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Pharmacoeconomic Evaluation - Coggle Diagram
Pharmacoeconomic Evaluation
components of economic evaluation
input
resources
process of healthcare
intervention and medicines that needs to be implemented or introduced to patients
outputs
consequences or outcomes
Types
Full
considers both costs and outcomes and compare alternative
specific type of health economic analysis that explicitly compares the cost (use of resources) and consequences (effects of health interventions( in question to an alternative course of action, known as the comparator
formally evaluate at least two alternative courses of action even when only looking at a single health intervention or policy
types
CMA
outcomes are assumed to be the same
analysis focuses on identifying the intervention with the lowest cost
CEA
natural units
measurable outcome that directly reflects the health effects of a treatment or intervention
CUA
natural units adjusted for quality of life or quality-adjusted life years
CBA
gives monetary value to costs and outcomes
ex: life years saved, reduction in BP, decrease in hospitalization are given currencies
Partial
only looks at on part, either cost only and does not compare to other alternative
only examines the costs or the consequences of an intervention independently; It can also examine both the cost and consequences of an intervention, but only evaluates a single course of action – no comparison.
Examples
Cost description
Examines cost only, comparing no alternatives
Example: Hospital only records how much is spent on diabetes treatment
Does not compare other treatments or outcomes
Outcome Description
Examines consequences only, comparing no alternatives
Example: study on how a new cancer drug improves survival rate -> does not compare costs of treatment and does not compare other drugs
example: report detailing on how much the hospital spends on a new surgery and how patients health improves -> does not compare to other surgeries
Cost-outcome description
cost + consequences
Cost analysis
general term referring to the process of identifying, measuring, and assessing the cost as initiated in a particular activity or intervention
Outcome analysis
cost of illness
economic burden
of a specific disease or health condition on the society on the society or individual
cost consequence analysis
compare the cost and consequences of different intervention or actions
extends beyond traditional effectiveness analysis by considering a broader range of outcomes
focuses on evaluating the costs and multiple outcomes of an intervention
Cost Minimization Analysis
main goal is to determine the least expensive
cost identification
Simples; most often used by pharmacy departments
Method of comparing 2 or more medicines of equal therapeutic effectiveness and safety
Application
Therapeutic equivalence
meets all 5 conditions
Safe & Effective
Generic pain relievers must relieve pain just as well as the brand name version without causing unexpected side effects.
Bioequivalence
Generic heart medication must have the same absorption rate in the bloodstream as the brand name version so it works the same way.
adequately labeled
compliant to cGMP
the drug must be produced following strict manufacturing guidelines to ensure its quality
Pharmaceutical Equivalence
the drug must have the same active ingredients, strength, dosage form, route of administration (e.g. oral, injectible) as the original drug
Comparison of medication in received in different settings
Example. Compare the cost of getting the vaccine from a physician in a hospital versus a pharmacist in a pharmacy. Which is cheaper?
costs must reflect
Acquisition cost of medicine (logistics)
Pharmacy, nursing and physician cost time
Laboratory costs
Cost of any ancillary equipment
Indirect cost (only if this can be measured and valued reliably)
Cost Benefit Analysis
method that uses monetary value in the compostion of costs and consequences
method use to evaluate the
economic efficiency
of healthcare interventions
main goal: to determine whether the benefits outweigh the cost, allowing for an informed decision on resource
involves comparing the costs of a particular intervention or drug with the benefits it provides in monetary terms
types
cost-effectiveness ratio
cost of treatment/outcome of treatment
benefit cost ratio
total benefit costs/total cost
advantages
can compare dissimilar alternatives
appropriate to assess economic efficiency of different healthcare interventions
identifies who gains costs and benefits
may demonstrate gains in society when implementing a program
Components of CBA
Costs
Direct nonmedical
Direct medical
Benefits
Direct benefits
Indirect
check for productivity which could be measured through
human capital or willingness to pay approach
Intangible
we could check through
patient preferences
and pain & suffering, and
willingness to pay
disadvantages
difficulty to place a monetary value on a clinical outcome
not all costs and benefits could be quantified into monetary terms
some important factors like human lives and environmental preservations are difficult to put a price on
it is also difficult to assign monetary values in intangible benefits
Cost and Benefits
In CBA, benefits must be higher than the cost which is called
cost savings or cost avoided
Measuring indirect and intangible benefits
human capital (HC) approach
lies on economic theory that it uses education, training and other investments in human beings as similar to investments in physical capital (i.e., machineries, infrastructures, buildings)
assumption: value of health benefits = economic productivity that they permit
asserts that individuals could improve their economic productivity and potential earnings through investment in education and skills and development
two components
wage rate
missed time
missed work
days missed form work (for employed)
missed housekeeping
days missed from housekeeping (for unemployed)
restricted activity days
percent time during which work of housekeeping was restricted
caregiver time
