Introduction to Pharmacoeconomics September 15 -16, 2009 Karen L. Rascati, PhD, Professor The...

Introduction to PharmacoeconomicsSeptember 15 -16, 2009

Karen L. Rascati, PhD, ProfessorThe University of Texas College of Pharmacy

Austin, Texas, USA

The Universidade Federal do Rio Grande do Sul (UFRGS) and the Programa of

Pós-graduação em Economia (PPGE/UFRGS)

Outline

Day 1Part I - What is pharmacoeconomicsPart II – Types of pharmacoeconomic studiesPart III – Costs/OutcomesPart IV – Evaluating StudiesPart V – Evaluation Example 1

Outline

Day 2Part VI – Decision AnalysisPart VII – Markov ModelingPart VIII – Evaluation Example 2Part IX – Future Issues

Part I

What is Pharmacoeconomics?

Definition Pharmacoeconomics “identifies,

measures, and compares costs and consequences of pharmacy products and services”

Some consider it a sub-set of health technology assessment (HTA)

Pharmacoeconomic Equation

COSTS RX OUTCOMES

How much is spent on health care per year as a percent of GDP?In OECD countries?

Health Expenditure as a Share of GDP, 2006

15.3

11.3

11.1

10.6

10.4

10.2

10.1

10.0

9.5 9.3 9.3 9.2 9.1 9.1 9.0 8.8 8.7 8.4 8.4 8.3 8.2 8.2

7.5 7.3 7.1 6.8 6.6 6.4 6.2 5.7

8.9

0

4

8

12

16

Unite

d Stat

es

Switz

erlan

d

Fran

ce

Germ

any

Belgi

um (1

)

Portu

gal

Austr

ia

Cana

da

Denm

ark (

1)

Neth

erlan

ds (2

)

New

Zeala

nd

Swed

en

Gree

ce

Icelan

d Italy

OECD

Austr

alia (

3)

Norw

ay

Spain

Unite

d King

dom

Hung

ary

Finlan

d

Japan

(4)

Irelan

d

Luxe

mbou

rg

Slova

k Rep

ublic

(4)

Czec

h Rep

ublic

Mex

ico

Kore

a

Polan

d

Turk

ey (4

)

% of GDP

Public

Private

(1) Public and private components are current expenditure,i.e. investments are not separated. (2) Current expenditure.(3) Data refer to 2005/06. (4) Data refer to 2005.

Brazil?

Brazil

About 8% GDP on healthcare SUS = tax funded system About half is public spending and half is

private spending (for about 20-30% of population) = much more spent per person if using private insurance

What is the average lifespan for various OECD countries?

Brazil?

Brazil

Life expectancy is about 72 years

Why is Pharmacoeconomics important? Pharmacoeconomics helps assess if

scarce health care resources are being spent wisely on pharmacy products and services.

Part II -Types of Pharmacoeconomic Studies Cost-minimization analysis (CMA) Cost-benefit analysis (CBA) Cost-effectiveness analysis (CEA) Cost-utility analysis (CUA)

COSTS RX OUTCOMES

More than one type may be included in a study (e.g. CEA and CUA)

Types of Pharmacoeconomic StudiesCost-Minimization

Analysis (CMA)

Costs = Monetary units

Outcomes = The same

Cost-Effectiveness Analysis (CEA)


Outcomes = Natural/clinical units

Cost-Utility

Analysis (CUA)


Outcomes = Adjusted by quality/utility (e.g., QALY, DALY)

Cost-Benefit Analysis (CBA)


Outcomes = Monetary units

Other ‘Cost’ Studies

Cost-consequence analysis (CCA)Lists costs and various outcomes presented

but no calculations or comparisons made

Cost-of-illness (COI)Estimate of total economic burden

(prevention, treatment, losses in productivity) of a particular condition or disease on society

Part III – COSTS/OUTCOMES Cost analysis :To identify resources

used or consumed in the production of a good or service and assign monetary values to these resources.

