Pharmaco-economics_An Article by Sahjesh Soni_Part 1

ABSTRACT:

Pharmacoeconomics focuses on the costs and benefits of drug therapy and pharmacoeconomic evaluations provide a basis for resource allocation and utilization. It is increasingly becoming important for health policy decision-making. A pharmacoeconomic evaluation may be conducted as an economic assessment incorporated into clinical trials. Such trials should compare the new drug/procedure with an older drug or existing intervention. Four techniques are used for economic evaluation, namely, cost-minimization analysis, cost-effectiveness analysis, cost-utility analysis and cost-benefit analysis.

INTRODUCTION:

Pharmacoeconomics refers to the scientific discipline that compares the value of one pharmaceutical drug or drug therapy to another.  Pharmacoeconomic studies serve to guide optimal healthcare resource allocation, in a standardized and scientifically grounded manner.

Pharmacoeconomics centres on the economic evaluation of pharmaceuticals, and can use cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis or analysis. Economic evaluations are carried out alongside randomized controlled trials and using methods of decision-analytic modelling.  

Terms you should know:

1) Quality adjusted life year (QALY):

The quality-adjusted life year or quality-adjusted life-year (QALY) is a generic measure of disease burden, including both the quality and the quantity of life lived. It is used in economic evaluation to assess the value for money of medical interventions. One QALY equates to one year in perfect health. If an individual's health is below this maximum, QALYs are accrued at a rate of less than 1 per year. To be dead is associated with 0 QALYs.

The QALY is a measure of the value of health outcomes. It assumes that health is a function of length of life and quality of life, and combines these values into a single index number. To determine QALYs, one multiplies the utility value associated with a given state of health by the years lived in that state. A year of life lived in perfect health is worth 1 QALY (1 year of life × 1 Utility value). A year of life lived in a state of less than perfect health is worth less than 1 QALY; for example, 1 year of life lived in a situation with utility 0.5 (e.g. bedridden, 1 year × 0.5 Utility) is assigned 0.5 QALYs. Similarly, half a year lived in perfect health is equivalent to 0.5 QALYs (0.5 years × 1 Utility). Death is assigned a value of 0 QALYs, and in some circumstances it is possible to accrue negative QALYs to reflect health states deemed "worse than dead."

USES OF QALY

Data on medical costs are often combined with QALYs in cost-utility analysis to estimate the cost-per-QALY associated with a health care intervention. This parameter can be used to develop a cost-effectiveness analysis of any treatment. In the United Kingdom, the National Institute for Health and Care Excellence, which advises on the use of health technologies within the National Health Service, has since at least 2013 used "£ per QALY" to evaluate their utility.

2) Disability adjusted life year (DALY):

The disability-adjusted life year (DALY) is a measure of overall disease burden, expressed as the number of years lost due to ill-health, disability or early death. It was developed in the 1990s as a way of comparing the overall health and life expectancy of different countries.

The disability-adjusted life year is a societal measure of the disease or disability burden in populations. DALYs are calculated by combining measures of life expectancy as well as the adjusted quality of life during a burdensome disease or disability for a population. DALYs are related to the quality-adjusted life year (QALY) measure; however, QALYs only measure the benefit with and without medical intervention and therefore do not measure the total burden. Also, QALYs tend to be an individual measure, and not a societal measure

DALYs are calculated by taking the sum of these two components:^[3]

DALY = YLL + YLD

3) Perspective of treatment:

Clarification of the perspective is critical because the results of a pharmacoeconomic evaluation depend heavily on the perspective taken. For example, if comparing the value of alteplase (tissue plasminogen activator, or t-PA) with that of streptokinase from a patient or societal perspective, t-PA may be the best-value alternative because a 1% reduction in mortality rates is observed in this large population. Yet, from a small community hospital's perspective, streptokinase may represent a better value because it provides similar outcomes for less money. Once the perspective is clear, a full evaluation of the relevant costs and consequences can begin.

a) Patient Perspective

Patient perspective is paramount because patients are the ultimate consumers of healthcare services. Costs from the perspective of patients are essentially what patients pay for a product or service—that is, the portion not covered by insurance.

