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Pharmaco-Economics Basic Principles
Soumana Chamoun Nasser, Pharm.D.
Secretary, ISPOR Lebanon Chapter (LSPOR)
Objectives
• PE Basic Principles
• PE models and scenarios
• Cost definitions and Factors
• Steps to PE study Evaluation
History of Health Economics
• 1950s ---1970s – an increase in health expenditure • 1960’s – Cost-Of-Illness studies • 1970’s – Cost-Benefit approach accepted but concern
valuing health with money • 1980’s – Cost Effectiveness approach - cost per health
outcome measures • 1990’s – PE Evaluation: CBA/ CEA/ CUA
Jeff Richardson - Economic Assessment of Health Care: theory and practice, 1990
• 2000’s – Integration of CBA/CEA/ CUA in Decision making
What is Economic Evaluation?
Economic Evaluation: compare inputs & outputs of alternatives , to address issue of efficiency to help decision making for resource allocation.”
Choice
Option A
Option B CostsB
CostsA
ConsequencesA
ConsequencesB
What is PE Evaluation? PE is “the analysis of the costs and consequences of pharmaceutical products and services, and their effects on individuals, health care systems and society.”
Inputs ($$ of medical services) Outputs (Healthy)
PE objectives:
- to apply economic principles to pharma interventions
- to improve individual and public health outcomes
- to provide more rational decision making
...to produce efficient/ optimal ECHO in Healthcare
Health Economics
PE
ECHO System in PE Economic, Clinical, Humanistic Outcomes System
Clinical Outcomes
Mortality and Morbidity
Humanistic Outcomes
QOL, QALYs
Economic Outcomes Cost of therapy and effect on society e.g. decrease in hospital stay, faster return to employment, etc
What Question does PE study address?
Could this drug work?
Does this drug work?
Is it worth having this drug?
Efficacy
Effectiveness
Efficiency
Why we need PE?
• PE combines Effectiveness data with Cost data to produce Efficiency in HealthCare
To determine when
the outcome is worth the cost
relative to competing alternatives
Hospital Formulary..
Drug Guidelines
• Micro-economics
Pharmacy
/ Medical Services
Resources Allocation
• Macro-economics
When we apply PE ?
PE Principles
PE Question Alternatives Perception
CEA/CUA/CBA ? Costs & Outcomes
Decision Making Incremental A. Adjusting
Basic Principles in PE Analysis Rubik’s Cube – Rules of the puzzle
• Point of views (perspectives)
• Costs & Consequences (inputs + outputs)
• PE models (Analysis)
Viewpoint/ Perspective taken ? Point of view influences the outcomes and costs used in PE model
Point of View
Patient’s:
Therapy, productivity,
(direct & indirect costs)
Payers’:
Govnt, insurance
(direct M. cost)
Societal’s:
direct & indirect costs
Provider’s: hospital, drugs,
lab test
(direct M. cost)
Identify Type of Costs
• Which to include depends on perspective taken
Intervention
Direct Costs Indirect Costs
Cost implications to
patient/society
eg. lost production
Non-Medical
services.
eg. patient
transportation,
informal care
Medical services.
eg. Inpatient,
outpatient, tests,
drugs
Costs to family
and friends
Costs vs. Consequences • Identification
– Cost: perspective is important
– Consequence: mortality, morbidity units • (eg., LY’s gained, nbr of hospital days, BP reduction, QALYs)
• Measurement – Cost: distinguish bet. types of cost, and counting units
• (e.g. nbr of MD visits)
– Consequence: final vs intermediate outcomes • (change in clinical indicators vs. survival rate)
• Valuation – Cost: price is not equal to cost, and adjust for inflation/currencies
– Consequence: For CUA expressed as QALYs, For CBA expressed as WTP
Cost-Effectiveness Plane cost
cost
effect effect
NE quadrant: more costly, more effective
NW quadrant: more costly, less effective
SW quadrant: less costly, less effective
SE quadrant: less costly, more effective
PERFORM CEA
PERFORM CEA
DOMINATED
DOMINATES
Adapted from: Smith KJ et al. In: Arnold, RJG, editor. Pharmacoeconomics from theory to practice. Boca Raton: CRC Press; 2010. p. 95-108.
