics in the world
www.ispor.org
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Literature:
• T. Walley, A. Haycox, A. Boland: Pharmacoeconomics
– 2004, CHURCHILL LIVINGSTONE, Elsevier Science Limited, UK
• Kolektiv autorů: Základy farmakoekonomiky pro lékaře, lékárníky
a další pracovníky ve zdravotnictví
– 2007, ČFES Praha
• A. Haycox, E. Noble: What is health economics?
– www.evidence-based-medicine.co.uk
• Zdravotná starostlivosť, náklady, kvalita a výsledky. Výkladový
terminologický slovník ISPOR
– 2003, ISPOR
• J. Vlček, Macek, Mullerová: Farmakoepidemiologie,
farmakoekonomika, farmakoinformatika
– 1999, UK Praha, Farmaceutická fakulta Hradec Králové
• J. Holomáň, V. Foltán, J, Bielik a kol.: Základy farmakoekonomiky
– 2004, TISING spol.s.r.o., Nové Mesto nad Váhom, Slovensko