COSTS RX OUTCOMES

Part III – COSTS/OUTCOMES PERSPECTIVE = Whose Costs?

Payer (third-party private/public and/or patient)

Provider/ InstitutionEmployerSociety

Types of Costs Direct Medical Costs

Direct Non-Medical Costs

Indirect Costs

Intangible Costs

Direct Medical Costs What is paid for specific health care

services, such as physician services, hospitalization, and pharmaceuticals

EX: Physical therapy, drugs to tx side effects, costs of clinic visits

Direct Non-Medical Costs Costs necessary to enable patients to

receive medical care

EX: Transportation to and from visits, lodging, baby-sitters (special diet)

Indirect Costs Measure of the patient’s lost productivity

plus the lost productivity of all unpaid caregivers

EX: Time off from work, less productive days, spouses time off from work.

25

Intangible Costs Reflect the patient’s level of pain and

suffering. These are the hardest to measure.

Anxiety, chronic pain, loss of functioning

Examples A daughter takes a week off from work to attend to her ill

father

Inpatient charge of R$268 per day for acute care

Fatigue from chemotherapy

Taxi fare to emergency department

Ambulance service to emergency department

Examples A daughter takes a week off from work to attend to her ill father

INDIRECT COSTS (productivity) Inpatient charge of R$268 per day for acute care

DIRECT MEDICAL COSTS Fatigue from chemotherapy

INTANGIBLE COSTS Taxi fare to emergency department

DIRECT NON-MEDICAL COSTS Ambulance service to emergency department

DIRECT MEDICAL COSTS

Example – Types of Costs for Schizophrenia Direct Medical

Medications Outpatient/

professional services Inpatient services Long-term care

Direct Non-Medical Law enforcement Shelters

Indirect Unemployment Reduced productivity

at work Premature mortality

(suicide) Caregiver

Incremental Costs Average costs = total cost / total units Incremental = Change in total cost /

change in units

Example: Drug A is R$500 per patient and is 95% effective while Drug B is R$750 per patient and 97% effective

Incremental Calculation

(R$750 – R$500) / (0.97 – 0.95) =

R$12,500 per extra cure

Adjusting for Time DifferencesTwo different concepts Inflation

If data collected over more than one yearPrices may be adjusted to uniform price

Time Preference If program or therapy extends more than one

year, “discounting” is appropriateUsed even if inflation rate is zero

Adjustment for Inflation

Can count number of services/ resources used and multiply by standard costs at one point in time

OR

Use inflation rate for past years times cost from past years

Adjustment for Inflation

Medical Resources To Treat Mild Infection

Cost Estimate for Resource

Year of Cost Estimate

Cost Adjusted to 2007 R

Office Visits R$115.00 2005 R$128.00a

Lab to Culture Organism

R$50.00

2006

R$53.55b

Antibiotic Medication

R$28.84

2007

R$28.84

TOTAL R$210.39 a: Brazilian CPI for 2005 to 2007 = 11.3% b: Brazilian CPI for 2006 to 2007 = 7.1 %

Example of Standardization: Using Consumer Price Index (CPI) - Brazil

Discounting A time preference is associated with money Current and future costs are not valued the

same If the treatment costs (and outcomes*)

extend for more than one year, discounting should be conducted to account for this difference.

Present Value (PV) Formula PV = Sum of [FC / (1+r)n] for each year in

future

FC = Future Costs (or benefits) n = number of years r = discount rate per year

Discounting Example

Year Costs are Incurred

Estimated Costs w/o Discounting

Calculation Present Value (PV)

Year 1 R$ 5,000 R$ 5,000 /1.05 R$ 4,762 Year 2 R$ 3,000 R$ 3,000 / (1.05)2 R$ 2,721 Year 3 R$ 4,000 R$ 4,000 / (1.05)3 R$ 3,455 Total Net Present Value (NPV)

R$ 12,000 R$ 10,938

Using a 5% discount rate

Sensitivity Analysis For any costs “estimates” that are uncertain,

a sensitivity or “what if” analysis should be conducted.

