4 - Pharmacoeconomics

Question 1

Define economics

Answer 1

Seeks efficient use of resources from the stand-point of population health

Question 2

Define ethics

Answer 2

Focus on fairness in allocating resources to meet health needs

Question 3

What is the difference between efficacy and effectiveness?

Answer 3

• Efficacy = shown to work in a trial

- Effectiveness = works in real life

Question 4

What are some economic fundamentals?

Answer 4

• Resources are scarce in relation to wants
• Resources have alternative uses
• Allocating resources to one health intervention involves some “opportunity cost” in that these resources aren’t available to support other health interventions

Question 5

What are the 3 components of pharmacoeconomics?

Answer 5

1. Clinical (efficacy, side effects, safety)
2. Economic (work productivity, direct medical costs)
3. Humanistic (QoL, satisfaction)

Question 6

What are the types of costs?

Answer 6

• Direct medical costs (ex: medications, clinic visits, rehab programs)
• Direct non-medical costs (ex: travel costs to receive health care, non-medical assistance related to condition, child care services for children of px)
• Indirect costs (ex: lost productivity for pt/ unpaid caregiver/ because of premature mortality)
• Intangible costs (ex: pain and suffering, fatigue, anxiety)

Question 7

What are the types of perspectives for costs?

Answer 7

• Societal – costs to payer, pt, and society
• Payer – costs to px, insurers, and to health care system
• Hospital – costs to treat px

Question 8

Is money in the future valued more or less than at present?

Answer 8

• Less
• Can calculate discounted cost through a formula
• Discount rates generally vary between 3-5%

Question 9

Describe input, consequences, and primary concern of cost-benefit analysis (CBA)

Answer 9

• Input = monetary
• Consequences = monetary
• Primary concern = maximal increment in benefit for limited resources

Question 10

Describe input, consequences, and primary concern of cost-effectiveness analysis (CEA)

Answer 10

• Input = monetary
• Consequences = clinical (life-year gained, % px reaching goal)
• Primary concern = least costly way to achieve objective; compare alternatives w/in 1 therapeutic category

Question 11

Describe input, consequences, and primary concern of cost-utility analysis (CUA)

Answer 11

• Input = monetary
• Consequences = quality-adjusted life-year (QALY) gained
• Primary concern = societal allocation; compare alternatives across therapeutic categories

Question 12

Describe input, consequences, and primary concern of cost-minimization analysis (CMA)

Answer 12

• Input = monetary
• Consequences = equal benefit assumed
• Primary concern = efficiency (ex: generic, therapeutic substitution)

Question 13

Describe cost-benefit analysis

Answer 13

• All costs and health effects are expressed in monetary terms
• Benefits harder to measure accrue over time (hospitalization, death injury, independence, mobility)
• Costs are well known and paid “up front” include direct and indirect, fixed and variable costs
• Cost benefit = all benefits minus all costs, sometimes called social return on investment
• Cost benefit ratio = all benefits divided by all costs, sometimes called social rate of return

Question 14

Describe cost effectiveness analysis

Answer 14

• Costs are expressed in monetary terms
• Benefits are expressed in “natural units” (ex: life-years, cases detected, mmHg)
• Cost effectiveness ratio = cost divided by life-years (or other measure of benefit)

Question 15

Limitation of CEA

Answer 15

Comparisons across tx/ programs w/ different outcomes would be difficult

Question 16

Describe cost utility analysis

Answer 16

• Costs expressed in monetary terms
• Benefits expressed in quality-adjusted “natural units” (ex: quality adjusted life-years)
• Cost utility ratio = cost divided by quality adjusted life years

Question 17

Advantages of cost utility analysis

Answer 17

• Can study multiple outcomes
• Can compare results across studies
• Integrate health consequences in terms of both quantity and quality of life

Question 18

What is the formula for incremental cost effectiveness ratio (ICER)?

Answer 18

• ICER = (Cb - Ca) / (Eb - Ea)
• Ca and Cb = costs of interventions A and B
• Ea and Eb = health effects of interventions A and B
• Intervention A often defined as status quo or standard tx

Question 19

What is the formula for incremental cost utility ratio (ICUR)?

Answer 19

(Cost drug A - cost drug B) / (QALY drug A - QALY drug B)

Question 20

What is the formula for QALY (quality-adjusted life year)?

Answer 20

of years * health utility

Question 21

How do you determine health utility of a medical condition?

Answer 21

• Time x = time living in perfect health followed by death
• Time t = time living in disease state followed by death
• Health utility = x/t but x is whatever time the pt decides is equivalent to living in a disease state (ex: pt would rather live in perfect health for 4 years than 10 years w/ disabling stroke, so utility = 4/10 = 0.4)

Question 22

Describe the standard gamble

Answer 22

• Choice between certainty of remaining in the disease state, or taking a gamble of either being in full health and risking death
• P is varied until the individual is indifferent between the certainty and the gamble
• Utility = P
• P = probability of being healthy; P-1 = probability of death

Question 23

How is health related quality of life (HRQoL) measured?

Answer 23

From px point of view based on how they score different domains of their health

Question 24

Do you want WTP (willingness to pay) to be less than or greater than ICER?

Answer 24

Want ICER < WTP

Question 25

Describe the box method

Answer 25

• Graph is cost difference (y axis) vs. effect difference (x axis)
• Box shows greatest and smallest difference in efficacy (horizontal) and greatest and smallest difference in cost (vertical)
• Never used

Question 26

Describe the league table approach

Answer 26

Decision maker is only concerned w/ the relative value of the CE ratio and programs are adapted in descending order of cost effectiveness until all available resources are exhausted

Question 27

Describe the threshold approach

Answer 27

Decision maker focuses on the absolute value of the CE ratio, if the program’s CE ratio is lower than the threshold value it should be adopted

Question 28

Describe the criteria for interpreting cost-utility ratios

Answer 28

• Less than GDP per capita = good value
• > 1x and < 3x GDP per capita = intermediate value
• > 3x GDP per capita = cost prohibitive
• Current GDP in MB is $42,000

Question 29

What are some common methodologic flaws in economic analyses?

Answer 29

• Omission of important costs or benefits
• Inappropriate selection of alternatives for comparison
• Problems in making indirect comparisons
• Inadequate representation of the effectiveness data
• Inappropriate extrapolation beyond the period observed in clinical studies
• Excessive use assumptions rather than data
• Inadequate characterization of uncertainty
• Problems in aggregation of results
• Reporting of average cost-effectiveness ratios
• Lack of consideration of generalizability issues
• Selective reporting of findings