Basic Concepts of Pharmacoeconomics 2024 PDF

Basic concepts of pharmacoeconomics Lecture 1 DR/ MARWA MOSTAFA MOHAMED PHD BIOINFORMATICS AND MEDICAL STATISTICS, CPHQ ,TOT,GAHAR PHARMACOECONOMIC- PHARMACOGENOMIC DR MARWA MOSTAFA MOHAMED 1  Learning outcomes Intr...

Basic concepts of pharmacoeconomics Lecture 1 DR/ MARWA MOSTAFA MOHAMED PHD BIOINFORMATICS AND MEDICAL STATISTICS, CPHQ ,TOT,GAHAR PHARMACOECONOMIC- PHARMACOGENOMIC DR MARWA MOSTAFA MOHAMED 1  Learning outcomes Introduction Outcomes Cost perspectives What and why ECHO model Types Types pharmacoeconomics examples examples 2 DR MARWA MOSTAFA MOHAMED Health care concept  Economics is about how we, individuals, society and governments, choose to use fixed resources. Fixed resources can be, for example, time, effort, money, machinery or buildings.  Health economics is the application of economic principles to the production and consumption of health in the population  Health care economics examines the economics of health care provision  Pharmacoeconomics applies economics to the provision of pharmaceutical services DR MARWA MOSTAFA MOHAMED 3  All economic problems arise from scarcity  i.e. Health care funders (governments, social security funds, insurance companies) are struggling to meet their rising costs.  Health economics is the science of assessing cost and benefits, not to make decisions about resource use, but to inform those decisions. DR MARWA MOSTAFA MOHAMED 4 Economists view of the world…  Pessimist: bottle ½ empty  Optimist: bottle ½ full  Economist: bottle ½ WASTED!! 5 DR MARWA MOSTAFA MOHAMED 5  What is Health Economics?  Theoretical framework to help healthcare professionals ,decision-makers or governments to make choices on… …HOW to maximize the health of population given constrained health producing resources.  What health economists need is…  To understand the relationship between resources used and health outcomes achieved by alternative options.  …and compare! 6 DR MARWA MOSTAFA MOHAMED 6 Pharmacoeconomics -the importance for pharmacists  Pharmacoeconomics is a relatively new branch of health economics. Some countries insist on pharmacoeconomics evaluations as part of the licensing process.  Hospital use pharmacoeconomics to inform decisions involving formularies and how medicines can be used in a more cost-effective or cost-beneficial manner. DR MARWA MOSTAFA MOHAMED 7 What and Why pharmacoeconomics?  Pharmacoeconomics is a branch of health economics that particularly considers drug therapy. It is of particular interest to pharmaceutical companies which are interested in developing new drugs Beside proving of efficacy, safety and tolerability must now prove cost effectiveness. It should be also of interest to clinical pharmacologists, either in their roles assessing new drugs or in the conduct of clinical trials. DR MARWA MOSTAFA MOHAMED 8 What and Why pharmacoeconomics?  It is also of important to governmental decision makers; Pharmacoeconomics studies have become an accepted part of evaluations for reimbursement and health intervention commission  Health economics/Pharmacoeconomics is about making choices between options, when there is scarcity of resources. It is fundamentally comparative, weighing the costs and benefits of option 1 with those of option 2 Drug 1 vs. Drug 2 (a new drug and the previous best therapy -traditional medical) DR MARWA MOSTAFA MOHAMED 9 Main Aim of Health economics  To identify what is most efficient, so that the greatest amount of benefit can be bought for a given amount of money or resources.  Efficiency is a key concept in economics, i.e. how to buy the greatest amount of benefit for a given resource use.  What is the difference between efficiency and effectiveness?? DR MARWA MOSTAFA MOHAMED 10 4 Es a.Efficacy is the degree to which an intervention works. Efficacy is determined by results achieved in carefully designed and well-controlled studies. These explanatory studies have high internal validity providing good cause and effect information. The highest levels of evidence are efficacy studies. b. Effectiveness is the degree to which the intervention can work in practice. Outcomes research is interested in effectiveness or the results achieved in the real world. When using observational studies to provide external validity, only an association can be identified. Pragmatic randomized controlled studies are designed to incorporate