parent's time spent as a caregiver to a child who has illness
advantages
straightforward
easy to measure
disadvantage
Biased against a specific grouos of people
assumption may also be biased
does not incorporate values for pain and suffering
willingness to pay (WTP) approach
measure both indirect and intangible aspects of a disease
determines how much people are willing to pay to reduce the chance of an adverse health outcome
grounded in welfare economic theory and incorporates patient preferences and intangible benefits
willingness to pay method
contingent valuation (CV)
commonly used
direct method to elicit dollar values or WTP amounts
individuals are asked
hypothetical questions about their WTP for a specific outcome/attribute
based on different scenarios
elements
hypothetical scenario
describe health program, amount of time, benefit
ex: data collector may describe health program, amount of item, or benefit (hypothetical scenario is given) -> ask how much value will you give to the described scenario
bidding vehicle
place a value on the program
there is a bidding happening
the higher the bid price, the more they need the intervention
advantages
place dollar value on intangible benefits
grounded in welfare economic theory
disadvantages
validity of WTP responses
compliance bias
strategic bias
respondents can over or understate their WTP to strategically impact the outcome
revealed preference method
relies on the idea that
individuals reveal their preferences through the actual choices
they make
when faced with different options and price
s
Method
Hedonic pricing (hedonic wage model/wage risk approach)
valuable tool in economics for
estimating the value of specific attributes that contribute to the overall value of a good or service
, especially in cases were direct market prices may not be readily available
Estimates the value of nonmarket good by observing their behavior in the market for related goo
Method
wage = f (education, experience, age, gender, etc. )
Strength: based on actual consumer choices involving health vs money; rather than hypothetical scenarios or preference statements
Weakness: varied estimates, and context; job-specific
assumes that the price of marketed good is related to its characteristics, including environmental conditions
ex: if house near a park is more expensive than similar houses farther away, the price difference can be attributed to value of proximity to the park
ex: hospital reputation, expertise of medical staff, advanced medical technology can impact price services
price you actually pay in purchasing healthcare services represents the health benefits of the healthcare services
in essence, it is willingness to pay but you already pay for it
Averting behavior
It is typically used to value the benefits of help
it assumes that the
expenditures
on averting or behavior is a lower bound on the value of
avoiding the medical conditions
example: reducing our exposure to air poluution by reducing the amount of time we spend outdoors. If we lessen our time outdoors, it can be averting behavior. We are not willing to spend so much time outdoors due to risk of getting sick because of air pollution
value of change in health status = money that the person is willing to spend on some controlling/preventing device or averting action
how much people spend to avoid health risk
ex: people spend money on air purifiers to avoid pollution, the cost of the purifiers can be used to estimate the value they place on clean air
Calculating results of Costs & Benefits
Net benefit (or net cost) calculations
presents the differences between the total costs and benefits
Net benefit = total benefits - total costs
Net cost = total costs - total benefits
Cost beneficial if:
net benefit > 0
net cost <0
Benefit-to-cost (cost-to-benefit) ratio
total benefits/total costs
total costs/total benefits
Beneficial if:
benefit-to-cost > 1
Cost-to benefit <1
Internal rate of return
rate of return that equates the present value (PV) of benefit to the PV of costs
Goal: find the rate of return that would make costs and benefits equal
After computing for internal rate of return (IRR), compare with specific hurdle rate (market rate of return)
Hurdle rate
minimum rate of return that the investment or project must meet or exceed for it to be considered acceptable or withwhile
benchmark to evaluating the attractiveness of an investment
Decision rule
accept all projects with an IRR > hurdle rate
cost effectiveness analysis
most common
prone to misinterpretation
complexity of the analysis
does not mean that you have two costs of treatment and two effectiveness, you can already compare or compute the CEA
it involves a lot of data (e.g., effectiveness, efficacy, assumptions, calculations) before you can compute in real study
inconsistent interpretation of results
different stakeholders may interpret CEA results differently bases on their perspective, values, and priorities
ex, healthcare - concern more on patient outcome than cost
limited scope of analysis
cannot capture all the scenarios in real life
cannot accurately reflect the actual CEA of that treatment in the real world
compare 2 or more medicines w/c are not exactly equivalent in terms of dose or therapeutic effect but used to treat the same clinical condition
consequence -> efficacy of effectiveness of the drug therapy
advantages
health units -> common outcomes -> familiar to health practitioners
gives more comprehensive view of the value of the intervention
no need for conversion to monetary units
comparative analysis
direct comparison of different interventions/polices providing decision-makers with information on which option offers the best value for money
considers both costs and outcomes
helps allocate limited resources
could provide most effective intervention at low cost
disadvantages
used only for alternatives whose outcomes are measured in the same cilinical units
if the alternatives treatment is not measured in the same clinical units, CEA cannot be used
need to measure several clinical outcomes -> several CE ratios -> ???
