Pharmacoeconomics : Analysis of The Cost of Drug Therapy To Health Care Systems and Society

ISSN No : 2321 – 8630, V – 1, I – 1, 2014 Journal Club for Pharmaceutical Sciences (JCPS)

Manuscript No: JCPS/REV/2014/23, Received On: 05/09/2014 , Accepted On : 22/09/2014, Published On: 09/11/2014

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Pharmacoeconomics : Analysis of The Cost of Drug Therapy To Health Care Systems and Society

Sharma PH *1, Kalasare SN 2, Kamble RA 3, Powar PV 4, Ambikar RB 5

1Department of Pharmaceutics, Padmashree Dr. D.Y. Patil College of Pharmacy, Akurdi, Pune- 411044.India

ABSTRACT Pharmacoeconomics is a subdivision of health economics and result from that discipline coming of age through consolidation to diversification. Health economics, as a branch of economics is itself relatively young. Economics, indeed, there are a still health economist who regards the growth of Pharmacoeconomics as an unnecessary over specialization. As a discipline which is still is the process of growth any definition would become outdated by the time this book is published. Earliest definitions of Pharmacoeconomics are very narrowly focused on the “analysis of the cost of drug therapy to health care systems and society”. This perception of Pharmacoeconomics research is solely concerned with cost and does not consider the outcome from the use of pharmaceutical products. Pharmacoeconomics research is about: “Assessing the implications of projected outcomes and costs of pharmaceutical products for the decision whether to continue or stop development of a drug and for global pricing strategy”. This expanded definition has got the advantage of incorporating Pharmacoeconomics research into the process of drug development from inception (pre phase one) up to phase four when post-marketing surveillance is taking place.

KEYWORDS

Health economics, Cost, Adverse Drug Reaction (ADR), Drug therapy, Pharmacoeconomics, Cost minimization analysis

INTRODUCTION

Pharmacoeconomics refer as sub-

discipline of health economics.

Pharmacoeconomics is a scientific

discipline that evaluates the clinical,

economic and humanistic aspects of

pharmaceutical products, services, and

programmes, as well as other health care

interventions.1 Different branches of

Pharmacoeconomics shown in Fig. 1. The

role of pharmacoeconomics plays various

roles at specific phases of drug

development; during the initial phases it

helps to recognize commercially exploited,

while at the later stages it performs

Address for Correspondence: Dr.(Mrs.) Padmini. H. Sharma, Associate Professor, Pad. Dr D Y Patil College Of Pharmacy, D. Y. Patil Education Complex, Sec No. 29, Akurdi, Pune 411 044 Email : [email protected]

mailto:[email protected]

Pharmacoeconomics : Analysis of The Cost of Drug Therapy to Health Care Systems and Society


function of informing choice of the drugs

which have been developed.

Pharmacoeconomics is an instrument

applied for strategic and operational

decisions about

Fig. 1. Disciplines of Pharmacoeconomics

pharmaceutical enlargement and

expenditure. The aim of

Pharmacoeconomics is to make sure

mainly proficient use of limited resources,

and recuperate the gap among R&D and

marketing departments of the

pharmaceutical companies.

Fig. 2. Study of the role of Pharmacoeconomics and Economics

Burdon of drug related problems “An incident or situation connecting a

patient’s drug treatment that truly, or

potentially, interferes with the success of a

most favorable result”

Commission= prescribing a drug with

a known fatal drug –drug interaction

Omission= failing to prescribe a drug

for a patient’s underlying disease

state

Goals of Pharmacoeconomics2

1. Broad methodologies to offer

information to generate the greatest benefit

in terms of patient outcomes.

2. Device for evidence base decision

making

Adverse drug reaction (ADR) 3

Unintended reactions to a drug that is

usually not anticipated or avoidable

adverse drug event (ADE)

Fig. 3. Drug related problems



1. To develop methods for

pharmaceutical interventions:

The extensive, system-based research

methodologies used to create significance

for pharmaceutical intervention.Fig. 4.

shows the methods for pharmaceutical

intervention.

Fig. 4. Methods for Pharmaceutical Interventions

2. Applications of pharmacoeconomics

method:

The applications of pharmacoeconomics

methodologies in various sectors like

R&D, Drug approval & sales revenue

shown in Fig. 4.

