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7/31/2019 P-Economics in Hospital
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Strategic Management of Hospitals:
Pharmacoeconomics as a Decision Tool
Hiren Mehta
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Outline
Healthcare costs and choices
Pharmacoeconomics
Definitions
Methods
Applications Advantages and disadvantages
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Canadian healthcare spending
1975-2005 (millions)
y = 1E-63e0.0782x
R2 = 0.9662
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
1970 1975 1980 1985 1990 1995 2000 2005 2010
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Healthcare costs by type
0%
20%
40%
60%
80%
100%
1975 1980 1985 1990 1995 2000 2005
Other
Admin
Public Health
Capital
Drugs
Nursing, etc
Physicians
Institutions
Hospital
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Trends hospital $ (Source: CIHI)
Hospital share is decreasing
From 44.7% in 1975 29.9% in 2005
28.7% decrease in share Hospital expenditures
$5.5 billion in 1975 [Total: $12 billion]
$42.4 billion in 2005 [Total: $142 billion]677% increase [Total: 1064%]
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Trends drug $
Drug share increasing8.5% in 1985
17.5% in 2005
106% in share
Drug costs$1.1 billion in 1975
$24.8 billion in 20052200% increase
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Reasons for increases Increase in utilization
More people taking drugs
More population
More >65, free drugs (access)
More disease more drugs
Longevity more disease more drugs
Increase in costResearch costs money
New drugs research intensive
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Canada: population increase 1966-2006
y =0.3007x - 571.25
R2 =0.992
15
20
25
30
35
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
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Average cost per citizen covered
by BC PharmacareYear Cost
1987 $1921991 $354
1995 $406
1999 $478
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Drug costs on the rise
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Costs of therapy (cancer drugs)
600
1,6204,980
7,600
12,000
18,000
26,000
0
5000
10000
15000
20000
25000
30000
$pertreatm
ent
Chl
oram
bucil
CHOP
Flud
arabin
e
CHOP
+G-CSF
Ritu
ximab
CHOP
+Ritu
ximab
Borte
zomib
Drug acquisition costs
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Selecting drugs in hospital
Open formulary
No restriction
Pay for all drugs prescribed Formulary
Most standard drugs available
Medical staff + pharmacy decide on content Problem: demand exceeds budget
Need a method for judging relative merits
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Background
Economics = the study of the allocation ofresources
Health economics: application of economicprinciples to healthcare
Basis = value for money
Money = common denominator forcomparisons
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Pharmacoeconomics
Pharmaco = drugs
Application of health economics to drugs
and drug services
Techniques not different
Interpretations parallel
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Levels of analysis
Macro (population)
Most PEA is this type
Applies to the average in the populationRequires translation to apply to patients
Meso (group)
Usually applied at this level Micro (Individual)
Never done at this level in PEA
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DefinitionPharmacoeconomics:
Evaluation of a drug against one or morecomparators with respect toboth costsand outcomes.Comparator = depends on purpose
Placebo, do nothing
Standard treatment
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Why?
Resources scarce
Demands increasing
Forced to make choice
Pharmacoeconomics assessesvalue for money(common metric)
A tool for decision making
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Perspective Whose viewpoint?
Need to identify the audience for the report
Need to specify the analytic viewpoint
Determines:
Data collected
Valuation of resources
Interpretation of results
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Analytic perspectives
Society (Comprehensive, overall)
All costs considered, regardless of payer
Usually includes indirect costs
Payer
Insurer, government, individual
Standard:Societal + Ministry of Health (Canada)
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Types of cost
Direct costs
Indirect costs
Economic NOT accounting definitionsused in PEA
Overhead costs included in hospitalperspective
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Direct costs
Costs of resources consumed in treating patients
Cost centres:
Drugs (preparation, administration, monitoring)
Medical care (MD, specialist) Hospital (inpatient, units)
Laboratory (blood, urine, x-ray, NMR, CAT scans)
Allied healthcare (nursing, physio, massage, social work)
Transportation to therapy (sometimes)
Cost of managing ADRs
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Using costs
Use standard lists for cost values The standard price that any person would pay
Do NOT use special costs, bargains