PE Models
Types of Economic Evaluation: C / E
Type of Analysis Result Consequences Costs
Cost Minimisation
Cost Benefit
Cost Utility
Cost Effectiveness
Money
Not necessarily
common measure.
Valued as “utility”
eg. QALY
Different magnitude of a
common measure eg.,
LY’s gained, blood
pressure reduction
Least cost alternative Equivalent
(efficacy & safety)
Money
Money
Money Cost per unit of
consequence. eg.
cost per LY gained
cost per QALY
valued in money
Net Benefit
or
Benefit to cost ratio
Steps to PE Study Evaluation
PE Evaluation – Decision-Tree Model
Rapid recovery
(p)
See doctor
1-(p)
Slow recovery
Become ill
Rapid recovery
(q)
Do not see doctor
1-(q)
Slow recovery
Decision node
INPPUTS (Costs)
Branches
terminal
Chance node
OUTCOMES (Clinical, ECHO)
Four Steps in PE Study Evaluation Deciding upon study Question
• Viewpoint taken
• Alternatives appraised
Assessment of costs and consequences
• Identification of relevant C&C
• Measurement of C&C
• Valuation of C (&C)
• Adjustment for timing
• Adjustment for uncertainty
• Incremental analysis performed
Incremental Analysis presented / discussed
• Making a decision
Well-defined Question?
Does the study compare competing alternatives?
Does the study examine both costs and consequences of each alternative?
Does the study state the viewpoint (perspective) taken?
Point of view influences the outcomes and costs used in a PE study
Viewpoint/ Perspective taken ?
Point of View
Patient’s:
Therapy, productivity, Copay
(direct & indirect costs)
Payers’:
Govnt, insurance
(direct M. cost)
Societal’s:
direct & indirect costs
Provider’s: hospital, drugs, lab
test
(direct M. cost)
Steps in PE Study Evaluation • Deciding upon study Question
• Viewpoint taken
• Alternatives appraised
Assessment of Costs and Consequences
• Identify relevant C&C
• Measure C&C
• Value C&C
• Adjustment for timing
• Adjustment for uncertainty
• Incremental analysis performed
Incremental Analysis presented / discussed
• Making a decision
Costs vs. Consequences • Identification
– Cost: perspective is important
– Consequence: mortality, morbidity units
• Measurement – Cost: distinguish bet. types of cost, and counting units
– Consequence: final vs intermediate outcomes
• Valuation – Cost: price is not equal to cost, and adjust for inflation
– Consequence: QALYs, clinical measures, hospitalization rate
PE Models – summary
PE models Costs Consequences
Cost Minimization m.u. Assumed Equivalent
Cost Effectiveness m.u. Natural Units
Cost Utility m.u. QALYs
Cost Benefit m.u. m.u.
Steps in PE Study Evaluation • Deciding upon study question
• Viewpoint taken.
• Alternatives appraised.
Assessment of costs and concequences
• Identification of relevant C&C
• Measurement of C&C
• Valuation of C (&C).
• Adjustment for timing
• Adjustment for uncertainty
• Incremental analysis performed
Incremental Analysis presented / discussed
Making a decision
Adjustments and Uncertainty
• Unit cost data may need to be adjusted for
– Time preference (Discounting)
– Price inflation (costs from different years)
– International currencies (different countries)
• Uncertainty (Sensitivity Analysis): • Account for impact of assumptions on findings • e.g. Efficacy rate 75% (60% - 90%)
Steps in PE Evaluation Deciding upon PE Question
• Viewpoint taken
• Alternatives appraised
Assessment of costs and consequences
• Identification of relevant C&C
• Measurement of C&C
• Valuation of C (&C)
• Adjustment for timing
• Adjustment for uncertainty
• Incremental analysis performed
Incremental Analysis – present & discuss
• Making a decision
Presentation – Discussion of Results
• What are the study results? – Interpret the meaning of the results – Discuss results of sensitivity analysis
• What are this study limitations?
