PHARMACO-ECONOMICS: THE COST OF HEALTH
Application of Pharmacoeconomics
PE utilizes for inform decision-making; moreover. This decision making in pharmacy perspective divided into two fundamental points:
• Evaluation of drug therapy
• Evaluation of clinical pharmacy.
Traditionally, PE methods were applied in the field of hospital pharmacy activities. The cost-effectiveness data were used to support the addition or deletion of a drug to or from a hospital formulary. However, currently, the pharmacoeconomic measurement of formulary procedures became a standardized part of numerous pharmacies and therapeutic team. In the past PE was mostly applied to drug therapy evaluations; however, different studies reveal a shift over the years in using PE for the justification of pharmacy services decision-making. Possible barriers to application of PE for drug decision-making identified as follows:
• The inadequacy of PE sophistication by hospital administrators and pharmacy directors.
• Incompetency of PE sophistication by pharmacy practitioners that create and interpret PE data.
• Deficiency of organizational resources in the application of PE such as time and financials.
• Financial plan and budgetary responsibilities (Web Pharmadost, 2017).
Figure 5. Parameters influencing the successful uptake and integration of biosimilars into US oncology practices.
The US FDA will provide a finalized pathway for biosimilar approval; this pathway will, in turn, influence the manufacturing and development process and the amount of clinical data needed for approval. The efficacy and safety of biosimilars will be monitored via ongoing pharmacovigilance practices to ensure that potential immunogenicity or adverse events with a given biosimilar can be identified quickly and addressed. Biosimilars have the potential to offer cost-savings with comparable efficacy and safety to innovator products. They are being used in the European Union, Canada, Japan, and Australia and may help with improving health outcomes while minimizing costs to patients and global healthcare systems. The overall value of a biosimilar is not determined solely by its pricing. Efficacy and safety relative to the reference biologic drug and competitive agents as well as development and manufacturing costs, treatment administration costs, and results from long-term safety monitoring are considered (Source: Henry et.al., 2014).
Pharmacoeconomic studies find value in
• Fixing the price of a new drug and re-fixing the price of an existing drug
• Finalizing a drug formulary
• Creating data for promotional materials of medicines.
• Compliance of requirement for drug license.
• Including a drug in the medical/insurance reimbursement schemes.
• Introduction of new schemes and programs in hospital pharmacy and clinical pharmacy.
• Drug development and clinical trials (National Library of Canada, 1997).
|Exhibit 2. Primary Components of Pharmacoeconomic Studies|
|The two primary components of pharmacoeconomic studies are measures of costs and outcomes. It can be measured using the five methods such as, Cost minimization analysis (CMA), Cost of Illness (COI), Cost effectiveness analysis (CEA), Cost-utility analysis (CUA), and Cost-benefit analysis (CBA).|
A. Cost of drug
Cost is defined as the value of the resources consumed a drug therapy of interest. It is the amount paid to the suppliers by the patient. Consequence is defined as the effects, outputs, or outcomes of the program of drug therapy of interest.
• Direct medical cost : This is what is paid for specialized health resources and services. It includes the physician’s salaries; the acquisition cost of medicine; consumables associated with drug administration; staff time in preparation and administration of medicines; laboratory costs of monitoring for effectiveness and adverse drug reactions.
• Direct non-medical cost : This includes cost necessary to enable an individual receive medical care such as lodging, special diet and transportation; lost work time (important to employers) such as acute Otitis media in pediatric patients with professional parents who lost work time during the treatment of their kid.
• Indirect cost : This is the cost incurred by the patient, family, friends or society. Many of these are difficult to measure, but should be of concern to society as a whole. This includes productivity loss in the society; unpaid care givers; lost wages; expenses of illness borne by patients, relatives, friends, employers and the government and; loss of leisure time.
• Intangible costs: These are costs related with the patient’s pain and suffering; worry and other distress of the family members of a patient; effect on quality of life and health perceptions. For example, patients of rheumatoid arthritis, cancer or having terminal illnesses in which quality of life is suffered due to adverse reactions of the drug treatment. These are difficult to measure in monetary terms but represent a considerable concern for both doctors and patients. Quality adjusted life year (QALY) is one method by which intangible costs can be effectively integrated in PE analysis.
The cost can be measured in following ways:
• Cost / Unit
• Cost / Treatment
• Cost / Person
• Cost / Person / Year
• Cost / Case Prevented
• Cost / Life Saved
• Cost / Daly (Disability-Adjusted Life Year)
B. Outcomes (The second fundamental component of a pharmacoeconomic study is outcomes or benefits). The expected benefits might be measured in:
• “Natural” units e.g. years of life saved, strokes prevented, and peptic ulcers healed etc.
• “Utility” units - Utility is an economist’s word for satisfaction, or sense of well-being, and is an attempt to evaluate the quality of a state of health, and not just its quantity. Utility estimates can be obtained through direct measurement (using techniques such as time trade off or standard gambles, or by imputing them from the literature or expert opinion. They are often informed by measures of quality of life in different disease states (Gattani et.al., 2009; TRASK, 2011; Ambrosioni, 2001; Jo, 2014)
Methods of Pharmacoeconomics
Pharmacoeconomics evaluation compares economic, clinical, and humanistic outcomes associated with different therapies. The evaluation mechanisms as described are frequently helpful in representing the cost impact of innovative treatments, yielding superior acceptance by healthcare providers, administrators, and the public.