cause and effect and external validity. DR MARWA MOSTAFA MOHAMED 11 4 Es c. Efficiency is an assessment of whether the intervention is worth its price. Efficiency is the measurement of the resource use function of value. Pharmacoeconomics provides efficiency evaluations. d. Equity is an assessment of whether the intervention represents a fair allocation of resources. Ethics is an underlying component of equity and is an assessment. PRO analysis ( patient reported outcome)can provide some insight into equity decisions. DR MARWA MOSTAFA MOHAMED 12 Definitions Cost : The total resources consumed in providing a good or service Price : The amount of money required to purchase an item. Drug Effectiveness : The effects of a drug when used in real life situation. Drug Efficacy : The effects of drug under clinical trial condition DR MARWA MOSTAFA MOHAMED 13 Outcome research vs pharmacoeconomics outcomes research: Outcomes research, according to Marcinko and Hetico, is “research on measures of changes in patient outcomes (such as patient health status and satisfaction resulting from specific medical and health interventions) pharmacoeconomics: One of the many independent subcategories of outcomes research is pharmacoeconomics, which, according to McGhan, is Kozma et al. described pharmacoeconomics as the systematic framework for decision-making based on the evaluation of pharmaceutical alternatives “the field of study that evaluates the behavior or welfare of individuals, firms, and markets relevant to the use of pharmaceutical products, services, and programs” DR MARWA MOSTAFA MOHAMED 14 DR MARWA MOSTAFA MOHAMED 15  Value: Much of the recent health care reform is oriented to a value- based system. Value is defined by Porter as “health outcomes per dollar spent,” where patient health outcome is equal to clinical outcome plus quality of the outcome plus satisfaction Trying to balance the need for access and quality with the constraints of finite resources DR MARWA MOSTAFA MOHAMED 16 Outcomes Definition: Health-related outcomes are often the objects of assessment in health care evaluations. Outcomes (also known as consequences or benefits) are the ultimate result of a pharmacy intervention or service. Important to pharmacoeconomic analyses is the end point, or how the outcome is being measured The economic, clinical, and humanistic outcomes (ECHO) model creates a visualization of the relevant outcomes for the intervention. ECHO Model: In 1993, Kozma et al. presented a model that has become the classic in categorizing the measurements of health care while preserving the overlapping relationships DR MARWA MOSTAFA MOHAMED 17 ECHO model The model portrays an optimal balance of the types of outcomes that establish ultimate value. Outcomes are stated in directional terms (usually as the desired change). 1. Clinical outcomes are changes in biomedical and physical events. 2. Economic outcomes are changes in the use of resources. 3. Humanistic outcomes are changes in patient status or quality of life. DR MARWA MOSTAFA MOHAMED 18 DR MARWA MOSTAFA MOHAMED 19 Types of Outcomes: Some outcomes can be quantified and accurately determined (e.g., death, myocardial infarction) but are often rare or take a long time to manifest. Other outcomes are more difficult to measure (e.g., depression, pain, quality of care) To decrease sample size or research time 1- Surrogates may be intermediary in the continuum to the quantifiable outcome or final end point as decrease in lumen diameter as a surrogate for myocardial infarction 2-Surrogates that are not intermediary but that are established as clinical indicators (e.g., laboratory values or physical transformations) are also used; for example, blood pressure readings are not intermediary but have a positive association with myocardial infarction or stroke. 