12 - Pharmacoeconomic Analysis

Question 1

How were health resources allocated in the past?

Answer 1

It was based on expert opinion, historical practices, and intuition. The data did not indicate funding behaviours and these decisions can be seen to be irrational and over reliance on intuition.

Question 2

What is Pharmacoeconomic Analysis (PEA)?

Answer 2

PEAs are a subset of health economic analysis that specifically considers alternative drug therapies, or drug therapies compared to non-drug therapy options based on their defined costs (inputs) and benefits (outcomes)

Question 3

What are some Pharmacoeconomic Analysis inputs?

Answer 3

Inputs are generally expressed in monetary terms:
Health Care Sector (Direct-medical)
Patient/family (Direct-non medical)
Other Sectors (Direct - non medical)
Productivity (Indirect)

Question 4

What are some direct healthcare costs?

Answer 4

Medical: the monetary value of healthcare resources associated with the prevention, detection or treatment of disease or illness. This includes hospital stays, drugs, medical supplies and equipment.

Non-medical: the monetary value of non-healthcare resources associated with the prevention, detection or treatment of disease or illness. This includes transportation, child or family care expenses and etc.

Question 5

What are some indirect and intangible healthcare costs?

Answer 5

Indirect Costs:
Lost productivity associated with morbidity and/or pre-mature death. Dollar amount based on earning capacity using actual or imputed wage rates.

Intangible Costs:
This is the cost of disease and illness (for which you wish to infer an economic value). This includes pain, suffering, inconvenience, and grief

Question 6

What is the ECHO Model?

Answer 6

Economic Outcomes (payer-centred):
Direct, indirect and intangible monetary value expressed as an outcome

Clinical Outcomes (provider-centred):
Changes in morbidity, mortality, and biological markers

Humanistic Outcomes (patient-centred):
Functional status and the concept of utility(measuring the value of things from a patient’s perspective)

Question 7

Explain Clinical Outcomes from the ECHO Model

Answer 7

Final:
Changes in levels or rates of:
Morbidity (myocardial infarction)
Mortality (deaths due to MI)
We cannot prevent these outcomes as they are being experienced, so we use intermediate outcomes to indicate our interventions.

Intermediate:
Researchers rely on intermediate clinical outcomes especially during clinical trials to predict how the future will play out.

Ex. Lipoprotein cholesterol levels (intermediate outcomes) vs. MI rates and deaths due to MI(final outcomes)

Question 8

Explain Humanistic Outcomes from the ECHO model

Answer 8

These outcomes reflect the social aspects of disease and its affect on the patient’s ability to respond to care.

Ex. What is the patient experiencing, and how does a service/intervention affect their quality of life?

Question 9

What is quality of life?

Answer 9

A broad concept encompassing the entire range of human experience, perceptions and states of being. Health-related quality of life is the most relevant for our purposes as pharmacists.

Question 10

How is health-related quality of life (HRQL) determined?

Answer 10

Many functional dimensions might be considered:
Physical (vision, hearing, speech, ambulatory, and dexterity)
Mental (cognition, emotional well-being)
Social interaction
Energy
Level of Pain

The EQ-5D is a great test that can be used to quickly assess the patient’s HRQL

Question 11

How can we effectively compare different kinds of intervention?

Answer 11

Health State Utility is a concept that refers to the patient’s preference or perceived value for a particular health state. Utility can be ranked on a hypothetical scale with 1.00 and 0.00 representing perfect health and death respectively

Question 12

What methods exist to measure utility?

Answer 12

Measure utility directly:
Rating scales (how are you feeling)
Standard Gamble (risk-based choice)
Time Trade-off (time-based choice)

Measure utility indirectly:
Compute utility based on assessment of functional status (Health Utilities Index)

Question 13

What is the Health Utilities Index 3?

Answer 13

This index measures functional status based on eight attributes (single item scales)

Vision
Hearing
Speech
Ambulation
Dexterity
Emotion
Cognition
Pain

Each attribute is scored and, based on that score, assigned a predetermined utility.