The pharmacoeconomic methods divided into two separate classes:
1. An economic evaluation, such as Cost of Illness, Cost Benefit, Cost Effectiveness, Cost
Minimization, and Cost Utility.
2. Humanistic evaluation similar to Quality of life, Patient preferences, Patient satisfaction. These techniques used in a variety of fields and are applied increasingly to healthcare and Pharmaceuticals.
Figure 6: Drug Therapy Vs Alternative Therapy, Nature of Pharmacoeconomic Assessment (Source: Drummond, 2006). As significant progress was made in recent years and there are many alternative treatments, which are indicated according to the stage and the type of the disease, the age and health status of patient, and vary from surgery to hormonal treatment and chemotherapy. Time horizon, stage of the disease, patient age, therapy onset, benefit duration and time to recurrence may influence the results. Pharmacoeconomic analyses of alternative therapy options will improve decision-making and will help to optimize the use of scarce health care resources allocated to the patient care. Costs involved in pharmacoeconomic evaluation can be mainly divided into financial cost (mandatory cost) and economic cost (resource for which no mandatory payment is made) opportunity cost is the benefit foregone when selecting one therapy alternative over the next best alternative. Several costs can be measured when weighing up the cost of any invention. The first step in any cost analysis is identification of the various costs. These can be direct, indirect and intangible.
Economic evaluation methods
A. Cost-of-Illness Evaluation
A cost-of-illness (COI) evaluation identifies and estimates the overall cost of a particular disease for a defined population. This evaluation method is often referred to as burden of illness and involves measuring the direct and indirect costs attributable to a specific disease. The costs of various diseases, including diabetes, mental disorders, and cancer, in the United States have been estimated. By successfully identifying the direct and indirect costs of an illness, one can determine the relative value of a treatment or prevention strategy. For example, by determining the cost of a particular disease to society, the cost of a prevention strategy could be subtracted from this to yield the benefit of implementing this strategy nationwide. COI evaluation is not used to compare competing treatment alternatives but to provide an estimation of the financial burden of a disease. Thus, the value of prevention and treatment strategies can be measured against this illness cost.
B. Cost-Minimization Analysis
Cost-minimization analysis (CMA) involves the determination of the least costly alternative when comparing two or more treatment alternatives. With CMA, the alternatives must have an assumed or demonstrated equivalency in safety and efficacy (i.e., the two alternatives must be equivalent therapeutically). Once this equivalency in outcome is confirmed, the costs can be identified, measured, and compared in monetary units (dollars). CMA is a relatively straightforward and simple method for comparing competing programs or treatment alternatives as long as the therapeutic equivalence of the alternatives being compared has been established. If no evidence exists to support this, then a more comprehensive method such as cost-effectiveness analysis should be employed. Remember, CMA shows only a “cost savings” of one program or treatment over another. Employing CMA is appropriate when comparing two or more therapeutically equivalent agents or alternate dosing regimens of the same agent. This method has been used frequently, and its application could expand given the increasing number of “me too” products and generic competition in the pharmaceutical market.
C. Cost-Benefit Analysis
Cost-benefit analysis (CBA) is a method that allows for the identification, measurement, and comparison of the benefits and costs of a program or treatment alternative. Both the costs and the benefits are measured and converted into equivalent dollars in the year in which they will occur.
The CBA is also defined as a systematic process for calculating and comparing benefits and costs of a project, decision or government policy (hereafter, "project"). Broadly, CBA has two purposes:
1. To determine if it is a sound investment/decision (justification/feasibility),
2. To provide a basis for comparing projects. It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much.
CBA is related to, but distinct from cost-effectiveness analysis. In CBA, benefits and costs are expressed in monetary terms, and are adjusted for the time value of money, so that all flows of benefits and flows of project costs over time (which tend to occur at different points in time) are expressed on a common basis in terms of their “net present value.”
Table 1: CBA interpretation ratio
CBA engaged when
• Costs and benefits of desired therapeutic choices do not occur concurrently.
• Paralleling treatment plans with different objectives, because all benefits changed into dollar units.
• Evaluating a particular program or relating multiple programs. Nevertheless, treasuring health benefits in monetary terms can be confusing and controversial.