underlying subjectively in decision making
despite giving the decision-makers CEA results, their decisions can still be affected by external factors (strong opponent)
simplification of complex realities
different assumptions are simplified, but may not give the exact result of the real world situations -> misleading results
presentation of costs and effectiveness
cost consequence analysis
average cost effectiveness ratios
ACER = total cost / effectiveness
CER
ratio of resources used per unit of clinical benefit
incremental cost-effectiveness ratios (ICER)
if 1 treatment is both more expensive and more effective
determine the magnitude of the added cost for each unit in health improvement
average ICER
ICER = (AveC1 - AveC2)/(E1-E2)
if the ICER and denominator is negative, then it is not accepted
if the ICER and the numerator is negative, then it is called cost saving
negative value
one treatment (the dominant option) is both more effective and less expensive that the other (dominated opinion)
incremental net benefit (INB) analysis
other literature: net benefit framework or net monetary benefit (NMB)
an estimate of the value for health benefits is substituted into the incremental analysis
(maximum acceptable willingness to pay * difference in the effectiveness of two treatment) - different in costs two treatments
If INB > 0
intervention is cost-effective
if INB < 0
intervention is not cost-effective
cost effectiveness grid
tool that will help us decide whether the medical intervention or any treatment is worth it compared to the other options
compares both cost and effectiveness of two interventions
grid
A
lower cost and lower effectiveness
better in terms of cost but not in effectiveness
compute ICER to check if the result would be acceptable or not
B
same cost and lower effectiveness
not accepted
C
higher cost and lower effectiveness
treatment is automatically dominated -> continue the old intervention
D
lower cost and same effectiveness
saves cost compared to old treatment
E
same cost and same effectiveness
retain old treatment (arbitrary)
F
higher cost and same effectiveness
not cost saving
G
lower cost and higher effectiveness
ideal, new treatment is better and cheaper
H
same cost and higher effectiveness
cost effective since you have better option
I
higher cost and higher effectiveness
indifferent, conduct ICER to check whether within willingness to pay new intervention
cost-effectiveness plane
quadrant
1
higher cost - higher effectiveness
tradeoff
are willing to give additional cost, for higher effectiveness
2
lower cost - higher effectiveness
treatment is considered dominant
3
lower cost - lower effectiveness
tradeoff
conduct ICER
4
higher cost - low effectiveness
dominated by other option
do not accept
cost utility analysis
special form of CEA
use a special type of clinical outcome measure -> QAL
takes patient preferences (utility) into account when measuring health consequences
do not only measure if the treatment increases life years but measures how good or bad the life is in terms of health and well-being (QALY)
utility
value of worth placed on a level of health status, or improvement in health status, as measured by the preferences of individuals or society
called preference weight or preference value
examples
QALY, DALY, QALMs, HYEs
QALY
calculation
1 yr of life in perfect health = 1 QALY
perfect health = 1 QALY
death = 0 QALY
(-) = people prefer to die rather than live with their current condition
multiply utility score with the life years saved (LYS)
most common unit
DALY
disability adjusted year
less common compared to QALY
time-based measure that combines years of life due to premature mortality (YLLs) and years of healthy life lost due to disability (YLDs)
YLLs
ex. died at 50 but the life expectancy is 70, YLLs is 20
YLDs
number of years someone lives with disability or health condition that affects their QALY
1 more item...
YLDs x YLLs
methods of determining utilites
rating scale (RS)
called "feeling thermometer"
visually explain the rate the patient QALY of life from 1 - 0
top scale
person in perfect health, no pain and discomfort
bottom scale
rated at 0 -> death
in the case of seasonal allergy
may be considered poor quality of life (bet 100 and 0)
ex. 5 years patient experiencing allergy (0.8) = 4
advantage
many disease states can be described to each subject
self-administered
less cognitively demanding
disadvantage
do not incorporate time into the utility score
biased
standard gamble (SG)
utlity
the probability (p) of normal health (vs immediate death, 1-p) for alternative 1 is varied until the subject is 'indifferent' between alternative 1 and 2
indifferent -> alternatives 1 & 2 seem equally attractive
the percentage where the patient becomes indifferent of treatment 1 and 2 will serve as their utility score
utility score = point of difference
the change of option based on probability of increasing or decreasing life expectancy and death affects choice of the patient on which alternative to choose, thus the variation of the utility score
advantage
the "gold standard" based on economic theory
disadvantage
more difficult for participants
few disease states can be cured
face to face administration
time trade off (TTO)
utility score can be computed by x/t
duration of benefit of intervention/duration with no intervention (e.g., life expectancy)
example
patient with chronic condition where 40 years is the life expectancy
treatment 1 = lifetime with chronic condition but death is not after 30 years
1 more item...
treatment 2 = you will live for 20 years in perfect condition but is followed by immediate death
1 more item...
should have a point of difference to compute utility score
advantage
more adaptable to disease states
incorporates time in the disease states
disadvantage
face to face administration
application
treatments with varying effects on quality of life
ex. cancer tx
length of time and quality of life is different
if patient has cancer, length of time may be shortened of it the px survive their quality of life is lower
treatments for health conditions with no impact on quantity of life but affects quality of life
same length of life or life expectancy but QALY is affected
hand amputation
poor eyesight/blindness
deafness
compare treatments and outcomes that are different
analysis of cost and utility
cost-consequence analysis
compute for QALY
average cost utility ratios
total cost/total utility
CUR
ratio of resources used per unit of clinical benefit
incremental cost-utility ratios (ICUR)
determine the magnitude of the added cost for each unit in health improvement
advantages
may compare different diseases
incorporate both morbidity and mortality into one common unit
disadvantage
difficult to measure accurate utility value
not readily understood or embraced by decision makers