3- Adverse effects and pain management may serve as surrogates for humanistic outcomes such as satisfaction; adverse effects may be a surrogate for quality of life, and satisfaction may be used as a surrogate for quality DR MARWA MOSTAFA MOHAMED 20 Case study, : Identifying Outcomes Diabetes mellitus has several outcomes. use The ECHO model to identify these outcomes. Identify as many outcomes in each category as possible. Include some direct and some surrogate outcomes for each. Clinical outcomes Economic outcomes Humanistic outcomes decreased fasting plasma glucose, decreased total dollars, increased quality of life, hemoglobin A1C, albuminuria, emergency department visits, satisfaction with care, adherence, foot infections (or cure of hospitalizations, ICU hours, and and ability to care for self. infection), end-stage kidney clinic visits. Increased use of Decreased pain (which can also be disease, retinopathy, neuropathy, glucometer strips and clinical) and loss of work (which is and life-years. pharmaceutical expenses would also an economic outcome) be a surrogate for adherence, which is a humanistic outcome. DR MARWA MOSTAFA MOHAMED 21 COSTS Costs are the resources used (resource consumption). Pharmacoeconomic analysis are being used because resources are finite and because if a resource is used, say for health care, it cannot be used for any other purpose. This is known as the opportunity cost, where, even more specifically, the resource cannot be used for its next best use. Evaluation of alternatives, pharmacy-related in pharmacoeconomics, can identify the alternative with the most efficient use of resources or the use that provides the highest value. DR MARWA MOSTAFA MOHAMED 22  Concept of opportunity cost “ The value of forgone benefit which could be obtained from a resource in its next-best alternative use”. Pg ‘A’ Pg ‘B’ Budget The aim is to choose activities where benefits outweigh opportunity cost. 23 DR MARWA MOSTAFA MOHAMED 23 Opportunity costs  Opportunity costs reflect the fact that choices have to be made between interventions because of the scarcity of resources.  It can be used to explain the consequences of choosing between two alternatives.  e.g. Imagine we have a choice of two effective treatments, A and B, but only enough money for one of them.  If treatment A is funded rather than treatment B, the opportunity cost of funding A is the benefits we forgo in not choosing B; the next best alternative use of the resources.  We need to be sure that spending money on the new therapy will buy more benefit than spending that money in some other part of the health care system (efficiency) DR MARWA MOSTAFA MOHAMED 24 Example  Two possible interventions: a cancer screening programme (intervention A) and the next best alternative, a smoking cessation programme (intervention B).  Only one of these interventions can be funded within the available budget.  The opportunity cost of funding A can be thought as the benefits that would have been gained through the smoking cessation programme. DR MARWA MOSTAFA MOHAMED 25 Presentation of Costs A. Microcosting: Each item is priced separately (e.g., the drug, syringe, catheter, time to prepare, time to administer). Microcosts are time-intensive to collect and can have a broad range of variation, so many providers, such as hospitals, use a technique to estimate these costs, called a cost-to-charge ratio. b. Aggregated: An average cost for the sum of the individual items is combined into a cost for a unit of resource (e.g., an intensive care unit [ICU] hour). Aggregation can be a simple average or can entail complex processes. DR MARWA MOSTAFA MOHAMED 26 Costs include fixed costs and variable costs. a. Fixed costs are costs that exist whether or not patients are present; these include the costs of major equipment or buildings. b. Variable costs are those that differ depending on the needs of the patient, such as amount of drug received or amount of time spent by a pharmacist calculating doses. Costs are always reported in a monetary unit DR MARWA MOSTAFA MOHAMED 27 Types of Costs DR MARWA MOSTAFA MOHAMED 28 Cost Category Costs Direct medical costs Medications Supplies Laboratory tests Healthcare professionals' time Hospitalization Direct nonmedical costs Transportation Food Family care Home aides Indirect costs Lost wages (morbidity) Income forgone because of premature death (mortality) Intangible costs Pain Suffering Inconvenience Grief Opportunity costs Lost opportunity Revenue forgone DR MARWA MOSTAFA MOHAMED 29 Direct costs Direct costs are divided into two categories: direct medical and direct nonmedical. a. Direct medical costs direct medical costs refer to the expenses incurred in providing healthcare services. They are the primary focus of government healthcare expenditure These costs encompass various components such as drugs, medical devices, laboratory tests, clinic visits, hospital stays, surgeries, emergency department visits, and labor costs. DR MARWA MOSTAFA