Fig. 5. R&D, Drug approval & sales revenue

Health economics 1,4

Health economics is a division of

economics concerned with issues linked to

dearth in the distribution of health and

health care sectors.

Fig. 6. Factors of health Economics

Fig. 7. The scope of health economics by

Alan William’s



Health of a country or the residence of that

country is greatly reliant on the geographic

location ,legal and economic stabilities of

the nation. The government body attentive

on the industry enhances the research and

development along with reinforcement to

infrastructure required.

Economics evaluation 2,5

There are four types of economics

evaluation, shown in Fig. 8. The ultimate

aim of methods is to compare the cost and

outcome of substitute regimens, ideally by

generating cost-outcome ratio.

Fig. 8. Types of Economic Evaluation

Fig. 9. Components of economic analysis

Methods of economic evaluation

Economic evaluation is framework which

draws up a balance sheet between costs

and benefits to assist decision making.

Common types of study

The four types of economics evaluation

given in Table.No.1.

Table 1. Methods of Economics Evaluation



COST-MINIMIZATION ANALYSIS

Fig. 10. Cost-Minimization Analysis

Cost minimization contains an clear

assumption that the two alternatives attain

the main outcome equally and it may

include additional information to test the

assumption of “all other things being

equal”. This involves measuring costs,

usually only to the health services, and is

applicable only where the outcomes are

identical and need not be considered

separately. An example is prescribing a

generic preparation instead of the brand

preparation .The major outcome of interest

is the same and is achieved similarly by

the alternative regimens, thus allowing the

evaluators of the program to concentrate

on the cost side of the equation and choose

the substitute that has the least costs. An

example is minor surgery for adults who

can be done either as in or out patient

without any significant difference in the

clinical outcome. The tool for successful

cost minimization is that the comparators

must have been shown equivalent clinical

effectiveness before the analysis is carried

out. Although the two options must

achieve the major outcome of interest

equally, they may still have other

outcomes which differ. For example, day

case surgery may be performed with a

higher proportion of local or regional

anesthesia than in-patient surgery, and this

may lead to differences in transient side

effects. A cost minimization analysis

would measure the costs arising from these

differences in anesthesia, while assuming

that the outcome of surgery is identical.

COST-EFFECTIVENESS ANALYSIS

Compares the total relevant cost of therapy

to the effectiveness when the outcomes for

the alternatives are NOT equal

Fig. 11. Cost-Effective Analysis

Example:

Example: Increment CE ratio



1. = cost drug A-cost drug B

2. Outcomes drug A-outcomes drug B

3. =$220,000-$20,000

4. 79 Lives-78Lives

5. =$200,000/Life saved

COST-BENEFIT ANALYSIS 7

Evaluates the value of all resources

consumed in implanting a program or

intervention against the value of the

outcome in terms of dollars.

Fig. 12. Cost-Benefit Analysis

The aim is to construct cost/outcomes

ratios to compare alternatives regimens.

Cost-effectiveness analysis cannot be

applied because the alternatives achieve

fundamentally different outcomes. For

example, one prolongs life and improves

quality of life (e.g. coronary artery bypass

grafting) whereas the other only improves

quality of life (e.g. hip joint replacement).

To compare different outcomes (some

positive some negative like adverse effect,

toxicity or adverse drug reaction) we need

a common denominator which is stable,

plausible, consistent and incorporates most

(if not all) possible outcomes. In Cost-

Benefit Analysis , the common

denominator for conversion is money.

Healthcare professionals often feel

instinctively uncomfortable about putting a

financial value on human suffering.

The most controversial aspect of Cost-

Benefit Analysis is to put value on items

like loss of eye sight, impairments of

hearing, renal failure or even loss of

human life; which are perceived to be

inherently invaluable by healthcare

professionals.

In Cost-Benefit Analysis, investigators

usually calculated the costs and benefits;

there are techniques for quantifying the

strengths of individual preferences for

alternatives. However the assets of this

analysis allow comparisons between very

different areas, and not just medical, e.g.

cost benefits of expanding university

education.

Example:



COST-UTILITY ANALYSIS 8

Evaluates the value of an involvement or a

program against the value of the outcome

in terms of quality-adjusted life years

(QALYs).

Fig. 13. Cost-Utility Analysis

This is similar to cost effectiveness in that

the costs are measured in money and there

is a

defined outcome (unit of utility e.g. a

QALY). Cost-Utility Analysis can look at

more area of medicines, like cost per

QALY of coronary artery bypass grafting

versus cost per QALY for erythropoietin in

renal disease.

