Final Flashcards
Costs
The value of the resources consumed by the program
Consequences
The effects, outputs, and outcomes of the program or treatment alternative
Pharmacoeconomics
A full evaluation of the costs and consequences differentiates pharmacoeconomics from traditional cost containment strategies and drug use evaluations
Cost vs price vs charge
Cost is magnitude of resources consumed in producing a good or service
Charge is what provider asks to be paid- like price
Reimbursement is what is actually paid
Cost categories
Direct
Indirect
Intangible
Direct cost
Resources consumed
Involves a transfer of money
Direct medical costs
Costs from the fundamental transactions associated with medical care.
Direct nonmedical
Exchange of money for something that is not medical care
Example- pay taxi to get to hospital
Indirect cost
Unpaid resource commitment
No money is exchanged
Productivity cost
Indirect medical cost
Costs that result from the morbidity and mortality of the illness.
Costs ranges in productivity that result from disease or health care interventions.
Missing work, lost productivity
Fixed cost
Overhead costs that are relatively constant that nod readily influenced
Heat, rent, lighting
Often not included
Intangible costs
Costs of pain, suffering, anxiety, or fatigue that can occur because of an illness or treatment of illness
What type of cost is drugs?
Direct medical
What type of cost is babysitting for the children of a patient?
Direct nonmedical
What type of cost is a decrease in lost time from work?
Indirect medical
What type of cost is a lab test
Direct medical
What type of cost is a pharmacist salary?
Direct medical
What type of cost is improvement in sleep awakening
Intangible
What type of cost is travel costs to clinic
Direct nonmedical
What type of cost is physician time/salary
Direct medical
What type of cost is advertising for medical service
Direct nonmedical
What type of cost is medical supplies
Direct medical
What type of cost is less anxiety from asthma attacks
Intangible
Resources for cost estimations
Measured directly
Retrospectively from medical records or reimbursement claims
Standard lists of costs
Average wholesale price (AWP)
List price, typically higher than what is actually paid by pharmacies
Average manufacturers price (AMP)
Calculated to reflect the amount paid to manufacturers by wholesalers
Proprietary information
The RedBook
Printed AWP info annually
Medical Services Cost Resources
Reimbursements rates
Physicians fee reference
Medicare Reimbursement
Varies by state
HCPCS
Personnel cost resources
Time spent performing activity multiplied by salary and fringe benefits
Work measurement methods (stopwatch, logs, etc)
How to measure personnel time costs?
Work sampling- observations made at pre-selected times
Stopwatch time study- how long to complete an activoty
Work logs
National compensation survey, bureau of labor statistics (wages)
How do you measure hospital services?
Per diem- sum all costs divided by number of patient days
Per diem but seperate out routine services and ancillary services
Hospitalization cost resources
Disease specific per diem
Diagnosis-related groups (DRG)
Perspective
The point fo view from which the economic analysis is performed
Societal perspective
Broadest
All direct and indirect costs
Most comprehensive but difficult and time consuming to conduct
Patient perspective
What the patient pays not covered by insurance.
Morbidity and mortality
Hospital perspective
Typically the perspective used to make formulary or drug use policy changes
Insurer perspective
Included cost to third-party plan
Typically only direct costs
Government
What was the perspective of a paper measuring the cost of depression that gives you direct costs (outpatient, inpatient, medication), indirect costs, and morbidity costs?
None of the costs are coming from the patient.
Societal
Adjust for timing
Time associated with money
Do you want 1000 today or in 5 years?
Standardization- bringing the past costs to the present
Multiply the costs for each year by the medical inflation rate for that year
CPI
From bureau of labor statistics
Discounting-Bringing future costs to present
Discount factor is the number by which a future cash flow to be received at time T must be multiplied in order to obtain the current value
If the discount rate is 5%, what is the discount factor for 2 years?
1/(1+0.05)^2= 0.907
So with a higher discount rate, is the money worth more or less in 2 years?
less
Sensitivity analysis
Model using different assumptions
Which discount rate to use?
CMA
If outcomes not measured, maybe only partial economic analysis?
If measure outcomes and they are equivalent, then CEA
Cost Benefit Analysis (CBA)
A form of economic evaluation Dollar values for inputs and outputs (outcomes)
Maximizes benefit of investment
Assumes limited resources
Theoretical roots for CBA
Comes from welfare economics and incorporates individual preferences and values to improve social welfare
Advantages of CBA
Measuring both costs and benefits in monetary has two main advantages:
Decision makers can determine whether the benefits of a program or intervention exceed the cost and can compare multiple programs/interventions with similar or unrelated outcomes
Step 1 of CBA
Clearly identify the intervention, program, therapeutic regimen and research to be evaluated.
Also identify alternatives, what is the program being compared to? This is the biggest source of bias!
Step 2 of CBA
Identify and value all of the resources consumed or costs of providing each intervention
Step 3 of CBA
Identify and value all of the benefits of providing the intervention program or regimen.
Assign dollar values to all of it.
Measuring benefits in CBA
Direct benefits are averted direct medical or nonmedical costs
Indirect benefits are averted indirect medical costs
Human capital approach
Step 4 of CBA
Net benefits= total benefits/total costs
If B/C >1= benefits exceeds costs
Present results
Human capital approach
One method to measure indirect benefits
HC approach quantifies the productivity loss (=wage)
Goes back to the welfare theory, what you participate to society matters
Human capital approach components
Wage rate
Missed time because of illness
Advantages to human capital approach
Straightforward
Easy to use
Days lost from work easily obtained
Income estimates available
Disadvantages of human capital approach
Biased against the unemployed
HC assumes the value of health benefits equals the economic productivity they permit.
Does not incorporate values for pain and suffering if it does impact productivity
Willingness to pay
Method that can value both the indirect and intangible aspects of a disease
Determines how much people are willing to pay to reduce the chance of an adverse health outcome
Advantages of WTP
Places a dollar value on benefits
Disadvantages of WTP
Validity is questioned
Difficult for patients
Compliance bias-overstating WTP
Strategic bias- understating WTP
WTP contingent valuation
What are you willing to pay for this intervention?
CEA
Cost effeciveness
Cost measured in dollars
Consequences measured in disease (lives saved, cases cured, etc.)
Results are cost-effectiveness ratio