MOHAMED 30 Direct nonmedical costs i. Direct nonmedical costs are those that would not be expended in the absence of the disease but are not considered medical purchases. ii. These include transportation, child care, special diets (not including medical supplements), modification of the home, lodging, and away meals. DR MARWA MOSTAFA MOHAMED 31  Indirect cost a. Indirect costs in pharmacoeconomic analyses include only the costs of lost productivity caused by morbidity and mortality. b. The longest-studied indirect cost is lost workdays (hours), which is called absenteeism. The cost of absenteeism may be directly measurable if sick leave is paid or a replacement is used or can be estimated by the cost of not getting the work completed. c. A more difficult indirect cost to measure, but one with increasing research reports, is presenteeism, the cost of lost productivity of being at work but not producing at the expected level. DR MARWA MOSTAFA MOHAMED 32  Indirect cost e. Valuing the indirect cost of being a child, retired person, or unpaid worker (homemaker, volunteer) is difficult. f. Wage disparities within a country and between countries affect the ability to establish generalizable valuation of indirect costs. Two types of methods try to establish this valuation, and each will give different valuations.(Methods to Estimate the Monetary Value of a Health Benefit ) i. Human capital approaches Ii Willingness to pay (WTP) DR MARWA MOSTAFA MOHAMED 33 i. Human capital approaches: The human capital approaches measure the cost of lost productivity in wages. (a) Pure human capital approach, also known as the forgone earnings approach, uses wages as the basis. If actual wages are not known, this approach uses a sample of individuals and creates a comparable earnings estimate for that group (by age and sex). (b) frictional cost, which is the cost to replace the worker. Value of productivity loss during friction period , Acute illness is not captured, The frictional method is a conservative estimate of indirect costs. (c) Washington Panel Approach, which separates the friction costs from productivity costs, with only the latter included in quality of life assessment. DR MARWA MOSTAFA MOHAMED 34  ii. Willingness to pay 1. Willingness to pay (WTP) is an often-used method to measure the benefit of an intervention by providing the maximum amount that people are willing to pay for it (or to prevent an adverse outcome such as lost productivity); a measure of what values to them. 2. The methods to obtain WTP (contingent valuation) include a question or series of questions about payment based on a carefully phrased question. 3. The question can be a simple “Would you pay X amount?”, choosing a card (from a continuum of prices) that indicates how much you would pay, or a bidding game that goes up or down depending on the answer to a previous price. 4. Each of these has its advantages and problems. The first price or range of prices can bias the results; adjustments are made for variations in incomes. 5. Although some question the technique, WTP is conducted on large sample sizes and has been found to be reliable, valid, and generalizable (for most English-speaking countries, if conducted in an English-speaking country). DR MARWA MOSTAFA MOHAMED 35 DR MARWA MOSTAFA MOHAMED 36 Intangible costs: These are the aspects of loss of health that are related to the personal costs such as effects of pain or decreased social and role functioning. Placing a valuation on these is very difficult; therefore, they are often not included in pharmacoeconomic analyses.  Techniques that can be used are WTP or incorporating the costs into the quality of life evaluations DR MARWA MOSTAFA MOHAMED 37  Perspectives of Pharmacoeconomics Evaluations DR MARWA MOSTAFA MOHAMED 38 PERSPECTIVE A. Viewpoint: One of the basic concepts in pharmacoeconomic analysis is that of perspective (viewpoint), and the valuation of those costs will be used in the analysis. Most discussions of perspective have four categories: society, payer, provider, and patient DR MARWA MOSTAFA MOHAMED 39 Society: The societal perspective is considered the preferred viewpoint for most pharmacoeconomic analyses This perspective is the combination of all other perspectives and, in its pure form, includes all types of costs. This makes it very difficult to conduct  At times, government can serve as the proxy for the societal