How do we know the discount rate is 5%?. Vary the rate from 0% to 10% and see if decision of “least costly” alternative still holds.

Or vary cost of hospitalizations by area

Costs - Summary When determining costs:

What is the perspective?

Are relevant/realistic costs included?

Is discounting or cost adjustment appropriate?

Is a sensitivity analysis conducted for uncertain values?

Types of Pharmacoeconomic StudiesCost-Minimization

Analysis (CMA)


Outcomes = The same

Cost-Effectiveness Analysis (CEA)


Outcomes = Natural/clinical units

Cost-Utility

Analysis (CUA)


Outcomes = Adjusted by quality/utility (e.g., QALY, DALY)



Outcomes = Monetary units

Cost-Minimization Analysis (CMA) Costs are measured in monetary units

Outcomes are assumed to be equivalent

Examples: compare generics or home vs. outpatient services.

CMA Research Example

Cost-minimization analysis of erlotinib in the second-line treatment of non-cell lung cancer: A Brazilian perspective

Doral Stephani S; Giorgio Saggia M; Vicino dos Santos EA.

Journal of Medical Economics 2008; Vol. (3), p. 383-96.

Example CMA

Budget impact of erlotinib versus docetaxol or pemetrexed as second-line treatment for NSCLC

Perspective = Private healthcare payer Costs = Panel assessed local costs Outcomes = from clinical trial that

assessed progression-free survival

Example CMA

Erlotinib was cost saving ($R26,825) compared to established chemotherapy (R$40,217 and R$78,911)

Sensitivity analysis showed robustness

Cost-Effectiveness Analysis (CEA) Advantage: Do not have to place a

dollar value on clinical outcomes Disadvantage: Can only compare

options with the same type of outcome, and only one outcome at a time can be measured.

Cost-Effectiveness GridCost Outcome

Lower cost Same Cost Higher Cost

Less effective A B C

Same effectiveness

D E F

More effective

G H I

Cost-Effectiveness Plane

Cost Differences (+)

Cost Differences (-)

Effect Differences

Quadrant IV Dominated

Quadrant I Trade-off

Effect Differences

(-) Quadrant III

Trade-off

Quadrant II Dominant

(+)

Examples of Ways to Present Cost and Effectiveness Results

Method Drug A Drug B Drug C

Costs

R$ 600 per year

Costs

R$ 210 per year

Costs

R$ 530 per year

Method 1

Cost-Consequence

Analysis (CCA)

Outcomes

GI SFDs = 130

% Healed = 50%

Outcomes

GI SFDs = 200 days

% Healed = 70 %

Outcomes

GI SFDs = 250 days

% Healed = 80 %

GI SFDs = gastro-intestinal symptom-free days


Method Drug A Drug B Drug C

R$ 600 / 130 =

R$ 4.61 per SFD

R$ 210 / 200 =

R$ 1.05 per SFD

R$ 530 / 250 =

R$ 2.12 per SFD

Method 2

Average Cost

Effectiveness Ratios R$ 600 / 0.5 = R$ 1,200 per cure

R$ 210 / 0.7 = R$ 300 per cure

R$ 530 / 0.8 = R$ 662 per cure



Method 3

Incremental Cost- Effectiveness Ratios

B compared to A = dominant for both SFDs and % healed;

C compared to A = dominant for both SFDs and % healed;

C compared to B = R$ 530 – R$ 210 / 250 – 200 SFDs = R$ 6.40 per extra SFD

C compared to B = R$ 530 – R$ 210 / .8 – 0.7

= R$ 3,200 per extra healed ulcer


Cost-Utility Analysis(Some consider this a type of CEA) Costs measured in dollars

Consequences measured in preference-based measures, such as QALYs/DALYs

Incorporates mortality and morbidity (quality and quantity of life)

Steps in Utility Analysis Describe the health state Choose the instrument Administer the instrument Calculate utility Calculate QALYs

Describe the Health State Example: You often feel tired and sluggish. A

piece of tubing has been inserted into a vein in your arm or leg. This may restrict your movement. There is no severe pain, but rather chronic discomfort. You must go to the hospital 2-3 times per wk (8 hours per visit). You must follow a strict diet (low salt, little meat, small amount of fluid, no alcohol). Many people become depressed because of the nuisances and restrictions, some feel they are being kept alive by a machine.

