Lecture 7 (Methods Of Cost Analysis) PDF

Lecture 7 (Methods of cost analysis) 1 Lecture Goal (RECOGNIZE SOME OF DIFFERENT METHODS OF COST ANALYSIS) Lecture Contents:- 1. Cost Effectiveness Analysis (CEA) 2. A budget Impact Analysis (BIA) 3. Cost Utility Analysis (CUA) 4. Computer-aided Decision Ma...

Lecture 7 (Methods of cost analysis) 1 Lecture Goal (RECOGNIZE SOME OF DIFFERENT METHODS OF COST ANALYSIS) Lecture Contents:- 1. Cost Effectiveness Analysis (CEA) 2. A budget Impact Analysis (BIA) 3. Cost Utility Analysis (CUA) 4. Computer-aided Decision Making from Drug Discovery to Pharmacoeconomics 2 1- Cost Effectiveness Analysis 3  1. Cost Effectiveness Analysis A cost effectiveness analysis (CEA) is used to simultaneously compare the costs and outcomes of different interventions. The incremental cost effectiveness ratio (ICER) is the pharmacoeconomic endpoint when additional costs are incurred to achieve greater clinical benefit. However, the inability to compare interventions measured using different outcomes or across therapeutic classes may limit their usefulness to policy makers. To overcome this limitation, CEAs are often performed to yield intermediate outcomes in cost-utility analyses (CUAs) where the results are reported in cost per quality-adjusted life-year (QALY). 4 Pharmacoeconomic approach can be used to analyze the value of health services to the public, as opposed to the traditional market place scenario where values are measured by the prices that the patient or patron is willing to pay. The use of valid economic evaluation methods to measure the value and impact of new services can increase acceptance of such programs by the medical profession, third party payers and consumers. Pharmaco-Economics is based on long-term benefits, whereas physicians are typically forced to seek immediate savings. 5 Example Cost-effective therapy ofdiabetes mellitus will not only ensure rational drug use but also reduce patients dropping out of treatment because of cost, thereby reducing incidence of therapeutic failure by enhancing economic, clinical and humanistic outcome of therapy. Complications due to this disease would be reduced and improvement in patients’ quality of life would be achieved. Cost-Effectiveness tool appear effective when applied properly in therapeutic decision making. The various outcomes of therapy namely: economic, clinical and humanistic (psycho- social) outcomes are considered. 6 The required sample size was 351. However, 1, 200 of estimated population were studied due to availability of resources and to reduce error. A retrospective review of case-notes of the selected subjects for treatment options identification with diagnosis and average cost for a full course of each identified treatment option involving standard cost-accounting technique was conducted. 7  Cost Effectiveness Analysis indicates which intervention provides the highest “value for money” and helps to choose the intervention which maximizes health for the available resources. Cost Effectiveness Analysis was carried out by calculating: (i) The cost i.e. the resources required to implement an intervention. (ii) The effectiveness i.e. the extent to which current and potential interventions improves population health. It is otherwise known as outcome. 1) Total Cost of a Treatment Option = Mean Cost per Defined Daily Dosage (DDD) x Duration of Therapy Total cost of a treatment option (in monetary unit) 2) CEA = ----------------------------------------------------------------------------- Effectiveness of the treatment option (in natural unit) 8 The results of this study support the reported fact that cost effectiveness analysis could help to make decisions about whether new drugs should be included in a drug formulary list where decisions are made. These decisions are made based on the principle that if a drug is not better than a comparable product, it should not cost more, if it is 1- superior to existing therapies but 2- more expensive (a common situation) and 3- funds are available, any extra expenditure should represent “value for money”. 9 2- A budget impact analysis (BIA) A budget impact analysis (BIA) is an economic assessment that estimates the financial consequences of adopting a new intervention. A cost-effectiveness analysis evaluates whether an intervention provides value relative to an existing intervention (with value defined as cost relative to health outcome). A budget impact analysis evaluates whether the high- value intervention is affordable. 10 For example, a cost-effectiveness analysis may indicate that Drug A is a good value relative to Drug B, because it has an incremental cost- effectiveness ratio of $40,000 per Quality-Adjusted Life Year. This means that per person, one needs to spend $40,000 additional dollars to provide each patient with Drug A. If there are 50,000 patients within a health system that need this drug, the healthcare system will have to spend an additional $2 billion dollars to treat these patients, which may not be affordable. 11 The budget impact analysis focus is on the direct costs of specific resources needed to put the intervention into effect, such as supplies, equipment, and staff. Because the budget impact analysis uses a short-term time horizon, and overhead costs are fixed in the short term, these overhead costs are ordinarily excluded in budget impact analyses. This distinguishes budget impact analysis from cost-effectiveness studies, which include overhead costs. 12 Difference between BIA and CEA 13 3- Cost–Utility Analysis 14 Advantages of cost–utility analysis were developed to address the problem of conventional cost-effectiveness analysis, which did not allow decision-makers to compare the value of interventions for different health problems. Cost–utility analysis can capture the value of improvements in morbidity and mortality. Cost–utility analysis makes it clear what value is attached to specific health states, and this transparency then allows discussion among the stakeholders involved in decision-making (for example, patients, doctors, budget holders) about the accuracy and robustness of these utilities. Cost–utility analysis thus increasingly facilitates the transparency of resource allocation processes. 15 16 4-COMPUTER-AIDED DECISION MAKING Computational models are becoming more widely available based upon quantitative structure activity relationships (QSAR), or docking methods with individual proteins known to be important therapeutic targets or that have some relationships to toxicity. Such drug–drug interactions, or other adverse drug reactions, can have potentially fatal consequences for the patient or be very costly for health care providers. In addition, some applications of software in pharmacoeconomics and ultimately suggest how we could use such approaches to create a decision- making algorithm for pharmaceutical research and development. Computational tools should be used for computer-aided drug design and computer aided decision making as well. 17 Thank you for attention ! 18