perspective if it is making policy for the good for the public. If the government is serving as the source of health insurance, the perspective is that of payer. DR MARWA MOSTAFA MOHAMED 40 Payer: The payer perspective is most concerned with direct medical costs. Depending on the purpose of the evaluation, indirect costs (preventing loss of productivity) and intangible costs (satisfaction) can be important in the payer perspective. DR MARWA MOSTAFA MOHAMED 41 Provider: The provider perspective is interested only in direct medical costs. The scope of the evaluation is based on the breadth of the provider’s services. DR MARWA MOSTAFA MOHAMED 42  Patient: The patient perspective is concerned about all categories of costs. These costs are only the out of-pocket costs and the valuation of the intangible costs. DR MARWA MOSTAFA MOHAMED 43 Case Study, the costs of diabetes mellitus were presented. Those costs are aggregated and described from a societal perspective. In the table below, identify one cost for each category for each of the perspectives, as applicable. Type of cost Perspective Societal Provider Payer Patient Direct medical cost Direct non- medical cost Indirect cost Intangible cost DR MARWA MOSTAFA MOHAMED 44 ANSWER Type of cost Perspective Societal Provider Payer Patient Direct medical Yes Yes Yes Yes cost Direct non- Yes No No Yes medical cost Indirect cost Yes ?? ?? Yes Intangible cost Yes ?? ?? Yes DR MARWA MOSTAFA MOHAMED 45 DR MARWA MOSTAFA MOHAMED 46 Check your understanding !!  Patient A (have an insurance in the MOH and he cover 20% of his insurance) has been transferred from MOH to JUH to get a medical treatment. The actual costs of the medical service provided by the JUH were 100 JD.  What the cost considered from the payer perspective? 80 JD  What the cost considered from the provider perspective? 100JD  What the cost considered from the patient perspective? 20 DR MARWA MOSTAFA MOHAMED 47 Check your understanding !! The costs of Drug A, on average  Drug costs = 10,000 JDs over 10 years  Prevent 5 doctor visits/over 10 years= 500 JDs  Prevent 1 hospitalization/over 10 years = 2000 JDs  Saves 10 working days for patients/over 10 years = 2000 JDs What would be the cost from:  Payer perspective (e.g. health insurance company)?  Societal perspective ? Answers  Payer perspective (e.g. health insurance company)? £12,500  Societal perspective ? £14,500 DR MARWA MOSTAFA MOHAMED 48 If you know that Drug X cost’s 70$/m and Drug Y cost’s 30$/m. The insurance cover 40$ for Drug X and 10$ for Drug Y, Answer the following: If the perspective was the Patient: If the perspective was the Insurance: a-How much the difference will pay between drug X a-How much the difference will pay between and Y? Drug X after insurance paid drug X and Y? Drug X for insurance = 70-40 = 30$ = 40$ Drug Y after insurance paid Drug Y for insurance = 10$ = 30-10 = 20$ So the different is 40–10 = 30$ So the different is 30 – 20 = 10$ b-How much will pay for Drug X? b-How much will pay for Drug X? Drug X for insurance = 40$ Drug X after insurance paid = 70-40 = 30$ c-How much will pay for Drug Y? Drug Y for insurance = 10$ c-How much will pay for Drug Y? Drug Y after insurance paid = 30-10 = 20$ DR MARWA MOSTAFA MOHAMED 49 If you know that the cost of medication A is 100$/m and the cost of medication B is 50$/m. The insurance cover 25$ for medication A only, Answer the following: If the perspective was the Patient: If the perspective was the Insurance: a-How much the difference will pay between a-How much the difference will pay between Medication A and B? Medication A and B? Medication A after insurance paid = 100-25 = Medication A for insurance = 25$ 75$ Medication B for insurance = 0$ So the Medication B without insurance = 50$ different is 25-0 = 25$ So the different is 75 – 50 = 25$ b-How much will pay for Medication A? Medication A for insurance = 25$ b-How much will pay for Medication A? Medication A after insurance paid = 100-25 = 75$ DR MARWA MOSTAFA MOHAMED 50 Think 1. For each situation, what type of cost is being measured? a. A patient must pay for a taxi ride to the clinic. b. A patient receives an influenza vaccination at the pharmacy. c. A patient is fatigued because of chemotherapy treatments. d. An adult daughter misses work to take care of her mother who recently had hip replacement surgery. DR MARWA MOSTAFA MOHAMED 51 DR MARWA MOSTAFA MOHAMED 52