Choose the InstrumentTHREE COMMON METHODS

Rating Scales

Time trade-off (TTO)

Standard Gamble (SG)

Rating Scale Endpoints = Dead / Healthy Other health states are explained and

subjects are asked to “rate “ them between the two endpoints

May look like a thermometer Can compare many health state options

and ask raters to place them on one scale

Rating Scale

Perfect Health

Death

Disease state

100

0

58

Time Trade-off Subjects are offered two alternatives:

State i for time t, followed by death, orHealthy time x (less than t) followed by death

Time x is varied until the subject is indifferent between the two alternatives

Alternative 2

Alternative 1

x t

1.0

0

i

Time Trade-off

Standard Gamble Subject is offered two alternatives:

Alternative 1 is a treatment with 2 possible alternatives; pt. lives healthy life for x years or dies immediately

Alternative 2 is the certain outcome of chronic state i for the rest of their natural life

Standard Gamble

p

1-pAlternative 1

Alternative 2

i

dead

healthy

Comparing the 3 Methods Rating Scale easiest but time not incorporated

as easily, must transform to QALYs TTO conceptually easier than SG SG and TTO give higher values than most using

rating scales TTO sometimes lower than SG Some consider SG to be “gold standard” Much research left to answer “which is best”

Administer the Instrument - to whom? The general public

societal perspectivehard to describe to general public

People with the disease if comparing people with the same diseasemay be biased

Health Professionals / Disease Expertsdo not have to explain or describemay be biased

Calculate Utilities Selected utilities from rating scale

1.0 Completely healthy .84 Kidney transplant .58 Hosp. dialysis (pts) .56 Hosp dialysis (public) .33 Hosp confinement0.0 Dead<0 ?

Calculate QALYs For example if dialysis extends a life 10

years at .58 on rating scale = 5.8 QALYs If Option A cost R$5000 and extends life

for 6 years at a quality of .8 and Option B costs R$4000 and extends life for 10 years at a quality of .3, according to CUA which would be preferred?

Based on CEA (no adjustment for quality) which option would you pick?

Option Cost YLS QALYS

A R$5000 6 years 0.8*6 =

4.8 QALYS

B R$4000 10 years 0.3* 10LYS

3.0 QALYS

1. Option A

2. Option B

3. Need ICER

Based on CUA (QALYS) Which option would you pick?

Option Cost YLS QALYS

A R$5000 6 years 0.8*6 =

4.8 QALYS

B R$4000 10 years 0.3* 10LYS

3.0 QALYS

1. Option A

2. Option B

3. Need ICER

DALYS

DALYs = Disability Adjusted Life Years Similar to QALYs DALYs = The sum of years of potential life

lost due to premature mortality and the years of productive life lost due to disability.

QALYs = Years of healthy life (sum of quality * years)

Advantages of CUA Includes patients’ preferences

Provides a single measure to incorporate morbidity and mortality

Allows comparisons across different options

Disadvantages of CUA Time consuming Results vary depending on who assesses the

conditions and by what instrument is used Should you discount utilities? Unanswered questions - Is a 20 QALY gain for

one person = a 1 QALY gain for 20 people?

How much is a QALY/DALY worth?


Costs measured in monetary units

Outcomes measured in monetary units

Calculate Benefit-to-Cost (B:C) ratio


Advantage = can summarize benefits from many sources into one number (money) and compare vastly different options

Disadvantage = difficult to place monetary value on health outcomes

Costs ($) Benefits ($)

Direct Benefits $ Indirect Benefits $ Intangible Benefits $

Productivity Patient PreferencesPain

Suffering

Human Capital (HC)

Willingness-to-pay (WTP) WTP

Medical Non-medical

Medical Non-medical

Human Capital

Value of health benefits=the economic productivity they permitCost of disease=lost productivity

Cost of a sick day=how much you earn that day

Human Capital

Use discounted values of expected earningsCensus estimates (age, gender, education)Gather data from individualsLabor income is estimated as before-tax income

Non-labor income is excluded (interest, etc.)