D. Cost-Utility Analysis
Cost-utility analysis (CUA) is an additional method for comparing treatment options. CUA incorporated patient preferences and health-related quality of life (QoL). The use of CUA is the most suitable method to utilize when comparing treatment alternatives that are life extending with serious adverse effects. For instance, treatment of cancer with chemotherapy, as well as those which produce a reduction in morbidity rather than mortality as treatment of arthritis. Cost measured in dollars. The term ‘quality-adjusted life year’ (QALY) is a standard measure of health status used in CUA combining morbidity and mortality data. The number of QALYs lived by an individual in one year is simply:
QALYs lived in one year = 1 * Q with Q ≤ 1
where Q is the health-related quality of life weight attached to the relevant year of life. The chosen treatment alternative is that with the lowest cost per QALY. Thus, QoL is the most important health outcome being examined as per patient preferences
E. Cost-Utility Analysis
CEA involves comparing therapeutic programs or treatment alternatives with different safety and
Efficacy profiles. It is an approach used for identifying, measuring, and comparing the significant costs and consequences of alternative interventions. A value measured in dollars, and outcomes measured in terms of obtaining a particular therapeutic outcome. These results often expressed in physical units, natural units, or non-dollar units for example lives saved, cases cured, life expectancy, or mm Hg drop in blood pressur. The outcome of CEA expressed as a ratio as well. The two possible methods for the CEA quotient are an incremental cost-effectiveness ratio (ICER) and an average cost-effectiveness ratio (ACER).
CEA is mainly practical in balancing cost with patient outcome, determining which treatment alternatives represent the best health outcome per dollar spent. It is also valuable in indicating when it is appropriate to measure outcome in terms of obtaining a particular therapeutic intention. For example, in comparing antiemetic agent for improvement of guidelines for the deterrence of emesis induces by chemotherapy, the Cost-effective analysis implemented (Gattani et.al., 2009; TRASK, 2011; Scaria et.al., 2015; Ahmed et.al., 2013; McGhan et.al., 1978; National Library of Canada, 1997)
Table 2: Summary of PE Methods.
Pharmacoeconomic Evaluation Steps
Pharmacoeconomic evaluation process contained several necessary steps useful in the health care system and nearly any therapeutic area or healthcare service.
1) Define the problem: A general question might be, "which antiemetic regimen represents the best value for the prevention of chemotherapy-induced emesis (CIE)?" However, a more succinct and measurable the problem would be "which regimen is the best value for preventing acute CIE patients receiving highly emetogenic chemotherapy?"
2) Gather various functional team members: Team members differ contingent on the analysis but may include members from medicine, nursing, pharmacy, hospital administration, and information technology and systems.
3) Define the perspective: Choose a study perception typically pertinent to the problem. For example, if the problem is similar as given in Step 1, then the institution or health care system perspective is a most appropriate chosen alternative.
4) Identify therapeutic preferences and outcomes: Treatment options include pharmacologic and non-pharmacologic choices. However, it should comprise all clinically relevant options. The identified outcomes should consist of both positive and negative clinical outcomes.
5) Determine the applicable pharmacoeconomic method: The methods of Pharmacoeconomic to choose from are CMA, CBA, CEA, and CUA. Employing the incorrect method can adversely affect medication decisions influencing both costs Moreover, quality of care.
6) Set a financial value on treatment alternatives and outcomes: Employing a financial value on treatment options and outcomes for drug administration and cost of purchase as well as the cost of positive and negative medical results.
7) Pinpoint resources to implement evaluation in a proficient method: Depending on the study, the necessary resources will fluctuate. However, it possibly will comprise entrance to medical or computerized records, regular medical personnel salaries specifically medical staff.
8) Detect possibilities that outcomes can transpire in the population under study: What are the likelihoods of the results recognized in step 4 (e.g. identifying therapeutic preferences and outcome) in fact to occur practically? By means of principal literature and professional selection, these probabilities can be acquired and perhaps expressed by way of efficacy rates and occurrence of ADRs.
9) Implement decision analysis: Numerous economic evaluations can be conducted by utilizing decision analysis, including CEA. Even though, Decision analysis and decision tree may not require forever evaluations in PE. However, they provide firm support for the verdict at hand. Using a decision tree, treatment options, results, and probabilities presented explicitly. Additionally, it can reduce algebraically to a single value for comparison (i.e., CEA ratio).
10) Discount costs, sensitivity, incremental cost analysis: Prospecting costs and consequences discounted back to their present value. Furthermore, sensitive variables tested over a clinically related range, and outcomes recalculated. If applicable, an incremental analysis of the costs and consequences should be made.
11) Present the outcome of study: The study results presented to the cross-functional team and the proper committees.
12) Cultivate a policy and procedure for intervention: Exploit the study outcomes and develop a policy and an intervention for the enhancement of healthcare quality and maintain efficiency.
13) Implement policy and educate professionals: Devote sufficient time and resources are cleverly executing the policy or intervention. Moreover, the healthcare professionals affected by the policy must be educated using different strategies such as verbal, written and online communication technology.
14) Follow-up documentation: Monitoring collected data after the implementation of policy and intervention for a practical period as this information will offer a response to the achievement and quality of the policy or intervention (Ahmed et.al., 2013; National Library of Canada, 1997; Parkis, 2006)
Figure 7. Medication Therapy Management Services (Source: APhA, 2008). Pharmacotherapy consult incorporates the pharmacist’s expertise into achieving desired therapeutic goals for patients by promoting safe, appropriate, and cost-effective use of medications. Patients requiring pharmacotherapy consults may have a single or multiple complex medical condition that require medication therapy to effectively manage. Pharmacists providing these services typically have advanced expertise and training in the subject area and may be Board Certified in their specialty by the Board of Pharmaceutical Specialties.
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