– Interpreting and generalizing the results
• How relevant this study is (results vs defined-question)?
• How comparable this study is with other studies?
• What are the study implications?
– in a different institution/country
Applications of Results – Decision Maker
Applications of results – Viewpoints:
e.g. decrease hospital stay is cost effective from the Provider’s
perspective, but not necessarily from the Patient’s perspective
who will end up paying for outpatient care
– Generalizability & feasibility
What does the decision maker want to know?
– Is the cost justified by the outcome/Benefit (Efficiency)?
– Is the result robust or sensitive to parameters?
Sample - Study Abstract: Pharmacoeconomic analysis of paliperidone palmitate for treating
schizophrenia in Greece. Einarson et al. Annals of General
Psychiatry 2012, 11:18
BACKGROUND: Patients having chronic schizophrenia with frequent relapses and hospitalizations represent a great challenge, both clinically and financially. Risperidone long-acting injection (RIS-LAI) has been the main LAI atypical antipsychotic treatment in Greece.
Paliperidone palmitate (PP-LAI) has recently been approved. It is dosed monthly, as opposed to biweekly for RIS-LAI, but such advantages have not yet been analyzed in terms of economic evaluation.
PURPOSE: To compare costs and outcomes of PP-LAI versus RIS-LAI in Greece.
METHODS: A cost-utility analysis was performed using a previously validated decision tree to model clinical pathways and costs over 1 year for stable patients started on either medication. Rates were taken from the literature. A local expert panel provided feedback on treatment patterns. All direct costs incurred by the national healthcare system were obtained from the literature and standard price lists; all were inflated to 2011 costs. Patient outcomes analyzed included average days with stable disease, numbers of hospitalizations, emergency room visits, and quality-adjusted life-years (QALYs).
RESULTS: The total annual healthcare cost with PP-LAI was €3529; patients experienced 325 days in remission and 0.840 QALY; 28% were hospitalized and 15% received emergency room treatment. With RIS-LAI, the cost was €3695, patients experienced 318.6 days in remission and 0.815 QALY; 33% were hospitalized and 17% received emergency room treatment.
Thus, PP-LAI dominated RIS-LAI. Results were generally robust in sensitivity analyses with PP-LAI dominating in 74.6% of simulations. Results were sensitive to the price of PP-LAI.
CONCLUSIONS: PP-LAI dominated RIS-LAI... PP-LAI appears to be a cost-effective option for treating chronic schizophrenia in Greece compared with RIS-LAI since it results in savings to the health care system along with better patient outcomes.
Practice Example.......Article Analysis
• Step 1: (Q1-2-3)
• Step 2 (Q4-5-6)
• Step 3: (Q7-8-9)
• Step 4: (Q 10)
• Well-defined Question: Need to analyze cost and effectiveness of PP-LAI dosed monthly (recently approved), as opposed to biweekly for RIS-LAI in chronic schizophrenia from Payer’s perspective.
• Costs: all direct cost. Consequences: average days with stable disease, numbers of hospitalizations, emergency room visits, and quality-adjusted life-years (QALYs).
• Results: PP-LAI has higher cost with higher effectiveness.
• Adjustment: robust in sensitivity analyses with PP-LAI dominating in 74.6% of simulations.....while sensitive to the price of PP-LAI
• Incremental analysis: extra cost for extra benefit presented?
• Author: PP-LAI dominated RIS-LAI... cost-effective option for treating chronic schizophrenia
• Recommendation to decision maker: ????
Important Reminder when Evaluating PE Study
Know how • to interpret study findings
• to extrapolate study findings to a different setting
(point of view, economic status...)
– Is the decision maker (Not author) willing to pay that extra amount for the extra outcome?
• to apply data in another institution in a different
country (PE transferability)
– Each health care system operates differently
Conclusion HCPs are constantly evaluating patient care choices & acting on them
PE enhances the quality of our practice
by strengthening our evaluation process
to deliver better value in patient care
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