Tables No 2. of QALYs gives comparisons

between ranges of therapies. The values in

such tables have usually been derived at

different ways and are not comparable.

Use of published probability of an

outcome event and its associated cost to

project the average expected cost per

patient for the alternatives being compared

Relatively fast??

Inexpensive

Can use external or internal

Tables. 2. Calculation of QALYs

With Treatment X Without

Treatment X Estimated

survival=10years

estimated

survival=5 years

Estimated quality of

life

estimated quality

of life (Relative to ‘perfect

health’)=0.7

(relative to ‘perfect

health’) =0.5

QALY gain from treatment X= 7-

2.5=4.5QALYs

If the cost of treatment X is £18,000 then

the cost per QALY is £4,000 per QALY

Decision Analysis Models

Use of published probability of an

outcome event and its associated cost to

project the average expected cost per

patient for the alternatives being compared

Relatively fast??



Inexpensive

Can use external or internal

DRUG DEVELOPMENT PROCESS

(Shown in Fig. 14.)

1. Test 5,000-10,000 compounds, to

identify candidates for further

development

2. Send approximately 250 for pre

clinical testing

3. Enter approximately 5 into:

Fig. 14. Clinical Trials

1. Approval of the new drug: license

10+ years after identification for

development

Cost incurred per NCE=$600 million

2. Pricing & reimbursement discussions

OBSERVATIONS:

Process is long, costly and risky

Highly regulated industry:

Gather drug profile information for

regulatory authorities to make decisions

(license, price, reimburse)

Some information then used for

promotional claims to persuade customers

to make decisions(also regulated)

Phase IV :

During this phase, investigators are

looking for additional information,

including the drug or treatment's risks,

benefits, and optimal use. This trial may

occur after the drug or treatment has been

approved for use by the FDA. Trials may

be conducted to determine better dosing

guidelines, new formulations, effects on

different populations or new indications.

Studies or trials conducted after a medicine

is marketed to provide additional details

about the medicine's efficacy or safety

profile. Different formulations, dosages,

durations of treatment, medicine

interactions, and other medicine

comparisons may be evaluated. New age

groups, races, and other types of patients

can be studied. Detection and definition of

previously unknown or inadequately

quantified adverse reactions and related

risk factors are an important aspect of

many Phase IV studies. If a marketed

medicine is to be evaluated for another

(i.e., new) indication, then those clinical

trials are considered Phase II clinical trials.

The term post marketing surveillance is

frequently used to describe those clinical

studies in Phase IV (i.e., the period

following marketing) that are primarily

observational or non-experimental in



nature, to distinguish them from well

controlled Phase IV clinical trials or

marketing studies.

Fig. 15. Drug development process

SCOPE OF

PHARMACOECONOMICS-

Fig. 16. Scope of Pharmacoeconomics

Conclusion and summary

Pharmacoeconomics is an upcoming

stream in Health care Pharmacy industry

which acts as a bridge which connects

pharmacy with economics. In today

competitive world one maintains

pharmaceutical product identity, integrity

and dignity, by providing their product

with good quality, quantity and maintain

cost effective. Pharmacoeconomics refers

to the scientific discipline that compares

the value of one pharmaceutical drug or

drug therapy to another. Which evaluates

the cost (expressed in monetary terms) and

effects (expressed in terms of monetary

value, efficacy or enhanced quality of life)

of a pharmaceutical product. Different

participants of Pharmacoeconomics shown

in Fig. 17.

Fig. 17. Pharmacoeconomics provides

weapons to health care

The premises upon which both health

Economics and Pharmacoeconomics are

based are virtually indistinguishable to

those of conventional Economics. The

fundamental problem in economics is to

discover a socially suitable solution to



people’s limitless demands and society’s

restricted ability to react to these demands

with production of goods and services.

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HOW TO CITE THIS ARTICLE

Sharma, P.H., Kalasare, S.N., Kamble, R.A., Powar, P.V., Ambikar, R.B. (2014). Pharmacoeconomics : Analysis of The Cost of Drug Therapy To Health Care Systems and

Society. Journal Club for Pharmaceutical Sciences (JCPS), 1(I), 142-151.

Pharmacoeconomics : Analysis of The Cost of Drug Therapy To Health Care Systems and Society

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