 

b) Provider Perspective

Costs from the provider's perspective are the actual expense of providing a product or service, regardless of what the provider charges. Providers can be hospitals, managed-care organizations (MCOs), or private-practice physicians

 

c) Societal Perspective

The perspective of society is the broadest of all perspectives because it is the only one that considers the benefit to society as a whole.

4) Cost:

A comparison of two or more treatment alternatives should extend beyond a simple comparison of drug acquisition costs. Healthcare costs or economic outcomes can be grouped into several categories: direct medical, direct nonmedical, indirect nonmedical, and intangible costs. Other costs often discussed in pharmacoeconomic evaluations include opportunity and incremental cost.

  

(i) Direct Medical Costs

Direct medical costs are the costs incurred for medical products and services used to prevent, detect, and/or treat a disease. Direct medical costs are the fundamental transactions associated with medical care that contribute to the portion of gross national product spent on healthcare. Examples of these costs include drugs, medical supplies, and equipment, laboratory and diagnostic tests, hospitalizations, and physician visits.

(ii) Direct Nonmedical Costs

Direct nonmedical costs are any costs for nonmedical services that are results of illness or disease but do not involve purchasing medical services. These costs are consumed to purchase services other than medical care and include resources spent by patients for transportation to and from healthcare facilities, extra trips to the emergency department, child or family care expenses, special diets, and various other out-of-pocket expenses.

 

(iii) Indirect Nonmedical Costs

Indirect costs are costs that result from morbidity and mortality and are an important source of resource consumption, especially from the perspective of the patient. Morbidity costs are costs incurred from missing work (i.e., lost productivity), whereas mortality costs represent the years lost as a result of premature death.

(iv) Intangible Costs

Intangible costs are those of other nonfinancial outcomes of disease and medical care. Examples include pain, suffering, inconvenience, and grief, and these are difficult to measure quantitatively and impossible to measure in terms of economic or financial costs.

 

(v) Opportunity Costs

Opportunity cost is the value of the alternative that was forgone. So basically, it is the alternate treatment which was not taken by the patient and thus had to pay the sum difference.

 

(vi) Incremental Costs

Incremental costs represent the additional cost that a service or treatment alternative imposes over another compared with the additional effect, benefit, or outcome it provides

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

 

Consequences:

Similar to costs, the outcomes or consequences of a disease and its treatment are an equally important component of pharmacoeconomic analyses.

One approach is to separate outcomes into three categories: Economic, Clinical, and Humanistic. 

^·               Economic outcomes are the direct, indirect, and intangible costs compared with the consequences of medical treatment alternatives.

^·               Clinical outcomes are the medical events that occur as a result of disease or treatment (e.g., safety and efficacy end points).

^·               Humanistic outcomes are the consequences of disease or treatment on patient functional status or quality of life along several dimensions (e.g., physical function, social function, general health and well-being, and life satisfaction).

 

Positive versus Negative Consequences:

These consequences (outcomes) can be further categorized as positive or negative.

An example of a positive outcome is a desired effect of a drug (efficacy or effectiveness measure), possibly manifested as cases cured, reductions in haemoglobin A, life-years gained, or improved health-related quality of life.

All drugs have adverse effects, negative consequences also can occur with their use. A negative outcome is an undesired or adverse effect of a drug, possibly manifested as a treatment failure, an adverse drug reaction (ADR), a drug toxicity, or even death. 

 

Intermediate and Final Consequences:

Consequences also can be discussed in terms of intermediate and final outcomes. Intermediate outcomes can serve as a proxy for more relevant Final outcomes. For example, achieving a decrease in low-density lipoprotein cholesterol levels with a lipid-lowering agent is an intermediate consequence that can serve as a proxy for a more final outcome such as a decrease in myocardial infarction rate.