Use market values value for non-market activities (unpaid household work, child care, etc.)

Human Capital

Problems Biased against specific groups

Age, gender, education

Earnings may not equal the value of outputs Professional athlete versus teacher

Does not include values for pain and suffering if the disease state or condition does not impact productivity

E.g., Menopause, Impotence vs. Diabetes, Cancer

Willingness-to-Pay

Valuation of goods/services are easier for marketed vs. non-marketed goods/services Health care vs. coffee or pair of jeans

Valuation of goods/services are based on: Need

e.g., health care (pain/suffering, productivity, etc.)

Resources Preference

Willingness-to-Pay

Determines how much people are willing to pay to reduce the chance of an adverse health outcome.Example: If a person was willing to pay

R$20 for a ½ hour visit with a pharmacist to improve their diabetes condition, then the imputed benefit/person/visit would be R$20.

Willingness-to-Pay Problems

What people say vs. what they will really pay

Inherent biases of surveys (e.g., starting point bias, income bias)

Can the average person answer questions

HC vs. WTP

Easier to measure

Only considers productivity (in terms of earnings)

Biases against specific groups

More difficult to measure

Captures productivity, patient preferences (intangibles)

Biases may not give accurate responses

HC WTP

CBA Research Example

Costs and Benefits of Influenza Vaccination and Work Productivity in a Columbian Company from the Employer’s Perspective

Morales A, et al. Value in Health, Vol 7, No 4, 2004, p. 433-

441.

CBA Example

Columbian bank employees volunteered to be in a prospective study involving vaccination versus no vaccination for influenza – 8 monthly questionnaires

CBA to determine if employer would save money offering vaccination to employees (therefore perspective = employer (title)

CBA Example

Fever of at least 2 days with at least one symptomatioc symptom (fevers, chills, myalgia) and at least one respiratory problem (rhinorrhea, sore throat, cough, hoarseness) = Influenza-like illness (ILI)

CBA Example

Input costsDirect = vaccine and materials, nurse Indirect = time lost by employee when getting

vaccinated (20 min) and if any days lost due to effects from vaccine

Outcome costs (diff vacc vs. no vacc) Indirect = sick leave and reduced efficiency at

work due to ILI

CBA Example

Vaccinated = 14.6% ILI Non-vaccinated = 39.4% ILI Employer saved $6 to $26 US per

employee vaccinated (depending on assumed efficiency at work with ILI – range 70% to 30%)

Part IV - Assessment of Pharmacoeconomic Studies

1. Is the title appropriate?

2. Is the question (objective) clear?

3. Are the alternatives appropriate?

Assessment4. Are alternatives described in detail?

5. Is the perspective addressed?

6. Is the type of study stated? What type was it?

Assessment7. Are relevant and realistic costs included/

justification for those not included?

8. Are relevant consequences/outcomes included/ justification for those not included?

9. Was adjustment or discounting needed/conducted?

Assessment10. Are assumptions stated/reasonable?

11. Was a sensitivity analysis conducted for important estimates/assumptions?

12. Were major limitations addressed?

13. Were appropriate generalizations made? Were extrapolations beyond population appropriate?

14. Is an unbiased, impartial attitude portrayed? Was an unbiased summary of the results presented?

Assessment

Part V - Evaluate Example 1

Economic Impact of a Rotavirus Vaccine in Brazil

Journal of Health Population Nutrition, 2008, Vol 26 (4), p 388-396.

Outline

Day 2Part VI – Decision AnalysisPart VII – Markov ModelingPart VIII – Evaluation ExamplePart IX – Future Issues

Part VI - Decision Analysis

A systematic, quantitative approach for assessing the relative value of one or more decision options.