Exception: hospitals analyzing their own data
Select year of analysis Usually current year or immediate past year
Standardize all costs to year of analysis Use health component of Consumer Price Index or
equivalent
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Indirect costs Lost productivity
Early death Time totally lost forever
Decreased ability to work Absenteeism due to disease
Presenteeism On the job, being paid, not inefficient
Caretaker time Problems
Leisure time, retired people
Consider lost time equal Under-employment/unemployment
Use Friction method Counts only time to train replacement personnel
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Time horizon
Analysis must be over enough time toallow for all important outcomesCancer drugs use lifetime
Antibiotics (acute) 1 month/3 months
Often use 1 year
Problem
Data availability over timeMust discount costs if >1 year
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Discounting
Preference for benefits now and costs later
NOT because of inflation
Based on stable rates for safe investments(government bonds, GICs, cash market)
Standard = 5%, vary in sensitivity analyses
over range 0-10%
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Summary: costs
A: Identify resources consumed B: Quantify resource use
C: Qualify (cost) that use
Use standard costsDiscount if over >1 year
Total cost = S Resourcei*Costi Average across all patients Extrapolate to population using
demographic statistics
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Outcomes: ECHO modelEconomicDollars
ClinicalPositive: Cure, life saved, life-year gained
Negative: Case avoided (disease, death)
HumanisticQuality of life, patient preferences
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QALYs Quality adjusted life-years
e.g., cancer patient
Estimate duration of life remaining Identify health states involved
e.g., Phases II-IVMeasure length of each health state Adjust each by utility value:
S Timei*Utilityi Average over all patients
Universal outcome Can compare across treatments Can compare across diseases
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Utilities
Standard gamble
Time tradeoff
Visual analog scale Whose?Patients
Accurate estimate of implications
Problem: adaptation to the condition
Normals (society) Need to help them understand the disease
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Preferred outcomes
Ultimate outcomes:Cure, life-year gained, QALY
Avoided cases of: Disease (vaccine)
Death
Avoid intermediate outcomesDecrease in BP, serum cholesterol, units on a
scale (pain, health status, etc.)
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Types of analyses
Cost-minimization
Cost-effectiveness
Cost-utility
Cost-benefit
Comparison ofefficacy /
effectiveness
Cost comparisonTwo or morealternatives
Cost-outcome
description (Non-comparative CBA)
Outcome
assessment (e.g.,Quality of Lifemeasurement)
Cost description
(Cost ofTreatment,Burden of Illness)
One (No
comparison ofalternatives)
Costs +Outcomes
Outcomesonly
Costs onlyAlternatives
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Cost analyses (non-PEA)
Burden of sickness
Cost of illness
Financial feasibility
Implementing a new pharmacy service
E.g., cost-revenue model
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Burden of sickness/illness Macro level (population based)
Top down analysis
Dollars spent on a disease
Direct costsDrugs, MD, hospital
Indirect costsMorbidity, mortality, time lost from work,
decreased productivity (presenteeism), etc.
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Cost of illness/Cost of treatment
Micro level
Bottom up analysis
Individual based Itemize resources consumed
Drug, visits to MD, tests, etc.
Chart review, database analysis, modelled
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Approaches to COI analysis Incidence based
Start at onset of disease Follow until resolution/death E.g., Gonzalez JC, Einarson TR. Cost of Type-2 diabetes in Colombia.
PharmacoEconomics 2008 (in press). Prevalence based
Cross sectional All cases in one year Example: Pain due to multiple sclerosis: analysis of
the prevalence and economic burden in Canada. PainRes Manag 2007;12(4):259-65
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Contribution
Identifies costs
Burden to society
Cost to treat individual Basis for pharmacoeconomic evaluation
(Baseline)
BUT, does not address appropriateness or
outcomes
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COI Example: bisphosphonatesResource Cost
Bisphosphonate $5,421
Other Drugs $6,290
Hospital $18,229
Clinic $7,715Laboratory $2,020
Imaging $3,355
Radiation $2,657Physicians $2,170
Total $47,857
Kruk. Supportive Care in Cancer2004; 12: 844-51.
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Burden of ADRs (USA)
Resource Events Cost (millions)
Physician visits 115,654,949 $7,460
Additional prescriptions 76,347,604 $1,933
Emergency visits 17,053,602 $5,321
Hospital admissions 8,761,861 $47,445
LTC admissions 3,149,675 $14,399
Deaths 198,815Total $76,558
Johnson. Arch Intern Med 1995;155(18):1949-56.
