P-Economics in Hospital

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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P-Economics in Hospital