Steps in Decision Analysis

Identify the specific decisionWhat is the perspective?

What are the competing options?

Over what period of time?


Draw the structure over timeBoxes represent choice nodes

(Drug A vs. Drug B)Circles represent chance nodes

(S.E. or no S.E.)Triangles represent termination nodes

(live vs. die)


Assess the probabilities

Use past literature, experts, judges, panels

Use reasonable ranges for uncertain probabilities


Determine the value of each outcome

Options must have the same type of outcome ( $ vs. $ or QALY vs. QALY)

Can look at costs and effectiveness in the same model

Steps in Decision Analysis Conduct a sensitivity analysis

Choose those values or probabilities that are most uncertain or those where a small difference has a big impact on the results

Use reasonable ranges

Calculate threshold values

Example

From an article by Alan Baskt, Pharm.D.

“Pharmacoeconomics and the formulary decision-making process” in Hospital Formulary, Vol 30, Jan 1995, p.42-50.

Example - ID Decision Background

DVT prophylaxisNewer agent Enoxaparin (Lovenox)No coagulation monitoring requiredLower DVT rate than heparin26 times more expensive than heparin

Example - ID Decision Perspective

Societal Options

enoxaparin fixed-dose heparin low dose warfarin

Time frameabout 1 month

Example - Draw Structure

Example - Assess Probabilities

Incidence Warfarin Enoxaparin Heparin

Proximal DVT

5 % 2% 4.8%

Distal DVT

19% 2% 5.3%

Pulmonary Embolism

2.7% 0.1% 1.9%

Major Bleeding

1.3-3.6% 4.1% 6.2%

Minor Bleeding

6.9% 8.2% 5.7%

Example - Determine ValuesCosts Warfarin Enoxaparin Heparin

Drug 0.14 159.88 6.10

PT test x 7 d 8.68 0 0

PTT test x 7 d 8.68 0 8.68

3 home visits 60.00 0 0

CCF nurse 20.87 0 0

PT and APTT x 3 visits

7.44 0 0

Outpt. Rx 12.30 0 0

TOTAL $118.11 $159.88 $14.78

Example - Determine Values

Complication Abbrev. Cost

Proximal DVT Comp1 $1,394

Distal DVT Comp2 $ 860

P. Embolism Comp3 $6,510

Major Bleed Comp4 $2,791

Minor Bleed Comp5 $ 189

Part VII - Markov Modeling

Real health consequences more complex May need to look at long-term consequences

over multiple years Patients may “transition” from one health state to

another over time Basic decision trees get too complex after a few

cycles Researchers use Markov Modeling to assist with

more complex and chronic disease states

Part VIII Evaluate Example 2

Cost-effectiveness Analysis of Cervical Cancer Vaccine in Five Latin American Countries

Colantonio L, et al. Vaccine, Volume 27, 2009, p. 5519-5529

Part IX - Issues Perspective - Whose costs? Appropriate comparators Efficacy vs. Effectiveness

CriteriaLength of follow-upSwitching

OutcomesAccuracy of measurementMultiple measures

Issues Barriers

Does not include budget impactLack of expertise in economic

evaluationsDecision-makers mistrust resultsSeen as “rationing” – may not want to

acknowledge resources are limited or that trade-offs are necessary

For More Information (in addition to my book, of course)… Methods for the Economic Evaluation of Health

Care Programmes, 3rd ed. Drummond, Sculpher, Torrance, O’Brien and Stoddart, 2005

Health Care Cost, Quality, and Outcomes: ISPOR Book of Terms, Berger et al, 2003 – available soon in Portuguese.

International Society for Pharmacoeconomics and Outcomes Research http://www.ispor.org

Introduction to Pharmacoeconomics September 15 -16, 2009 Karen L. Rascati, PhD, Professor The...

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Transcript of Introduction to Pharmacoeconomics September 15 -16, 2009 Karen L. Rascati, PhD, Professor The...