O O O
O O O
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HOSPITAL CARE EXPENDITURE BY DIAGNOSTIC CATEGORY, CANADA,1993
DIAGNOSTIC CATEGORY 1993 Cost($1000)
% ofTotal
Cardiovascular Diseases 4,862,322 18.6
Mental Disorders 3,631,788 13.9
Cancer 2,467,408 9.5
Injuries 2,253,487 8.6
Digestive Diseases 2,093,374 8.0
Respiratory Diseases 1,788,230 6.9
Pregnancy 1,649,707 6.3
Well-patient Care 1,349,205 5.2
Musculoskeletal Diseases 1,285,910 4.9
Genitourinary Diseases 1,075,828 4.1
Nervous System and Sense Organ Diseases 792,862 3.0
Endocrine and Related Diseases 526,785 2.0
Perinatal Conditions 518,012 2.0
Infectious and Parasitic Dieseases 345,071 1.3
Birth Defects 231,923 0.9
Skin and Related Diseases 223,015 0.9
Blood Diseases 156,808 0.6
Ill-defined Conditions 844,567 3.2
TOTAL 26,096,300 100.0
SUBCATEGORY
Coronary Heart Disease 1,571,999 6.0
Stroke 1,258,063 4.8
Chronic Bronchitis / Emphysema / Asthma 636,491 2.4
Motor Vehicle Traffic Accidents 283,106 1.1
Diabetes 274,621 1.1
Female Cancers 206,068 0.8
HOSPITAL CARE EXPENDITURE BY DIAGNOSTIC CATEGORY, CANADA,1993
DIAGNOSTIC CATEGORY 1993 Cost($1000)
% ofTotal
Cardiovascular Diseases 4,862,322 18.6
Mental Disorders 3,631,788 13.9
Cancer 2,467,408 9.5
Injuries 2,253,487 8.6
Digestive Diseases 2,093,374 8.0
Respiratory Diseases 1,788,230 6.9
Pregnancy 1,649,707 6.3
Well-patient Care 1,349,205 5.2
Musculoskeletal Diseases 1,285,910 4.9
Genitourinary Diseases 1,075,828 4.1
Nervous System and Sense Organ Diseases 792,862 3.0
Endocrine and Related Diseases 526,785 2.0
Perinatal Conditions 518,012 2.0
Infectious and Parasitic Dieseases 345,071 1.3
Birth Defects 231,923 0.9
Skin and Related Diseases 223,015 0.9
Blood Diseases 156,808 0.6
Ill-defined Conditions 844,567 3.2
TOTAL 26,096,300 100.0
SUBCATEGORY
Coronary Heart Disease 1,571,999 6.0
Stroke 1,258,063 4.8
Chronic Bronchitis / Emphysema / Asthma 636,491 2.4
Motor Vehicle Traffic Accidents 283,106 1.1
Diabetes 274,621 1.1
Female Cancers 206,068 0.8
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Pharmacoeconomic
analysisProperties
ModelsOutcomesIssues
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Pharmacoeconomic analysis
Compare 2 or more options Need to identify, describe each
Usually a new drug trying to enter the market
Requires an estimate for each of: Costs
Outcomes produced
Other requirements: Analytic time horizon, perspective, discount rate(s)
Clinical consequences and their management
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Purpose of PEA
Permission to market drug NOC in Canada
License in other countries
Acceptance by formulary Provided by system (e.g., ODB)
Paid by insurer (in whole or in part)
Purpose
model, approach
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Approaches: licensure Population based model
Evidence = Efficacy data
Data source = RCTs
Assume full compliance, ideal conditions
Per protocol analysis Defined population
Limited to eligible patients who take full treatment
Comparator = placebo, standard
Viewpoint = societal
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Approaches: formulary Meso (Group) model
Evidence = Effectiveness data
Data source: Effectiveness trials
Real life experience
Unselected patients
Compliance matters
Model via RCT + other factors (adherence)
Intent-to-treat analysis Population = all possible candidates
Comparator = standard therapy
Viewpoint = payer
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Product
Need to describe drug in detail
Identify therapeutic category
ATC system
Comparators
What is being used now
Utilization rates, costs, burden Justify WHY this drug is being examined
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Population
Indication
Disease How diagnosed, classified, e.g., ICD-10
Severity Mild, moderate, severe
Population
Types of patients Males, females Ages
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Comparator Placebo
Form identical to drug of interest
Do nothing alternative
Standard therapyGuidelines
Actual practice
Expert panel
Hospital setting:
Usual treatment
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Pharmacoeconomic modelsProspective
RetrospectivePredictive
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Prospective models
Pharmacoeconomic RCT
Designed specifically for PEA
Add-on to clinical RCTPiggy-back trials
Collect data
Identify resources used
Cost concurrently or later
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RCT advantages Prospective data collection
Data are stochastic Can calculate Mean, SD
All factors controlled Ideal conditions Provides efficacy data
Valid for NOC, licensing
Disadvantages:
Sample not representative Patients, conditions, drugs taken, age, sex, etc. Cannot extrapolate results to real life
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Retrospective models
Model existing RCT
Chart review
Database analysis
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Modelling RCTs Easy to do
Efficacy from trial
Determine costs
Problems: Retrospective bias
Artificial conditions (extrapolation)
Requires expert input
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Chart Reviews Easy to do, not expensive (usually)
Problems:
Time consumingMissing data
Outcomes
Resources used (not planned for)
Patients d/c, re-entry, move
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Database Analyses
Available, easy to use
Powerful - huge samples
Versatile:Cohort, case control, matching
Time series, cross sectional
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Disadvantages
Missing data
Diagnosis, outcomes, status (smoking, alcohol, etc)
Confounding
Causation = ? Assumptions (Consumption, indication, compliance)
Cost = large, delays long
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Predictive decision models Most common model
Relatively easy to perform
Software (TreeAge/Data
) Often require expert panel
Applies to average patient
Population based
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Decision Types
Decision treeFixed time period
Non-recursive (one-way only)All outcomes included
Markov modelRecursive model (can move backwards)
Cumulates values over time
Versatile
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Markov model
EDSS 6-6.5
EDSS 5-5.5
EDSS 4-4.5
EDSS 3-3.5
EDSS 2-2.5
EDSS 0-1.5
Monosymptomatic
Clinically
Defined MS
Second Event
1st Year Transitions
Expanded Disability Status ScaleIskedjian et al. Multiple Sclerosis2005; 11: 542-51
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Markov model
Monosymptomatic
EDSS 0-1.5
EDSS 2-2.5
EDSS 3-3.5
EDSS 4-4.5
EDSS 5-5.5
EDSS 6-6.5
Second Event
Multiple Year Transitions
Iskedjian et al. Multiple Sclerosis2005; 11: 542-51
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Base case analysis Identify what happens to the typical
patient
Number of treatments undergoneComponents of each treatment
Resources consumed
What happens if success, fail, etc.