Question 14

What is Standard Gamble?

Answer 14

Ex. Chronic Cancer
Treatment will eliminate cancer completely, but small chance that you will die immediately after drug administration.

The more serious condition, the more they will risk death to cure illness. Actual utility of an existing condition lies at the point wheee person is indifferent/or cannot choose between chance of improvement vs. death

Question 15

What is Time Trade-off?

Answer 15

How much life are you willing to sacrifice to return to full health.

Calculate utility(h1) by dividing life expectancy after sacrifice(t) by life expectancy without sacrifice(x)

Ex.

If x = 20 years, t = 16 years, what is h1?
h1= t/x
h1=16/20
h1=0.8
This means the utility of this particular condition is 0.8

Question 16

What are some issues with measuring utility?

Answer 16

Utility and Time:
Assumes individuals are indifferent to time spent in a particular health state. Age effects how likely you would sacrifice time from your life

Acute utility values often under-estimated:
In reality, patients are prepared to spend considerable amount of money to avoid severe, short term events such as chemotherapy-induced nausea and vomiting

Risk neutral vs. Risk averse
We tend to overvalue current situation due to risk aversion. Benefits of new technologies under-estimated. Major concern with standard gamble.

Question 17

What are some types of Pharmacoeconomic Analysis?

Answer 17

Partial (either input or outcome):
Cost analysis
Benefit analysis

Complete (both input and outcome):
Cost-minimization
Cost-effectiveness
Cost-benefit
Cost-utility

Question 18

What is cost-minimization analysis?

Answer 18

This is the simplest form of complete PE analysis. It is used when the effectiveness of different drugs or therapies are identical

Ex. Drug A (Co) = $400 Drug B (C1) = $700

C1-Co = 700-400 = 300, so select Drug A, but this is the cost of the drug itself, not the full cost.

If you take into account additional expenses like Lab Tests and MD monitoring, that can change the picture

After taking all medical costs into consideration:

Drug A = $800 Drug B =$750, so actually pick Drug B

The hard part is figuring out total costs by including everything before making profound decisions.

Question 19

What are some limitations of Cost-minimization analysis?

Answer 19

Identical outcomes/benefits often seen between “me too” drugs. Often the difference is very small-statistically significant though not substantially or clinically significant.

Question 20

What is cost-effectiveness analysis?

Answer 20

It measures outcomes in natural units such as: years of life saved, blood pressure, death rates, etc.

Comparators measure the same type of outcome; but the amount or level of the outcome is different.
Ex. Lipid-lowering agents vs. Antihypertensive agents in reducing mortality

CEA is calculated with the incremental cost-effectiveness ratio

CE = (C1-C0)/(E1-E0)

Question 21

What are some limitations of cost-effectiveness analysis?

Answer 21

It is difficult to assess value of a clinical outcome, you may live longer but quality is unknown

Difficult to use with multiple outcomes as it may result in a range of clinical benefits and at a range of levels

Question 22

What is Cost-benefit analysis?

Answer 22

Outcomes are measured in monetary terms.

This allows comparison of therapies with different or multiple outcomes by converting into return in investment.

There are two analytical approaches:
Incremental cost-benefit ratio = (B1-B0)/(C1-C0)
Net Benefit = (B1-B0) - (C1-C0)

Question 23

What are some limitations of Cost-benefit analysis?

Answer 23

Difficult to place a dollar value on clinical or functional outcomes.

Ethics, concerns with assigning a monetary value to a health state or individual life
(CBA tends to favour interventions for disease associated with more productive individuals). There is also meritorious bias (we give more to people that we think deserve our help)

Question 24

What is cost-utility analysis?

Answer 24

It uses patient preference or the relative value placed by patients on a particular state of health, as the outcome measure

Incremental cost-utility ratio = (C1-C0)/(U1-U0)

In cost-utility analysis, utility is generally expressed as a qualitative weighting of time spent in a particular health state.