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Requirements for PEA
Drug of interest
Comparator(s)
Measurements of both Success (and/or other) rates Costs of inputs (in $)
Patient outcomes
Outcomes expressed incrementally
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Clinical efficacy
Source of data RCT
Head-to-head or IndirectObservational studies
Type of data
Intention to treat
Per protocol (completers)
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PEA types
CCA = cost consequence analysis
CBA = cost benefit analysis
CMA = cost minimization
CEA = cost effectiveness
CUA = cost utility
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Cost consequence (CCA)
No summary statistic calculated
Costs valued in $
Outcomes quantified and listed
Reader judges importance
Could be in every PEA
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Cost benefit (CBA)
Measurement:Costs $
Outcomes $ Benefit: Cost ratio calculatedB:C >1 socially beneficial
Incremental ratio used
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CBA example
If a program costs $2000 and produces$5000 in benefits, as compared with theexisting program costing $1000 with
benefits of $2000, Ratio1 = $5000/$2000 = 2.5
Ratio2 = $2000/$1000 = 2.0
Since ratio1:2 = 2.5/2.0 =1.25 >1, the newprogram produces more benefits and ispreferred, if affordable
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CBA Advantages:
Theory based
Can use willingness to pay
Contingent valuation
Disadvantages
Valuations
Intangibles (pain, suffering)
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Cost minimization (CMA)
All outcomes sameMust be demonstrated
Consider only costs Decision rule: lowest cost is preferred
choice
Example: gent vs tobra ??
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Cost-effectiveness (CEA)
Costs = $
Outcomes = natural units
Cures, deaths avoided Intermediate outcomesNot desirable (need linkage)
e.g., Blood level (cholesterol)
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Cost utility (CUA)
Cost = $
Outcome = patient utility
QALY = quality adjusted life year Assess quality of life utility Quantify and adjust by utility
Compare incrementally between drugs
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Interpreting outcomes
Incremental cost-outcome ratio:
Cost1 Cost2__________________
Benefit1 Benefit 2
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Incremental analysis
Compare costs and outcomes
Ideal = lower cost + better outcomes
Usual = more cost more outcome Problem = assessment
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Incremental CEA
If cost lower + benefit greater = dominant
If incremental cost cost/outcome, then
CEA If lower cost + lower outcome, could be
OK
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Interpretation of PEA results
Outcome+
Outcome-
Cost+
IncrementalCE
Dominated
Cost- Dominant ???
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Interpretation: Suggestion
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CEA example
New drug cost = $500, cure = 0.7 (70%)
Old drug cost $400, cure = 0.5 (50%)
ICER = ($500 - $400)/(0.7 0.5) = $500 peradditional cure
Old drug cost $400/0.5 = $800/cure; therefore,the new drug is cost-effective and should be
adopted, if it can be afforded
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CEA example 2
New drug cost = $500, cure = 0.7
Old drug cost $100, cure = 0.5
ICER = ($500 - $100)/(0.7 0.5) = $1,000 per additional cure
Requires judgment (no real rules)
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CEA interpretation
Dominant = adopt (if affordable)
If the incremental cost cost/outcome of
standard, then the new drug may beconsidered to be cost effective
Otherwise, judgment required
S
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Summary
PEA requires at least 1 drug and 1comparison treatment
PEA involves simultaneous analysis ofcosts AND outcomes
Decision makers prefer dominanttreatments they provide savings;incremental cost-effectiveness involves
increased costs
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Thank You
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