Quality-adjusted life years (QALY) = Utility x Time

Ex. 10 years with 0.5 utility = 5 QALYs or 5 years of perfect health

Question 25

What are quality-adjusted life years (QALYs)?

Answer 25

The QALY is the most common utility measure used in health economic evaluation studies. It allows comparison of multiple health outcomes of different duration. It also allows for the combination of different or multiple health outcomes of different duration into a single measure.

Check the slides to see examples

Question 26

How do we decide what we should consider in cost/benefit analysis?

Answer 26

While we generally seek to maximize benefits and minimize costs (value for money), what is considered a relevant benefit/cost often depends on one’s point of view.

Common points of view:

Providers (care about clinical outcomes and service learning)

Payers (care about economic outcomes and sources of revenue)

Patients (care about humanistic outcomes and out-of-pocket expenses)

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Question 27

What is discounting?

Answer 27

Costs and benefits of an action often occur at different times.
The timing of costs and benefits affects how wevalue these costs and benefits in relative terms

The purpose of discounting is to adjust the value of costs and benefits to reflect how we value the timing of these costs and benefits

Question 28

What is The Time-Value Trade-off?

Answer 28

Until you repay me I cannot use the money to fulfill another want or need (delayed gratification also referred to as deferred consumptioon)

This is why interest is charged on loans

Question 29

How to calculate Time-Value?

Answer 29

Payback (principal +interest) = A(1+r)^n

A=initial sum
r=interest rate
n=duration of time

Question 30

What is NPV?

Answer 30

Net Present Value (inverse of discounting):

The value of future costs and/or benefits are reduced (discounted) to reflect current value.

NPV= A/(1+r)^n

A=initial sum
r=interest rate
n=duration of time

Question 31

Is the first year of budget spending discounted in pharmacoeconomics?

Answer 31

No, spending is not discounted in the first year because the funding is spent on Day 1, therefore no value was lost due to time

Question 32

If we consider discounting, what is the benefit of the HPV Vaccine?

Answer 32

Without discounting, the benefits vs. costs for HPV vaccines is really good and gets better each year. But when you consider discounting, there still is a benefit, but it remains stable over decades.

Should we spend money today to save lives today or lives in the future

Question 33

How is the discount rate (r) determined?

Answer 33

Rate was 5% for many years (currently 3%). As the discount rate increases, the relative value of long-term benefits and costs will decline

Question 34

Are the variables used in pharmacoeconomics 100% accurate?

Answer 34

Most input (cost) and outcome (benefit) measures are estimates or averages. Pharmacoeconomists test assumptions about variables as it is hard to find exact values. We need to evaluate imperfect data

Question 35

What is univariate sensitivity analysis?

Answer 35

Examining the impact of changing one variable on the evaluation’s conclusions. Helps us determine best and worst scenarios

Question 36

What is multivariate sensitivity analysis?

Answer 36

Examining the impact of changing two or more variables, but one at a time.

Monte Carlo Simulation:
Uses a computer model in which various scenarios (based on probability) are run between 10,000 and 100,000 times

Question 37

What is a quality of a robust model?

Answer 37

A model that produces the same result despite changes in variables and confidence variables

Question 38

How does the Decision Plane help pharmacoeconomists make cost-effective decisions?

Answer 38

Points on this plot are arranged based on efficacy vs. cost. The points below the threshold (arbitrary based on $50,000 yearly income) are considered cost-effective interventions

Question 39

Why do healthcare systems use economic analysis?

Answer 39

They are not concerned with reducing costs, but maximizing funds and efficiencies

(Is what we are doing actually making a difference?)

Question 40

Why is the Oregon Plan a lesson about being cautious of pharmacoeconomic analysis replacing judgement?

Answer 40

Medicare covered family has a child. Unfortunately due to pharmacoeconomic analysis defined what was covered by Medicare. The child had a type of cancer not covered, so child died because they couldn’t pay for procedure

The Oregon Health Service Commisson threw out the old system and focus more on what things Medicare should cover based on judgement.